Exhibit 10.1

EXECUTION VERSION

$900,000,000

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

 

 

W&T OFFSHORE, INC.,

as Borrower

and

TORONTO DOMINION (TEXAS) LLC,

as Agent

and

BNP PARIBAS,

as Syndication Agent

and

NATIXIS, THE BANK OF NOVA SCOTIA AND BANK OF SCOTLAND,

as Co-Documentation Agents

and

VARIOUS FINANCIAL INSTITUTIONS AND OTHER PERSONS FROM TIME TO TIME

PARTIES HERETO,

as Lenders

 

 

TD SECURITIES (USA) LLC and

BNP PARIBAS SECURITIES CORP.,

as Co-Lead Arrangers and Co-Bookrunners

May 5, 2011

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TABLE OF CONTENTS

 

           Page  

ARTICLE I -    DEFINITIONS AND REFERENCES

  

Section 1.1.

  

Defined Terms

     2   

Section 1.2.

  

Exhibits and Schedules; Additional Definitions

     25   

Section 1.3.

  

Amendment of Defined Instruments

     25   

Section 1.4.

  

References and Titles

     25   

Section 1.5.

  

Calculations and Determinations

     26   

ARTICLE II -    THE LOANS

  

Section 2.1.

  

Commitments to Make Loans; Restrictions on Commitments or Issuance or
Participation in Letters of Credit

     26   

Section 2.2.

  

Requests for New Loans

     27   

Section 2.3.

  

Continuations and Conversions of Existing Loans

     28   

Section 2.4.

  

Use of Proceeds

     29   

Section 2.5.

  

Fees

     29   

Section 2.6.

  

Optional Prepayments

     31   

Section 2.7.

  

Mandatory Prepayments

     31   

Section 2.8.

  

Initial Availability Amount

     33   

Section 2.9.

  

Determinations of Borrowing Base

     33   

Section 2.10.

  

Maturity Date

     34   

Section 2.11.

  

Letters of Credit

     34   

Section 2.12.

  

Interest

     41   

Section 2.13.

  

Register; Notes

     41   

Section 2.14.

  

Defaulting Lenders

     42   

Section 2.15.

  

Reduction of Aggregate Commitments

     43   

ARTICLE III -    PAYMENTS TO LENDERS

  

Section 3.1.

  

General Procedures

     44   

Section 3.2.

  

Capital Reimbursement

     45   

Section 3.3.

  

Increased Cost of Eurodollar Loans

     46   

Section 3.4.

  

Availability

     46   

Section 3.5.

  

Funding, Losses

     47   

Section 3.6.

  

Taxes

     47   

Section 3.7.

  

Change of Applicable Lending Office

     50   

 

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TABLE OF CONTENTS

(continued)

 

           Page  

Section 3.8

  

Replacement of Lenders

     50   

Section 3.9.

  

Participants

     50   

ARTICLE IV -    CONDITIONS PRECEDENT TO LENDING

  

Section 4.1.

  

Closing Date

     51   

Section 4.2.

  

Conditions Precedent to Increase in Initial Availability Amount

     53   

Section 4.3.

  

Additional Conditions Precedent to All Loans and Letters of Credit

     54   

ARTICLE V -    REPRESENTATIONS AND WARRANTIES

  

Section 5.1.

  

No Default

     55   

Section 5.2.

  

Organization and Good Standing

     55   

Section 5.3.

  

Authorization

     55   

Section 5.4.

  

No Conflicts or Consents

     55   

Section 5.5.

  

Enforceable Obligations

     55   

Section 5.6.

  

Initial Financial Statements

     56   

Section 5.7.

  

Other Obligations and Restrictions

     56   

Section 5.8.

  

Full Disclosure

     56   

Section 5.9.

  

Litigation

     56   

Section 5.10.

  

Labor Disputes and Acts of God

     56   

Section 5.11.

  

ERISA Plans and Liabilities

     57   

Section 5.12.

  

Environmental Matters

     57   

Section 5.13.

  

Names and Places of Business and State of Incorporation or Formation

     57   

Section 5.14.

  

Borrower’s Subsidiaries

     57   

Section 5.15.

  

Title to Properties, Licenses

     58   

Section 5.16.

  

Government Regulation

     58   

Section 5.17.

  

Insider

     58   

Section 5.18.

  

Insurance

     58   

Section 5.19.

  

Solvency

     58   

Section 5.20.

  

Taxes

     59   

Section 5.21.

  

Gas Imbalances, Prepayments

     59   

Section 5.22.

  

Marketing of Production

     59   

 

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TABLE OF CONTENTS

(continued)

 

           Page  

Section 5.23.

  

Hedging Transactions

     59   

Section 5.24.

  

Restriction on Liens

     59   

Section 5.25.

  

Maintenance of Properties

     59   

Section 5.26.

  

Compliance with Laws and Agreements

     60   

Section 5.27.

  

OFAC

     60   

ARTICLE VI -    AFFIRMATIVE COVENANTS OF BORROWER

  

Section 6.1.

  

Payment and Performance

     60   

Section 6.2.

  

Books’ Financial Statements and Reports

     61   

Section 6.3.

  

Other Information and Inspections

     63   

Section 6.4.

  

Notice of Material Events and Change of Address

     64   

Section 6.5.

  

Maintenance of Properties

     64   

Section 6.6.

  

Maintenance of Existence and Qualifications

     65   

Section 6.7.

  

Payment of Trade Liabilities, Taxes, etc.

     65   

Section 6.8.

  

Insurance

     65   

Section 6.9.

  

Performance on Borrower’s Behalf

     65   

Section 6.10.

  

[Reserved]

     66   

Section 6.11.

  

Compliance with Agreements and Law

     66   

Section 6.12.

  

Environmental Matters; Environmental Reviews

     66   

Section 6.13.

  

Evidence of Compliance

     67   

Section 6.14.

  

Hedging Program

     67   

Section 6.15.

  

Maintenance of Liens on Properties

     67   

Section 6.16.

  

Perfection and Protection of Security Interests and Liens

     68   

Section 6.17.

  

Bank Accounts; Offset

     68   

Section 6.18.

  

Production Proceeds

     68   

Section 6.19.

  

Guaranties of Borrower’s Subsidiaries; Joinder; Non-Guarantor Subsidiaries

     69   

Section 6.20.

  

Casualty and Condemnation

     69   

Section 6.21.

  

ERISA Information and Compliance

     69   

ARTICLE VII -    NEGATIVE COVENANTS OF BORROWER

  

Section 7.1.

  

Indebtedness

     70   

Section 7.2.

  

Limitation on Liens

     71   

 

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TABLE OF CONTENTS

(continued)

 

           Page  

Section 7.3.

  

Hedging Contracts

     72   

Section 7.4.

  

Limitation on Mergers, Issuances of Securities

     73   

Section 7.5.

  

Limitation on Sales of Property

     73   

Section 7.6.

  

Limitation on Distributions; Redemptions and Prepayments of Indebtedness

     74   

Section 7.7.

  

Limitation on Investments and New Businesses

     75   

Section 7.8.

  

Limitation on Credit Extensions

     76   

Section 7.9.

  

Transactions with Affiliates; Creation and Dissolution of Subsidiaries

     76   

Section 7.10.

  

Certain Contracts; Amendments; Multiemployer ERISA Plans

     77   

Section 7.11.

  

Current Ratio

     77   

Section 7.12.

  

Leverage Ratio

     78   

Section 7.13.

  

Fiscal Year

     78   

ARTICLE VIII -    EVENTS OF DEFAULT AND REMEDIES

  

Section 8.1.

  

Events of Default

     78   

Section 8.2.

  

Remedies

     80   

ARTICLE IX -    AGENT AND ISSUERS

  

Section 9.1.

  

Appointment and Authority of Agent

     81   

Section 9.2.

  

Exculpation, Agent’s Reliance, Etc.

     81   

Section 9.3.

  

Credit Decisions

     82   

Section 9.4.

  

Indemnification

     82   

Section 9.5.

  

Rights as Lender

     83   

Section 9.6.

  

Sharing of Set-Offs and Other Payments

     83   

Section 9.7.

  

Investments

     83   

Section 9.8.

  

Benefit of Article IX

     83   

Section 9.9.

  

Resignation

     84   

ARTICLE X -    MISCELLANEOUS

  

Section 10.1.

  

Waivers and Amendments; Acknowledgments

     84   

Section 10.2.

  

Survival of Agreements; Cumulative Nature

     87   

Section 10.3.

  

Notices

     87   

Section 10.4.

  

Payments of Expenses; Indemnity

     87   

 

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TABLE OF CONTENTS

(continued)

 

           Page  

Section 10.5.

  

Joint and Several Liability; Parties in Interest

     89   

Section 10.6.

  

Assignments

     89   

Section 10.7.

  

Confidentiality

     91   

Section 10.8.

  

Governing Law; Submission to Process

     92   

Section 10.9.

  

Limitation on Interest

     92   

Section 10.10.

  

Termination: Limited Survival

     93   

Section 10.11.

  

Severability

     93   

Section 10.12.

  

Counterparts

     93   

Section 10.13.

  

Waiver of Jury Trial, Punitive Damages, etc.

     93   

Section 10.14.

  

Release of Collateral; Collateral Matters; Hedging

     93   

Section 10.15.

  

Amendment and Restatement

     94   

Section 10.16.

  

Other Agents

     94   

Section 10.17.

  

USA Patriot Act Notice

     94   

Section 10.18.

  

Posting of Approved Electronic Communications

     94   

Section 10.19.

  

Assignment and Reallocation of Existing Loans, Etc.

     96   

 

SCHEDULES   

Schedule 1.

  

Form of Disclosure Schedule

Schedule 2.

  

Security Schedule

Schedule 3.

  

Lenders Schedule

EXHIBITS

  

Exhibit A-1.

  

Form of Revolving Loan Note

Exhibit B.

  

Borrowing Notice

Exhibit C.

  

Continuation/Conversion Notice

Exhibit D.

  

Certificate Accompanying Financial Statements

Exhibit E.

  

Assignment and Acceptance

Exhibit F.

  

Form of Subsidiary Guaranty

Exhibit G.

  

Form of Issuance Request

 

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THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”‘) is made as
of May 5, 2011, by and among W&T Offshore, Inc. (herein called “Borrower”), a
Texas corporation and successor-by-reincorporation to W&T Offshore, Inc., a
Nevada corporation, the various financial institutions and other persons from
time to time parties hereto, as lenders (collectively, the “Lenders”), each
Issuer referred to below, as issuers of Letters of Credit (in such capacity
together with any successors thereto, each an “Issuer”), Toronto Dominion
(Texas) LLC (“TD (Texas)”), individually and as agent (herein called “Agent”)
for the Lenders, BNP Paribas, as syndication agent (the “Syndication Agent”),
Natixis, The Bank of Nova Scotia and Bank of Scotland, as Co-Documentation
Agents (the “Co-Documentation Agents”), and TD Securities (USA) LLC and BNP
Paribas Securities Corp., as Co-Lead Arrangers and Co-Bookrunners (the
“Arrangers”).

W I T N E S S E T H:

WHEREAS, W&T Offshore, Inc., a Nevada corporation and predecessor to W&T
Offshore, Inc., a Texas corporation, the Lenders (or their
predecessors-in-interest), the Issuers (or their predecessors-in-interest) and
Toronto Dominion (Texas) LLC have heretofore entered into that certain Amended
and Restated Credit Agreement, dated as of February 24, 2000 (as so amended), as
amended and restated by that certain Second Amended and Restated Credit
Agreement dated as of March 15, 2005, among the Borrower, the Lenders, the
Issuers and the Agent, as further amended and restated by that certain Third
Amended and Restated Credit Agreement, dated as of May 26, 2006 (as amended and
modified from time to time, the “Existing Credit Agreement”), pursuant to which
the Lenders and Issuers agreed to make Loans to the Borrower or issue or
participate in Letters of Credit on behalf of the Borrower;

WHEREAS, pursuant to the Existing Credit Agreement, the Borrower and its
Subsidiaries have entered into mortgages, guarantees and other security
documents (collectively, the “Existing Security Documents”) under which (a) the
Borrower and its Subsidiaries have granted Liens to the Agent for the benefit of
the Lender Parties on substantially all of their properties and assets to secure
the payment and performance of the Obligations (as defined in the Existing
Credit Agreement) and (b) the Subsidiaries of the Borrower have guaranteed the
Obligations (as defined in the Existing Credit Agreement);

WHEREAS, the indebtedness of the Borrower to the Lenders is evidenced by certain
promissory notes of the Borrower (collectively, the “Existing Notes”) and is
secured by the Existing Security Documents (the Existing Credit Agreement, the
Existing Notes, the Existing Security Documents and the various related
agreements, documents and instruments are referred to collectively as the
“Existing Credit Documents”);

WHEREAS, in order to acquire oil and gas properties in the future, and to
provide for working capital and general corporate purposes, including to acquire
oil and gas properties, the Borrower has requested that the Lenders and Issuers
provide:

(a) Revolving Loan Commitments (to include availability for Revolving Loans and
Letters of Credit and repayment of Reimbursement Obligations) pursuant to which
Revolving Loans will be made from time to time prior to the Revolving Loan
Commitment Termination Date; and

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(b) Letter of Credit Commitments pursuant to which Letters of Credit will be
issued from time to time prior to the Revolving Loan Commitment Termination
Date.

WHEREAS, the Borrower, Agent, Lenders and the Issuers are willing, on the terms
and subject to the conditions hereinafter set forth (including Article V), to
amend and restate the Existing Credit Agreement in order to extend Commitments
and make Loans to the Borrower (which Loans shall be used, among other things,
in order to extend, renew and continue the Existing Notes and the corresponding
loans under the Existing Credit Agreement to acquire oil and gas properties in
the future, and to provide for working capital and general corporate purposes),
and to issue and participate in such Letters of Credit hereunder for the account
of the Borrower; and

WHEREAS, the parties hereto have agreed that it is in their respective best
interests to enter into this Agreement to extend, renew and continue, but not to
extinguish, terminate or novate, the Existing Notes and the corresponding loans
and to amend, restate and supersede, but not to extinguish, terminate or cause
to be novated the Indebtedness under, the Existing Credit Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein the parties hereto agree to amend and restate the Existing
Credit Agreement as follows:

ARTICLE I - Definitions and References

Section 1.1. Defined Terms. As used in this Agreement, each of the following
terms has the meaning given it in this Section 1.1 or in the sections and
subsections referred to below:

“ABR Loan” means a Loan that bears interest at a fluctuating rate determined by
reference to the Alternate Base Rate.

“ABR Payment Date” means (a) the last Business Day of March, June, September and
December of each year, beginning with the first such Business Day following the
Closing Date, and (b) any day on which past due interest or principal is owed
under the Notes and is unpaid. If the terms of any Loan Document provide that
payments of interest or principal on the Notes shall be deferred from one ABR
Payment Date to another day, such other day shall also be an ABR Payment Date.

“Affiliate” means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be “controlled by” any other Person if such other Person possesses,
directly or indirectly, 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.

“Agent” means TD (Texas), as Agent hereunder, and its successors in such
capacity.

“Agreement” means this Credit Agreement.

 

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“Aggregate Commitments” means the Revolving Loan Commitments of all Lenders.

“Aggregate Percentage Share” means, at any time and with respect to any Lender,
the percentage obtained by dividing (a) the Revolving Loan Commitment of such
Lender, by (b) the aggregate Revolving Loan Commitments of all Lenders. If the
Revolving Loan Commitments have terminated or expired, the Aggregate Percentage
Shares shall be determined using the Revolving Loan Commitments most recently
set forth in the Register, giving effect to any assignments made in accordance
with Section 10.6 or any increases or decreases in Revolving Loan Commitments
made in accordance with this Agreement.

“Alternate Base Rate” means, for any day, the per annum rate equal to the
Applicable Margin plus the highest of the determinable of (i) the Prime Rate,
(ii) the Federal Funds Rate plus one-half percent (0.5%) per annum, and
(iii) the Reference Eurodollar Rate plus one percent (1%) per annum. If the
Prime Rate or the Federal Funds Rate changes after the date hereof, the
Alternate Base Rate shall be automatically increased or decreased, as the case
may be, without notice to Borrower, from time to time as of the effective time
of each such change. The Alternate Base Rate shall in no event, however, exceed
the Highest Lawful Rate. If for any reason the Agent shall have determined
(which determination shall be conclusive and binding, absent manifest error)
that it is unable to ascertain the Federal Funds Rate for any reason, including,
without limitation, the inability or failure of the Agent to obtain sufficient
bids or publications in accordance with the terms hereof, the Alternate Base
Rate shall be determined using the Prime Rate until the circumstances giving
rise to such inability no longer exist.

“Applicable Lending Office” means, with respect to each Lender, such Lender’s
Domestic Lending Office in the case of ABR Loans and such Lender’s Eurodollar
Lending Office in the case of Eurodollar Loans.

“Applicable Margin” means, for any day and with respect to all Loans maintained
as Eurodollar Loans or ABR Loans, the applicable percentage set forth below
corresponding to the Borrowing Base Utilization Percentage:

 

If the Borrowing Base Utilization Percentage is:

   Then the Applicable
Margin for
Eurodollar Loans is:     Then the Applicable
Margin for ABR
Loans is:  

Greater than or equal to 90%

     2.75 %      1.75 % 

Greater than or equal to 60% but less than 90%

     2.50 %      1.50 % 

Greater than or equal to 30% but less than 60%

     2.25 %      1.25 % 

Less than 30%

     2.00 %      1.00 % 

 

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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.

“Approved Counterparty” means any Lender or any affiliate of any Lender.

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

“Arrangers” means TD Securities (USA) LLC and BNP Paribas Securities Corp.,
collectively, as Co-Lead Arrangers; and “Arranger” means either of them.

“Arm’s Length Transaction” means, with respect to any transaction between a
Restricted Person and one of its Affiliates, that the terms thereof are no less
favorable to such Restricted Person than those which could have been obtained at
the time of such transaction in an arm’s-length dealing with Persons other than
such Affiliate.

“Assignment and Acceptance” means each Assignment and Acceptance, substantially
in the form of Exhibit E attached hereto or in another form acceptable to the
Agent.

“Authorized Officer” means, as to any Person, its President, its Chief Executive
Officer, its Chief Financial Officer, its Chief Accounting Officer, its General
Counsel, its Executive Vice President, its Treasurer, or any other officer
specified as such to the Agent in writing by any of the aforementioned officers
of such Person or by resolution from the board of directors or similar governing
body of such Person.

“Available Distribution Amount” means, with respect to any Fiscal Year,
$60,000,000.

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

“Bonds” is defined in Section 7.1 (h).

“Borrower” means W&T Offshore, Inc., a Texas corporation, and its permitted
assigns and successors.

“Borrowing” means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a continuation or conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.

“Borrowing Base” means, at the particular time in question, either the Initial
Availability Amount or such other amount provided for in Section 2.8 or the
amount determined by Agent or the Required Lenders, as the case may be, in
accordance with the provisions of Section 2.9, as such amount may be reduced
pursuant to the terms of this Agreement (including Sections 2.9 and 7.5).

 

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“Borrowing Base Deficiency” has the meaning given it in Section 2.7(b).

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the Facility Usage on such
day, and the denominator of which is the Borrowing Base in effect on such day.

“Borrowing Notice” means a written or telephonic request, or a written
confirmation, made by an Authorized Officer of Borrower which meets the
requirements of Section 2.2.

“Business Day” means a day, other than a Saturday or Sunday or United States
federal holiday, on which commercial banks are open for business with the public
in New York, New York and Houston, Texas. Any Business Day in any way relating
to Eurodollar Loans (such as the day on which an Interest Period begins or ends)
must also be a day on which, in the judgment of Agent, significant transactions
in dollars are carried out in the interbank eurocurrency market in London,
England.

“Capital Lease Obligation” means, at the time any determination thereof is to be
made, the amount of the liability in respect of a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP.

“Capital Stock” means (a) in the case of a corporation, corporate stock, (b) in
the case of an association, limited liability company or other business entity,
shares, interests, participations, rights or other equivalents (however
designated) thereof, (c) in the case of a partnership, partnership interests
(whether general or limited) and (d) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

“Cash Equivalents” means investments in:

(a) marketable obligations, maturing within 12 months after acquisition thereof,
issued or unconditionally guaranteed by the United States of America or an
instrumentality or agency thereof and entitled to the full faith and credit of
the United States of America;

(b) demand deposits, and time deposits (including certificates of deposit)
maturing within 12 months from the date of deposit thereof, with any office of
any Lender or with a domestic office of any national or state bank or trust
company which is organized under the Laws of the United States of America or any
state therein, which has capital, surplus and undivided profits of at least
$500,000,000, and whose certificates of deposit have at least the third highest
credit rating given by either Rating Agency;

(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any commercial bank meeting the specifications of clause (b) above;

(d) open market commercial paper, maturing within 270 days after acquisition
thereof, which has the highest or second highest credit rating given by either
Rating Agency; and

 

5

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(e) investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (a) through
(d) above.

“Casualty Event” means any loss, casualty or other insured damage to, or any
taking under power of eminent domain or by condemnation or similar proceeding
of, any Collateral.

“Change in Control” means the occurrence of any of the following: (a) the sale,
lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Borrower and its Subsidiaries taken as a
whole, to any “person” or group of related “persons” (a “Group”) (as such terms
are used in Section 13(d)(3) of the Exchange Act), (b) the adoption of a plan
relating to the liquidation or dissolution of the Borrower, (c) the consummation
of any transaction (including, without limitation, any purchase, sale,
acquisition, disposition, merger or consolidation) the result of which is that
any “Person” (as defined above) or Group becomes the “beneficial owner” (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of more
than 25% of the outstanding Voting Stock of the Borrower, provided, however,
that no Change of Control shall have occurred as a result of the consummation of
any such transaction if, immediately following such consummation, Tracy W. Krohn
is the beneficial owner of more than 50% of the outstanding Voting Stock of the
Borrower, or (d) the first day on which a majority of the members of the Board
of Directors of the Borrower are not Continuing Directors.

“Closing Date” means the date on which the conditions specified in Section 4.1
are satisfied (or waived in accordance with Section 10.1).

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

“Collateral” means all property of any kind which is subject to a Lien in favor
of Lenders (or in favor of Agent for the benefit of Lenders) or which, under the
terms of any Security Document, is purported to be subject to such a Lien.

“Commitment” means, as the context may require, any Revolving Loan Commitment or
Letter of Credit Commitment.

“Commitment Fee Rate” means, on each day, a rate per annum equal to one-half of
one percent (0.500%).

“Commitment Period” means the period from and including the Closing Date until
and including the Revolving Loan Commitment Termination Date (or, if earlier,
the day on which the Notes first become due and payable in full).

“Commitment Termination Date” means the Revolving Loan Commitment Termination
Date.

“Commitment Termination Event” means

(a) the occurrence of any Default described in clauses (i) through (iii) of
Section 8.1(j) with respect to the Borrower; or

 

6

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(b) the occurrence and continuance of any other Event of Default and either

(i) the declaration of the Loans to be due and payable pursuant to Section 8.1
or 8.2, or

(ii) in the absence of such declaration, the giving of notice by the Agent,
acting at the direction of the Required Lenders, to the Borrower that the
Commitments have been terminated.

“Communications” is defined in Section 10.18(a).

“Consolidated” refers to the consolidation of any Person, in accordance with
GAAP, with its properly consolidated subsidiaries. References herein to a
Person’s Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.

“Consolidated Interest Expense” means as to any Person or Persons for any
period, the Consolidated interest expense of such Person and its Subsidiaries
for such period determined in accordance with GAAP, whether paid or accrued
including, without limitation, amortization of original issue discount and
capitalized debt issuance costs, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to the present value of the net rental payments under sale and leaseback
transactions, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers’ acceptance financings, and net payments
(if any) pursuant to Hedging Contracts described in Section 7.3(b).

“Consolidated Net Income” means, as to any Person or Persons for any period, the
net income of such Person or Persons (determined without duplication on a
Consolidated basis and in accordance with GAAP).

“Consolidated Tangible Net Worth” means the remainder of all Consolidated assets
of Borrower, other than intangible assets (including without limitation as
intangible assets such assets as patents, copyrights, licenses, franchises,
goodwill, trade names, trade secrets and leases other than oil, gas or mineral
leases or leases required to be capitalized under GAAP), minus Borrower’s
Consolidated Liabilities.

“Continuation/Conversion Notice” means a written or telephonic request, or a
written confirmation, made by an Authorized Officer of Borrower which meets the
requirements of Section 2.3.

“Continuing Directors” means, as of any date of determination, any member of the
Board of Directors of Borrower who (a) was a member of such Board of Directors
on the date hereof or (b) was nominated for election or elected to such Board of
Directors with the approval of (i) two-thirds of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (ii) two-thirds of those Directors who were previously approved by
Continuing Directors.

 

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“Covered Property” is defined in Section 6.2(f).

“Default” means any Event of Default and any default, event or condition which
would, with the giving of any requisite notices and the passage of any requisite
periods of time, constitute an Event of Default.

“Default Rate” means, at the time in question, (a) with respect to Eurodollar
Loans, the per annum rate equal to two percent (2.0%) per annum plus the
Eurodollar Rate then in effect and (b) with respect to ABR Loans and all other
Obligations, the per annum rate equal to two percent (2.0%) per annum plus the
Alternate Base Rate then in effect. The Default Rate shall never exceed the
Highest Lawful Rate.

“Defaulting Lender” means any Lender, as reasonably determined by the Agent,
that (a) has failed, within two Business Days of the date required to be funded
or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its
participations in Letters of Credit or (iii) pay over to any Restricted Person
any other amount required to be paid by it hereunder, unless, in the case of
clause (i) above, such Lender notifies the Agent in writing that such failure is
the result of such Lender’s good faith determination that a condition precedent
to funding (specifically identified and including the particular default, if
any) has not been satisfied, (b) has notified the Borrower, any other Restricted
Person, the Agent, any Issuing Bank or any Lender in writing, or has made a
public statement to the effect, that it does not intend or expect to comply with
any of its funding obligations under this Agreement (unless such writing or
public statement indicates that such position is based on such Lender’s good
faith determination that a condition precedent (specifically identified and
including the particular default, if any) to funding a loan under this Agreement
cannot be satisfied) or generally under other agreements in which it commits to
extend credit, (c) has failed, within three Business Days after request by the
Agent, any Issuing Bank or any Lender, acting in good faith, to provide a
certification in writing from an authorized officer of such Lender that it will
comply with its obligations (and is financially able to meet such obligations)
to fund prospective Loans and participations in then outstanding Letters of
Credit under this Agreement, provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon such Restricted Person’s
receipt of such certification in form and substance satisfactory to it and the
Administrative Agent, or (d) (i) becomes or is insolvent or has a parent company
that has become or is insolvent or (ii) becomes the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee or custodian
appointed for it, or, other than by way of an Undisclosed Administration, 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 corporate or board or other action seeking or agreeing
to the appointment of any such Person.

“Determination Date” has the meaning given it in Section 2.9.

“Disbursement” means, with respect to an Issuer, the amount disbursed by such
Issuer on a Disbursement Date.

“Disbursement Date” is defined in Section 2.11(e).

 

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“Disclosure Report” means either a notice given by Borrower under Section 6.4 or
a certificate given by Borrower’s chief financial officer under Section 6.2(b).

“Disclosure Schedule” means Schedule 1 hereto.

“Distribution” means (a) any dividend or other distribution made by a Restricted
Person on or in respect of the Capital Stock of such Restricted Person
(including any option or warrant to buy such an equity interest), or (b) any
payment made by a Restricted Person to purchase, redeem, acquire or retire any
Capital Stock in such Restricted Person (including any such option or warrant).

“Domestic Lending Office” means, with respect to any Lender, the office of such
Lender specified as its “Domestic Lending Office” below its name on the Lender
Schedule attached hereto, or such other office as such Lender may from time to
time specify to Borrower and Agent.

“EBITDA” means, with respect to any Person for any period, the Consolidated Net
Income of such Person for such period plus (a) an amount equal to any
extraordinary loss, plus any net loss realized in connection with an asset sale
(together with any related provisions for taxes by a Restricted Person), to the
extent such losses were included in computing such Consolidated Net Income, plus
(b) an amount equal to the provision for taxes based on income or profits of
such Person and its Subsidiaries for such period (including state franchise
taxes), to the extent that such provision for taxes was deducted in computing
such Consolidated Net Income, plus (c) Consolidated Interest Expense of such
Person, to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (d) depreciation, depletion and amortization
expenses (including amortization of goodwill and other intangibles) for such
Person and its Subsidiaries for such period to the extent that such
depreciation, depletion and amortization expenses were deducted in computing
such Consolidated Net Income, plus (e) accretion expense for abandonment
retirement obligations, plus (f) other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period or amortization of a prepaid cash expense that
was paid in a prior period or to the extent it represents a restructuring
change) of such Person and its Subsidiaries for such period to the extent that
such other non-cash charges were deducted in computing such Consolidated Net
Income, in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation, depletion and amortization and other non-cash
charges and expenses of, the Subsidiaries of the relevant Person shall be added
to Consolidated Net Income of such Person only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be distributed to such Person
by such Subsidiary without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that such Subsidiary
or its stockholders.

“Eligible Transferee” means a Person which either (a) is an Issuer, a Lender or
an Affiliate of Lender or an Approved Fund, or (b) is consented to as an
Eligible Transferee by (i) Agent, (ii) with respect solely to transfers of
Revolving Loans or Revolving Loan Commitments,

 

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each Issuer that has issued a Letter of Credit hereunder that remains
outstanding, and (iii) so long as no Default or Event of Default is continuing,
by Borrower, which consents in each case will not be unreasonably withheld
(provided that no Person organized outside the United States may be an Eligible
Transferee without the consent of Borrower if Borrower would be required to pay
withholding taxes on interest or principal owed to such Person).

“Energy VI” means W&T Energy VI LLC, a Delaware limited liability company.

“Energy VII” means W&T Energy VII LLC, a Delaware limited liability company.

“Engineering Report” means the Initial Engineering Report and each subsequent
engineering report delivered pursuant to Section 6.2(d).

“Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, obligations, liabilities, losses, proceedings, decrees,
judgments, penalties, fees, fines, demand letters, orders, directives, claims
(including claims for contribution or claims involving liability in tort,
strict, absolute or otherwise), Liens, notices of noncompliance or violation, or
claims for legal fees or costs of investigations or proceedings, relating to any
Environmental Law or arising from the actual or alleged presence or Release of
any Hazardous Material, including without limitation, enforcement, mitigation,
cleanup, removal, response, remedial or other actions or damages or
contribution, indemnification, cost recovery, compensation or injunctive or
declaratory relief pursuant to any Environmental Law.

“Environmental Laws” means all applicable Laws relating to pollution or the
regulation or protection of human health or safety (to the extent such health or
safety relate to exposure to Hazardous Materials), natural resources or the
environment (including ambient air, surface water, ground water, land, natural
resources or wetlands), including those relating to any release of hazardous
materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, management, generation, recycling
or handling of, or exposure to, Hazardous Materials. Without limitation,
Environmental Laws include, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980 and the Hazardous and Solid Waste Amendments of 1984; the
Toxic Substances Control Act, 15 U.S.C.; the Federal Water Pollution Control
Act; the Hazardous Materials Transportation Act; the Clean Air Act; the Safe
Drinking Water Act; the Federal Insecticide, Fungicide and Rodenticide Act, the
Endangered Species Act and The Oil Pollution Act, each as amended and their
state and local counterparts or equivalents.

“Equity Investment” means relative to any Person, any ownership or similar
interest held by such Person in any other Person consisting of any purchase or
other acquisition of any capital stock, warrants, rights, options, obligations
or other securities of such Person, limited partnership interests, membership
interest in a limited liability company, or beneficial interests in a trust.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute of similar import, together with
all rules and regulations promulgated with respect thereto.

 

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“ERISA Affiliate” means Borrower and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code of 1986, as amended.

“ERISA Plan” means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability (other than a “multiemployer plan” as
that term is defined in Section 4001 of ERISA).

“Eurodollar Lending Office” means, with respect to any Lender, the office of
such Lender specified as its “Eurodollar Lending Office” below its name on the
Lender Schedule attached hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to Borrower and Agent.

“Eurodollar Loan” means a Loan bearing interest at a fluctuating rate determined
by reference to the Eurodollar Rate.

“Eurodollar Margin” means the Applicable Margin in effect at such time for
Eurodollar Loans.

“Eurodollar Rate” means with respect to each particular Eurodollar Loan and the
associated LIBOR Rate and Reserve Percentage, the rate per annum calculated by
Agent (rounded upwards, if necessary, to the next higher 0.01%) determined on a
daily basis pursuant to the following formula:

 

 

Eurodollar Rate =

  LIBOR Rate  

    + Eurodollar Margin

    100.0% - Reserve Percentage  

The Eurodollar Rate for any Eurodollar Loan shall change whenever the Eurodollar
Margin or the Reserve Percentage changes. No Eurodollar Rate shall ever exceed
the Highest Lawful Rate.

“Eurodollar Rate Payment Date” means, with respect to any Eurodollar Loan:
(a) the day on which the related Interest Period ends, and (b) any day on which
past due interest or past due principal is owed under the Notes with respect to
such Eurodollar Loan and is unpaid. If the terms of any Loan Documents provide
that payments of interest or principal with respect to such Eurodollar Loan
shall be deferred from one Eurodollar Rate Payment Date to another day, such
other day shall also be a Eurodollar Rate Payment Date.

“Evaluation Date” means the following dates:

(a) Each date which Required Lenders, at their option, specify as a date as of
which the Borrowing Base is to be redetermined, provided that each such date
must be the first or last day of a current calendar month and that Required
Lenders shall not be entitled to request any such redetermination more than once
during any Fiscal Year;

(b) April 15 and October 15 of each Fiscal Year, beginning October 15, 2011;

 

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(c) The date of each sale of interests in oil and gas properties that would
permit the Agent and the Lenders to redetermine the Borrowing Base pursuant to
the terms of Section 7.5; and

(d) Each date which the Borrower, at its option, specifies as a date as of which
the Borrowing Base is to be redetermined, provided that each such date must be
the first or last day of a current calendar month and that the Borrower shall
not be entitled to request any such redetermination more than once during any
Fiscal Year.

“Event of Default” has the meaning given it in Section 8.1.

“Excepted Liens” means: (a) 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; (b) 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; (c) 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 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 other Restricted Person or
materially impair the value of such property subject thereto; (d) 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 of
Governors and no such deposit account is intended by Borrower or any other
Restricted Person to provide collateral to the depository institution;
(e) easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any property of the Borrower or any other
Restricted Person 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, that do not secure
any monetary obligations and 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 other Restricted

 

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Person or materially impair the value of such property subject thereto;
(f) 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;
(g) 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
(h) royalties, overriding royalties, reversionary interests, production payments
and similar burdens granted by a Restricted Person with respect to its oil and
gas properties to the extent such burdens do not reduce such Restricted Person’s
net interests in production in its oil and gas properties below the interests
reflected in each Engineering Report or the interests warranted under this
Agreement or the Security Documents and do not operate to deprive any Restricted
Person of any material rights in respect of its assets or properties (except for
rights customarily granted with respect to such interests).

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

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
the Agent, any Lender, any Issuer or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder or under any
other Loan Document, (a) Taxes imposed on or measured by the recipient’s net
income (however denominated), franchise Taxes imposed on the recipient, and
branch profits Taxes imposed on the recipient, in each case, (i) by the United
States of America (or any political subdivision thereof) or by the jurisdiction
(or any political subdivision thereof) 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, or (ii) by any other
jurisdiction as a result of a present or former connection between the recipient
and the jurisdiction imposing such Tax (other than a connection arising solely
from such recipient having executed, delivered, become a party to, perforrned
its obligations under or received payments under, received or perfected a
security interest under, or enforced, any Loan Document), (b) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 3.8), 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 or inability to comply with Section 3.6(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 from the Borrower with respect to such withholding tax
pursuant to Section 3.6(a), (c) any United States backup withholding Tax and
(d) any Taxes imposed under FATCA.

“Existing Credit Agreement” is defined in the first recital.

“Existing Credit Documents” is defined in the third recital.

“Existing Lender” is defined in Section 10.19.

“Existing Notes” is defined in the third recital.

 

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“Existing Security Documents” is defined in the second recital.

“Existing Senior Notes” means the Borrower’s 8.25% senior notes due 2014.

“Facility Amount” means $900,000,000.

“Facility Usage” means, at the time in question, the aggregate outstanding
principal amount of all Loans of all Lenders plus all Letter of Credit
Outstandings of all Issuers.

“Fairway Acquisition” means the acquisition of certain oil and gas properties
from Shell Offshore, Inc. pursuant to that certain Amended and Restated Letter
of Intent dated April 5, 2011 by and between the Borrower, as buyer, and Shell
Offshore Inc., as seller on terms approved by the Agent in its sole and
reasonable discretion.

“Fairway Acquisition Effective Date” is defined in Section 4.2.

“FATCA” means Sections 1471 through 1474 of the Code (and any amended or
successor sections thereto) and any present or future regulations or official
interpretations thereof.

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent in
good faith.

“Fiscal Quarter” means a three-month period ending on
March 31, June 30, September 30, or December 31 of any year.

“Fiscal Year” means a twelve-month period ending on December 31 of any year.

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

“Four Quarter Period” means as of the end of any Fiscal Quarter, the period of
four consecutive Fiscal Quarters then ended.

“GAAP” means those generally accepted accounting principles and practices which
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any

 

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such successor) in order for such principle or practice to continue as a
generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to Borrower or with respect to
Borrower and its Consolidated subsidiaries may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
each Lender and Majority Lenders agree to such change insofar as it affects the
accounting of Borrower or of Borrower and its Consolidated subsidiaries.

“Hazardous Materials” means (a) any petroleum or petroleum product (including
crude oil or fraction thereof), explosive, radioactive material, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, lead and radon gas;
(b) any chemical, material, gas substance waste which is defined as or included
in the definition of “hazardous substance”, “hazardous waste”, “hazardous
material”, “extremely hazardous substance”, “hazardous chemical”, “toxic
substance”, “toxic chemical”, “contaminant” or “pollutant” or words of similar
import under any Environmental Law; and (c) any other chemical, material, gas
substance or waste, exposure to which, or the presence, use, generation,
treatment, Release, transport or storage of which is prohibited, limited or
regulated under any Environmental Law.

“Hedging Contract” means (a) any agreement providing for options, swaps, floors,
caps, collars, forward sales or forward purchases involving interest rates,
commodities or commodity prices, equities, currencies, bonds, or indexes based
on any of the foregoing, (b) any option, futures or forward contract traded on
an exchange, and (c) any other hedging contract, derivative agreement or other
similar agreement or arrangement.

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender.

“Increased Costs” is defined in Section 3.9.

“Indebtedness” of any Person means Liabilities in any of the following
categories:

(a) Liabilities for borrowed money,

(b) Liabilities constituting an obligation to pay the deferred purchase price of
property or services,

(c) Liabilities evidenced by a bond, debenture, note or similar instrument,

(d) Liabilities which (i) would under GAAP be shown on such Person’s balance
sheet as a liability, and (ii) is payable more than one year from the date of
creation thereof (other than reserves for taxes and reserves for contingent
obligations),

(e) Liabilities arising under Hedging Contracts,

 

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(f) Capitalized Lease Obligations and Liabilities arising under operating leases
and Liabilities arising with respect to sale and lease-back transactions,

(g) Liabilities arising under conditional sales or other title retention
agreements,

(h) Liabilities owing under direct or indirect guaranties of Liabilities of any
other Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Liabilities of any other
Person (such as obligations under working capital maintenance agreements,
agreements to keep-well, or agreements to purchase Liabilities, assets, goods,
securities or services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection,

(i) Liabilities (for example, repurchase agreements) consisting of an obligation
to purchase securities or other property, if such Liabilities arises out of or
in connection with the sale of the same or similar securities or property,

(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,

(k) Liabilities with respect to payments received in consideration of oil, gas,
or other minerals yet to be acquired or produced at the time of payment
(including obligations under “take-or-pay” contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment), or

(1) Liabilities with respect to other obligations to deliver goods or services
in consideration of advance payments therefor;

provided, however, that the “Indebtedness” of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until (x) such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor or, (y) if such Person is contesting any such Liability in
good faith by appropriate proceedings (promptly initiated and diligently
conducted) and has set aside on its books adequate reserves therefor, such
Liability is outstanding more than 180 days past the original invoice or billing
date therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.

“Indentures” is defined in Section 7.1(h).

“Initial Availability Amount” means the amount provided for in Section 2.8.

“Initial Engineering Report” means, the engineering report of Netherland Sewell
and Associates, Inc., dated January 1, 2011 concerning oil and gas properties of
Borrower and its Subsidiaries reflecting reserves of Borrower as of January 1,
2011.

 

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“Initial Financial Statements” means the audited annual financial statements of
Borrower dated as of December 31, 2010.

“Insurance Schedule” means a schedule of the insurance of the Borrower and its
Subsidiaries to be delivered on or near the Closing Date in form and substance
satisfactory to the Agent, as such schedule may be amended or otherwise modified
from time to time with the consent of the Agent.

“Interest Period” means, with respect to each particular Eurodollar Loan in a
Borrowing, a period of 1, 2, 3 or 6 months, as specified in the Borrowing Notice
applicable thereto, beginning on and including the date specified in such
Borrowing Notice (which must be a Business Day), and ending on but not including
the same day of the month as the day on which it began (e.g., a period beginning
on the third day of one month shall end on but not include the third day of
another month), provided that each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected which would extend
past the date on which the associated Note is due and payable in full.

“Investment” means any investment, in cash or by delivery of property made,
directly or indirectly in any Person, whether by acquisition of shares of
Capital Stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise.

“Investment Percentage” means, as to any Person and any Restricted Person, the
percentage of total Capital Stock of such Person owned by such Restricted
Person.

“Issuance Request” means a request and certificate duly executed by the chief
executive, accounting or financial authorized officer of the Borrower,
substantially in the form of Exhibit G attached hereto (with such changes
thereto as may be agreed upon from time to time by the Agent and the Borrower).

“Issuer” means each of BNP Paribas, Natixis and The Toronto-Dominion Bank, New
York Branch (or one of its respective Affiliates) or any other Lender which has
agreed to issue one or more Letters of Credit at the request of the Agent (which
shall, at the Borrower’s request, notify the Borrower from time to time of the
identity of such other Lender); provided that no Issuer without its consent
shall be required to have outstanding at any time Letters of Credit issued by
such Issuer having a Stated Amount of more than $30,000,000 in the aggregate.

“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment,
order, decree, permit, concession, franchise, license, agreement or other
governmental restriction of the United States or any state or political
subdivision or regulatory agency thereof or of any foreign country or any
department, province or other political subdivision thereof, including without
limitation Environmental Laws.

“Lender Parties” means the Agent, the Other Agents, the Issuers, the Lenders and
Affiliates of Lenders who have entered into Hedging Contracts with the Borrower
and their successors, transferees and assigns; and “Lender Party” means any of
them.

 

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“Lenders” means each signatory hereto (other than Borrower and Restricted
Persons a party hereto), including TD (Texas) in its capacity as a lender
hereunder rather than as Agent, and the successors of each such party as holder
of a Note.

“Lending Office” means, with respect to any Lender, the office, branch, or
agency through which it funds its Eurodollar Loans; and, with respect to Agent,
the office, branch, or agency through which it administers this Agreement.

“Letter of Credit” is defined in Section 2.11(a).

“Letter of Credit Commitment” means, relative to any Lender, such Lender’s
obligation to issue (in the case of an Issuer) or participate in (in the case of
all Lenders) Letters of Credit pursuant to Section 2.11.

“Letter of Credit Commitment Amount” means $90,000,000.

“Letter of Credit Fee” is defined in Section 2.5(c).

“Letter of Credit Outstandings” means, at any time, an amount equal to the sum
of (a) the aggregate Stated Amount at such time of all Letters of Credit then
outstanding and undrawn (as such aggregate Stated Amount shall be adjusted, from
time to time, as a result of drawings, the issuance of Letters of Credit, or
otherwise), plus (b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.

“Leverage Ratio” means for any Person, as of the last day of any Fiscal Quarter,
the ratio of

(a) Total Debt of such Person and its Consolidated Subsidiaries outstanding on
the last day of such Fiscal Quarter

to

(b) EBITDA for such Person and its Consolidated Subsidiaries computed for the
period consisting of such Fiscal Quarter and each of the three immediately
preceding Fiscal Quarters.

“Liabilities” means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.

“LIBOR Rate” means, with respect to each particular Eurodollar Loan and the
related Interest Period, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters LIBOR01 page (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term “LIBOR Rate” shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for

 

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deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). The
LIBOR Rate determined by Agent with respect to a particular Eurodollar Loan
shall be fixed at such rate for the duration of the associated Interest Period.
If Agent is unable so to determine the LIBOR Rate for any Eurodollar Loan,
Borrower shall be deemed not to have elected such Eurodollar Loan and Agent
shall promptly provide written notice thereof to Borrower.

“Lien” means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to him or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows him to have such Liabilities satisfied
out of such property or assets prior to the general creditors of any owner
thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s
or materialman’s lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business. “Lien”
also means any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement or action
which would serve to perfect a Lien described in the preceding sentence,
regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.

“Loan” means a Revolving Loan of any Type.

“Loan Documents” means this Agreement, the Notes, all Letters of Credit, the
Security Documents, any Hedging Contract between Borrower or its Subsidiaries
and any then current Lender or an Affiliate of any then current Lender, and all
other agreements, amendments, certificates, documents, instruments and writings
at any time delivered in connection herewith or therewith (exclusive of term
sheets, commitment letters, correspondence and similar documents used in the
negotiation hereof, except to the extent the same contain information about
Borrower or its Affiliates, properties, business or prospects, but inclusive of
any fee letters between any Restricted Person and any Arranger or Agent).

“Majority Lenders” means Lenders whose Aggregate Percentage Shares exceed fifty
percent (50%); provided that the Commitment of any Defaulting Lender shall be
excluded for purposes of making a determination of the Majority Lenders.

“Material Adverse Change” means a material adverse change in, or material
adverse effect on (a) the business, operations, property or condition (financial
or otherwise) of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower or any Subsidiary to perform any of its obligations
under the Loan Documents to which it is a party or (c) the validity or
enforceability of any of the Loan Documents or the rights or remedies of or
benefits available to the Agent, any other agent, the Issuing Banks or the
Lenders thereunder.

 

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“Maturity Date” means, with respect to Revolving Loans, the Revolving Loan
Maturity Date.

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

“Mortgaged Properties” means all property of any Restricted Person as to which a
mortgage lien, deed of trust lien or similar lien has been granted by such
Restricted Person in favor of the Agent and/or a trustee pursuant to a deed of
trust, mortgage or other similar instrument in form and substance satisfactory
to the Agent in order to secure the Obligations.

“Net Cash Proceeds” means, with respect to any sale or other disposition
(including a Casualty Event), the cash proceeds (including cash equivalents and
any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received) of such sale or other disposition
(including a Casualty Event) received by the Borrower or any of its
Subsidiaries, net of all attorneys’ fees, accountants’ fees, investment banking
fees and other customary expenses, fees and commissions actually incurred by the
Borrower or any of its Subsidiaries and net of taxes paid as of the date of
receipt of such Net Cash Proceeds as a result of such sale or disposition by the
Borrower or any of its Subsidiaries.

“Non-Consenting Lender” is defined in Section 10.1(a).

“Non-Guarantor Subsidiary” means any Subsidiary of Borrower designated as such
on the Disclosure Schedule as of the Closing Date of this Agreement or which
Borrower has designated in writing to Agent to be a Non-Guarantor Subsidiary
pursuant to Section 6.19.

“Non-Recourse Debt” means any Indebtedness, 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 Non-Guarantor Subsidiary to be
performed, satisfied, and paid only out of, the property of such Non-Guarantor
Subsidiary and/or one or more of its Subsidiaries (but only to the extent that
such Subsidiaries are Non-Guarantor Subsidiaries) and/or any other Person (other
than Borrower and/or any other Restricted Person) and (ii) shall have no direct
or indirect recourse (including by way of guaranty, support or indemnity) to the
Borrower or any other Restricted Person or to any of the property of Borrower or
any other Restricted Person, whether for principal, interest, fees, expenses or
otherwise; and (b) the terms and conditions relating to the non-recourse nature
of such Indebtedness are in form and substance reasonably acceptable to the
Agent.

“Note” means a Revolving Loan Note.

“Obligations” means all Liabilities from time to time owing by any Restricted
Person to any Lender Party under or pursuant to any of the Loan Documents.

“Obligation” means any part of the Obligations.

“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.

 

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“Other Agents” means BNP Paribas, as Syndication Agent, Natixis, the Bank of
Nova Scotia and Bank of Scotland and as Co-Documentation Agents, and TD
Securities (USA) LLC and BNP Paribas Securities Corp., as Co-Lead Arrangers and
Co-Bookrunners, and their successors and assigns in such capacities.

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

“Participant Register” shall have the meaning assigned to such term in
Section 10.6(a).

“Patriot Act” is defined in Section 10.17.

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

“Percentage Share” means, as the context may require, any Aggregate Percentage
Share or Revolving Loan Percentage Share, as the case may be.

“Permitted Lien” has the meaning given to such term in Section 7.2.

“Person” means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Tribunal, or any
other legally recognizable entity.

“Platform” is defined in Section 10.18(b).

“Prime Rate” means the rate of interest adopted by Agent as the reference rate
for the determination of interest rates for loans of varying maturities in
dollars to United States residents of varying degrees of creditworthiness and
being quoted at such time by The Toronto-Dominion Bank, New York Branch as its
“base rate” or “prime rate”.

“Projected Oil Production” means the projected production of oil (measured by
volume unit, not sales price) for the term of the contracts or a particular
month, as applicable, from properties and interests owned by any Restricted
Person for thirty (30) days or more which are located in or offshore of the
United States and which have attributable to them proved developed producing oil
reserves, as such production is projected in the most recent report delivered
pursuant to Section 6.2(d) of this Agreement, after deducting projected
production from any properties or interests sold or under contract for sale that
had been included in such report and after adding projected production from any
properties or interests that had not been reflected in such report but that are
reflected in a separate or supplemental reports meeting the requirements of
Section 6.2(d) of this Agreement and otherwise are satisfactory to Agent.

“Projected Gas Production” means the projected production of gas (measured by
BTU equivalent, not sales price) for the term of the contracts or a particular
month, as applicable, from properties and interests owned by any Restricted
Person for thirty (30) days or more which are located in or offshore of the
United States and which have attributable to them proved developed

 

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producing gas reserves, as such production is projected in the most recent
report delivered pursuant to Section 6.2(d) of this Agreement, after deducting
projected production from any properties or interests sold or under contract for
sale that had been included in such report and after adding projected production
from any properties or interests that had not been reflected in such report but
that are reflected in a separate or supplemental reports meeting the
requirements of Section 6.2(d) of this Agreement and otherwise are satisfactory
to Agent.

“Proposed Change” is defined in Section 10.1 (a).

“Public Lender” is defined in Section 10.18(b).

“Rating Agency” means either S&P or Moody’s.

“Reference Eurodollar Rate” means, as of any day, a rate of interest per annum
equal to the Eurodollar Rate (for a one-month Interest Period) on such day or,
if such day is not a Business Day, the immediately preceding Business Day.

“Register” is defined in Section 2.14.

“Regulation D” means Regulation D of the Board of Governors as from time to time
in effect.

“Reimbursement Obligations” is defined in Section 2.11(f).

“Release” means the release, deposit, disposal or leakage of any Hazardous
Material at, into, upon or under any land, water or air or otherwise into the
environment, including, without limitation, by means of burial, disposal,
discharge, emission, injection, leakage, seepage, dumping, pumping, pouring,
escaping, emptying or placement.

“Required Lenders” means Lenders whose Aggregate Percentage Shares exceed
sixty-six and two-thirds percent (66-2/3%); provided that, with respect to any
increase in the Borrowing Base or with respect to any determination or
redetermination of the Borrowing Base that would result in a new Borrowing Base
that is greater than the Borrowing Base then in effect prior to such
determination or redetermination, “Required Lenders” shall mean Lenders whose
Aggregate Percentage Shares equal one hundred percent (100%); and provided
further that, the Commitment of any Defaulting Lender shall be excluded for
purposes of making a determination of the Required Lenders.

“Reserve Percentage” means, on any day with respect to each particular
Eurodollar Loan, the maximum reserve requirement, as determined by Agent
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher
0.01%, which would then apply under Regulation D with respect to “Eurocurrency
liabilities”, as such term is defined in Regulation D, of $ 1,000,000 or more.
If such reserve requirement shall change after the date hereof, the Reserve
Percentage shall be automatically increased or decreased, as the case may be,
from time to time as of the effective time of each such change in such reserve
requirement.

“Restricted Person” means any of Borrower and each Subsidiary of Borrower.

 

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“Revolving Loan” is defined in Section 2.1(c).

“Revolving Loan Commitment” means, relative to any Lender, such Lender’s
obligation to make Revolving Loans pursuant to Section 2.1(c), as such Revolving
Loan Commitment may be reduced, adjusted or terminated from time to time in
accordance with the terms of this Agreement. The initial amount of each Lender’s
Revolving Loan Commitment is set forth on Schedule 3 or in the Schedule
following any Assignment and Acceptance to which such Lender is a party. The
initial aggregate amount of the Revolving Loan Commitments of the Lenders is
$900,000,000.

“Revolving Loan Commitment Termination Date” means the earliest to occur of
(a) the Revolving Loan Maturity Date, and (b) the date on which any Commitment
Termination Event occurs.

“Revolving Loan Lender” is defined in Section 2.1(c).

“Revolving Loan Maturity Date” means May 5, 2015; provided however, that should
any of the Existing Senior Notes remain outstanding on January 15, 2014, then
the Revolving Loan Maturity Date shall mean March 15, 2014.

“Revolving Loan Note” means a promissory note of the Borrower payable to any
Lender, in the form of Exhibit A-1 hereto (as such promissory note may be
amended or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Revolving
Loans, and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.

“Revolving Loan Percentage Share” means, at any time and with respect to any
Revolving Loan Lender, the percentage obtained by dividing (a) the Revolving
Loan Commitment of such Lender, by (b) the aggregate Revolving Loan Commitments
of all Revolving Loan Lenders. If the Revolving Loan Commitments have terminated
or expired, the Revolving Loan Percentage Shares shall be determined using the
Revolving Loan Commitments most recently set forth in the Register, giving
effect to any assignments made in accordance with Section 10.6 or any increases
or decreases in Revolving Loan Commitments made in accordance with this
Agreement.

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

“SEC” means the Securities and Exchange Commission.

“Security Documents” means the instruments listed in the Security Schedule and
all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Restricted Person to Agent in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Restricted Person’s other
duties and obligations under the Loan Documents.

 

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“Security Schedule” means Schedule 2 hereto, as such Schedule 2 may be amended
or otherwise modified with the consent of the Agent.

“Stated Amount” of each Letter of Credit means the face amount of such Letter of
Credit or the “Stated Amount” of such Letter of Credit (as defined therein), in
each case, as such amount is in effect on the issuance date thereof.

“Stated Expiry Date” is defined in Section 2.11 (a).

“Subject Sale” is defined in Section 7.5.

“Subsidiary” means, with respect to any Person, any corporation, association,
partnership, joint venture, or other business or corporate entity, enterprise or
organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges, withholdings, assessments, fees or other charges imposed by
any governmental authority, including any interest, penalties or additions to
tax applicable thereto.

“TD (Texas)” means Toronto Dominion (Texas) LLC, and its successors and assigns.

“Termination Event” means (a) the occurrence with respect to any ERISA Plan of a
reportable event described in Section 4043(c) of ERISA other than a reportable
event not subject to the provision for 30-day notice to the Pension Benefit
Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an
ERISA Plan during a plan year in which it was a “substantial employer” as
defined in Section 4001 (a)(2) of ERISA, or (c) the filing of a notice of intent
to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) the withdrawal or partial withdrawal by any ERISA
Affiliate from a “multiemployer plan” as that term is defined in Section 4001 of
ERISA, or (f) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.

“Total Debt” means the aggregate Indebtedness of the Borrower and its
Subsidiaries on a Consolidated basis.

“Tribunal” means, in the case of all parties hereto, any government, any
arbitration panel, any court or any governmental department, commission, board,
bureau, agency or instrumentality of the United States of America or any state,
province, commonwealth, nation, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted and/or
existing, and, solely in the case of Lender Parties, any foreign governmental
and supervisory authorities and central banks, whether now or hereafter
constituted and/or existing.

 

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“Type” means, with respect to any Loans, the characterization of such Loans as
either ABR Loans or Eurodollar Loans.

“Undisclosed Administration” means in relation to a Lender the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee, custodian
or other similar official by a supervisory authority or regulator under or based
on the law in the country where such Lender is subject to home jurisdiction
supervision if applicable law requires that such appointment is not to be
publicly disclosed.

“Voting Stock” means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person normally entitling the holders thereof
to vote under ordinary circumstances in the election of members of the Board of
Directors or other governing body of such Person.

“Wholly-owned Subsidiary” means any Subsidiary of Borrower, one hundred percent
(100%) of the Voting Stock of which is directly or indirectly (through one or
more intermediaries) owned by Borrower.

Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits and
Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to the Security Schedule for the meaning of certain
terms defined therein and used but not defined herein, which definitions are
incorporated herein by reference.

Section 1.3. Amendment of Defined Instruments. Unless the context otherwise
requires or unless otherwise provided in the relevant defined term or unless
otherwise provided herein the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments and restatements of such
agreement, instrument or document in accordance with the Loan Documents,
provided that nothing contained in this section shall be construed to authorize
any such renewal, extension, modification, amendment or restatement.

Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words “this
Agreement”, “this instrument”, “herein”, “hereof, “hereby”, “hereunder” and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases “this section”
and “this subsection” and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word “or” is not exclusive,
and the word “including” (in its various forms) means “including without
limitation”. Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. All references to any Person shall be construed to include such
Person’s successors and assigns, provided such successors and assigns are
permitted by the Loan Documents.

 

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Section 1.5. Calculations and Determinations. All calculations under the Loan
Documents of interest chargeable with respect to Eurodollar Loans and of fees
shall be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other calculations of interest
made under the Loan Documents shall be made on the basis of actual days elapsed
(including the first day but excluding the last) and a year of 365 or 366 days,
as appropriate. Each determination by a Lender Party of amounts to be paid under
any of Sections 2.11, 3.2, 3.3, 3.4, 3.5 or 3.6 or any other matters which are
to be determined hereunder by a Lender Party (such as any Eurodollar Rate, LIBOR
Rate, Business Day, Interest Period, or Reserve Percentage) shall, in the
absence of manifest error, be conclusive and binding. Unless otherwise expressly
provided herein or unless Required Lenders otherwise consent all financial
statements and reports furnished to any Lender Party hereunder shall be prepared
and all financial computations and determinations pursuant hereto shall be made
in accordance with GAAP.

ARTICLE II - The Loans

Section 2.1. Commitments to Make Loans: Restrictions on Commitments or Issuance
or Participation in Letters of Credit.

(a) [Reserved].

(b) [Reserved],

(c) Revolving Loans. Subject to the terms and conditions hereof, each Lender
that has a Revolving Loan Commitment (herein referred to as a “Revolving Loan
Lender”) severally agrees to make revolving loans to Borrower (herein called
such Revolving Loan Lender’s “Revolving Loans”) upon Borrower’s request from
time to time during the Commitment Period, provided that subject to Sections
3.3, 3.4 and 3.6, all Revolving Loan Lenders are requested to make Revolving
Loans of the same Type (or participate in Letters of Credit) in accordance with
their respective Revolving Loan Percentage Shares and as part of the same
Borrowing. Subject to the terms and conditions hereof, Borrower may borrow,
repay, and reborrow Revolving Loans hereunder.

(d) Restrictions on Credit Extensions. No Lender shall be permitted or required
to

(i) make any Loan if, after giving effect thereto (A) the Facility Usage would
exceed the lowest of (1) the Borrowing Base in effect as of the date on which
the requested Loans are to be made, (2) the Aggregate Commitments or (3) the
Facility Amount; and (B) the sum of the aggregate outstanding principal amount
of all Loans of such Lender together with such Lender’s Revolving Loan
Percentage Share of the aggregate Letter of Credit Outstandings would exceed
such Lender’s Aggregate Percentage Share of the lowest of (1) the Borrowing Base
then outstanding, (2) the Aggregate Commitments or (3) the Facility Amount; or

(ii) [Reserved];

 

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(iii) [Reserved];

(iv) make any Revolving Loan if, after giving effect thereto (A) the Revolving
Loan by such Lender would exceed such Lender’s Revolving Loan Percentage Share
of the aggregate amount of Revolving Loans then requested from all Lenders; and
(B) the sum of the aggregate outstanding principal amount of all Revolving Loans
of such Lender together with such Lender’s Revolving Loan Percentage Share of
the aggregate Letter of Credit Outstandings would exceed such Lender’s Revolving
Loan Percentage Share of the aggregate Revolving Loan Commitments of all
Revolving Loan Lenders; or

(v) issue (in the case of an Issuer) or participate in (in the case of a Lender)
any Letter of Credit if, after giving effect thereto (A) the Facility Usage
would exceed the lowest of (1) the Borrowing Base in effect as of the date on
which the requested Letter of Credit is to be issued, (2) the Aggregate
Commitments or (3) the Facility Amount; (B) such Lender’s Revolving Loan
Percentage Share of all Letter of Credit Outstandings together with the
aggregate outstanding principal amount of all Loans of such Lender would exceed
such Lender’s Aggregate Percentage Share of the lowest of (1) the Borrowing Base
then outstanding, (2) the Aggregate Commitments or (3) the Facility Amount;
(C) such Lender’s Revolving Loan Percentage Share of all Letter of Credit
Outstandings together with the aggregate outstanding principal amount of all
Revolving Loans of such Lender would exceed such Lender’s Revolving Loan
Percentage Share of the aggregate Revolving Loan Commitments of all Lenders; or
(D) all Letter of Credit Outstandings would exceed the Letter of Credit
Commitment Amount.

(e) Minimum Borrowing Amounts. The aggregate amount of all Loans in any
Borrowing of ABR Loans must be greater than or equal to $1,000,000 (any higher,
in multiples of $1,000,000) or must equal the remaining availability under the
Borrowing Base. The aggregate amount of all Loans in any Borrowing of Eurodollar
Loans must be greater than or equal to $1,000,000 (any higher, in multiples of
$1,000,000) or must equal the remaining availability under the Borrowing Base.
Borrower may have no more than ten (10) Borrowings of Eurodollar Loans
outstanding at any time.

Section 2.2. Requests for New Loans. Borrower must give to Agent written notice
(or telephonic notice promptly confirmed in writing) of any requested Borrowing
of new Loans to be advanced by Lenders. Each such notice constitutes a
“Borrowing Notice” hereunder and must:

(a) specify (i) the aggregate amount of any such Borrowing of new ABR Loans and
the Business Day on which such ABR Loans are to be advanced, (ii) the aggregate
amount of any such Borrowing of new Eurodollar Loans, the Business Day on which
such Eurodollar Loans are to be advanced (which shall be the first day of the
Interest Period which is to apply thereto), and the length of the applicable
Interest Period, and (iii) with respect to the Borrowing Notice delivered on or
before the Closing Date, which Loans are to be advanced as Revolving Loans; and

 

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(b) be received by Agent not later than 12:00 noon, New York City time, on
(i) the Business Day on which any such ABR Loans are to be made, or (ii) the
third Business Day preceding the Business Day on which any such Eurodollar Loans
are to be made.

Each such written request or confirmation must be made in the form and substance
of the “Borrowing Notice” attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Agent shall give each Lender prompt notice of the terms thereof. Each
Borrowing Notice shall be irrevocable and binding on Borrower. If all conditions
precedent to such new Loans have been met, each Lender will on the date
requested promptly remit to Agent at Agent’s office in New York, New York, the
amount of such Lender’s new Loan in immediately available funds, and upon
receipt of such funds, unless to its actual knowledge any conditions precedent
to such Loans have been neither met nor waived as provided herein, Agent shall
promptly make such Loans available to Borrower. Unless Agent shall have received
prompt notice from a Lender that such Lender will not make available to Agent
such Lender’s new Loan, Agent may in its discretion assume that such Lender has
made such Loan available to Agent in accordance with this section and Agent may
if it chooses, in reliance upon such assumption, make such Loan available to
Borrower. If and to the extent such Lender shall not so make its new Loan
available to Agent, such Lender and Borrower severally agree to pay or repay to
Agent within three days after demand the amount of such Loan together with
interest thereon, for each day from the date such amount was made available to
Borrower until the date such amount is paid or repaid to Agent, with interest at
(i) the Federal Funds Rate, if such Lender is making such payment and (ii) the
interest rate applicable at the time to the other new Loans made on such date,
if Borrower is making such repayment. If neither such Lender nor Borrower pay or
repay to Agent such amount within such three-day period, Agent shall in addition
to such amount be entitled to recover from such Lender and from Borrower, on
demand, interest thereon at the Default Rate, calculated from the date such
amount was made available to Borrower. The failure of any Lender to make any new
Loan to be made by it hereunder shall not relieve any other Lender of its
obligation hereunder, if any, to make its new Loan, but no Lender shall be
responsible for the failure of any other Lender to make any new Loan to be made
by such other Lender.

Section 2.3. Continuations and Conversions of Existing Loans. Borrower may make
the following elections with respect to Loans already outstanding: to convert
ABR Loans to Eurodollar Loans, to convert Eurodollar Loans to ABR Loans on the
last day of the Interest Period applicable thereto, or to continue Eurodollar
Loans beyond the expiration of such Interest Period by designating a new
Interest Period to take effect at the time of such expiration. In making such
elections, Borrower may combine existing Loans made pursuant to separate
Borrowings into one new Borrowing or divide existing Loans made pursuant to one
Borrowing into separate new Borrowings. To make any such election, Borrower must
give to Agent written notice (or telephonic notice promptly confirmed in
writing) of any such conversion or continuation of existing Loans, with a
separate notice given for each new Borrowing. Each such notice constitutes a
“Continuation/Conversion Notice” hereunder and must:

(a) specify the existing Loans which are to be continued or converted;

 

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(b) specify (i) the aggregate amount of any Borrowing of ABR Loans into which
such existing Loans are to be continued or converted and the date on which such
continuation or conversion is to occur, or (ii) the aggregate amount of any
Borrowing of Eurodollar Loans into which such existing Loans are to be continued
or converted, the date on which such continuation or conversion is to occur
(which shall be the first day of the Interest Period which is to apply to such
Eurodollar Loans), and the length of the applicable Interest Period; and

(c) be received by Agent not later than 12:00 noon, New York City time, on
(i) the day on which any such continuation or conversion to ABR Loans is to
occur, or (ii) the third Business Day preceding the day on which any such
continuation or conversion to Eurodollar Loans is to occur.

Each such written request or confirmation must be made in the form and substance
of the “Continuation/Conversion Notice” attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and
binding on Borrower. During the continuance of any Default, Borrower may not
make any election to convert existing Loans into Eurodollar Loans or continue
existing Loans as Eurodollar Loans. If (due to the existence of a Default or for
any other reason) Borrower fails to timely and properly give any notice of
continuation or conversion with respect to a Borrowing of existing Eurodollar
Loans at least three days prior to the end of the Interest Period applicable
thereto, such Eurodollar Loans shall automatically be converted into ABR Loans
at the end of such Interest Period. No new funds shall be repaid by Borrower or
advanced by any Lender in connection with any continuation or conversion of
existing Loans pursuant to this section, and no such continuation or conversion
shall be deemed to be a new advance of funds for any purpose; such continuations
and conversions merely constitute a change in the interest rate applicable to
already outstanding Loans.

Section 2.4. Use of Proceeds. Borrower shall use all Loans to finance capital
expenditures, and provide working capital for its operations and for other
general business purposes, including the acquisition of oil and gas properties
and related assets. In no event shall the funds from any Loan be used directly
or indirectly by any Person (a) for personal, family, household or agricultural
purposes or (b) for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any “margin stock” or any “margin securities”
(as such terms are defined respectively in Regulation T, U and X promulgated by
the Board of Governors) or to extend credit to others directly or indirectly for
the purpose of purchasing or carrying any such margin stock or margin securities
or (c) for the acquisition of any Person unless such acquisition has been
approved by the board of directors, management committee or partners, as the
case may be of such Person. Borrower represents and warrants that Borrower is
not engaged principally, or as one of Borrower’s important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.

Section 2.5. Fees.

 

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(a) Commitment Fees. In consideration of each Revolving Loan Lender’s commitment
to make Revolving Loans, Borrower will pay to Agent for the account of each
Revolving Loan Lender (excluding any Defaulting Lenders) a commitment fee
determined on a daily basis by applying the Commitment Fee Rate to such
Revolving Loan Lender’s Revolving Loan Percentage Share of the unused portion of
the Borrowing Base that is available for Revolving Loans on each day during the
Commitment Period. This commitment fee will be due and payable in arrears on
each ABR Payment Date and at the end of the Commitment Period.

(b) Other Fees. In addition to all other amounts due to Agent under the Loan
Documents, Borrower will pay fees to Agent and TD Securities (USA) LLC as
described in a letter agreement dated as of April 6, 2011 between Agent, TD
Securities (USA) LLC and Borrower.

(c) Letter of Credit Stated Amount Fee. The Borrower agrees to pay to the Agent,
for the account of each Lender (excluding any Defaulting Lenders), a
participation fee with respect to its participations in Letters of Credit, for
the period from and including the date of the issuance of such Letter of Credit
to (but not including) the date upon which such Letter of Credit expires, at a
rate per annum equal to Eurodollar Margin on the Stated Amount (as such Stated
Amount may be adjusted, from time to time, as a result of drawings thereunder)
of such Letter of Credit, based on a year comprised of three-hundred and sixty
(360) days (such participation fee, “Letter of Credit Fee”). A prorated portion
of such fee shall be payable by the Borrower in arrears on each ABR Payment
Date, and at the end of the Commitment Period for any period then ending for
which such fee shall not theretofore have been paid, commencing on the first
such date after the issuance of such Letter of Credit.

(d) Letter of Credit Issuance Fee. The Borrower agrees to pay to each Issuer for
its own account an issuance fee for each Letter of Credit issued by such Issuer
equal to the greater of (i) $500 or (ii) 0.25% of the Stated Amount of such
Letter of Credit. Such fee shall be payable by the Borrower quarterly in
arrears. The Borrower also agrees to pay such Issuer’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder, which fees shall be payable to such Issuer
within ten (10) days after demand.

(e) Initial Upfront Fee. The Borrower will pay to the Administrative Agent, for
the account of the Lenders (including TD (Texas), (a) an upfront fee on each
Lender’s Commitment level as limited by the Borrowing Base then in effect on the
Closing Date and, (b) upon closing of the Fairway Acquisition, an incremental
upfront fee will be paid in respect of each Lender’s increase in Commitment
level resulting from the increase in Borrowing Base above the Initial
Availability Amount resulting from such closing. The upfront fee tier will be
based on each Lender’s Commitment to the Borrowing Base as shown in the chart
below:

 

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Commitment Level

         Upfront Fee   $ 75,000,000          100 bps    $ 50,000,000          75
bps    $ 35,000,000          50 bps   

(f) Additional Upfront Fees. In the event that, as a result of a redetermination
of the Borrowing Base, the Borrowing Base is increased to an amount that is
higher than $575,000,000 (the “Base Amount”; and such higher amount herein the
“Designated Amount”), the Borrower agrees to pay to the Agent, for the account
of each Revolving Loan Lender (excluding any Defaulting Lenders), an upfront fee
in an amount to be agreed upon between the Borrower and the Agent, according to
such Revolving Loan Lender’s Revolving Loan Percentage Share of the difference
between the Designated Amount and the Base Amount; provided, however, that
solely for purposes of calculating the upfront fee pursuant to this clause (e),
upon payment of such upfront fee and for purposes of future upfront fees
pursuant to this clause (e), the Base Amount shall be increased to be equal to
the last Designated Amount for which an upfront fee has been paid hereunder.

Section 2.6. Optional Prepayments. Borrower may, upon one Business Day’s notice
in the case of ABR Loans, or three Business Days’ notice in the case of
Eurodollar Loans, to Agent for the account of each Lender, from time to time and
without premium or penalty prepay the Revolving Loans, in whole or in part, so
long as the aggregate amounts of all partial prepayments of principal on such
prepaid Loans equals $1,000,000 or any higher integral multiple of $1,000,000,
so long as Borrower pays all breakage costs associated with the prepayment of
any Eurodollar Loan as provided in Section 3.5, and so long as Borrower does not
make any prepayments which would reduce the unpaid principal balance of any Loan
to less than $1,000,000 without first either (a) terminating this Agreement or
(b) providing assurance satisfactory to Agent in its discretion that Lenders’
legal rights under the Loan Documents are in no way affected by such reduction.
Each prepayment of principal of a Eurodollar Loan under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.

Section 2.7. Mandatory Prepayments.

(a) If at any time the Facility Usage exceeds the Aggregate Commitments (whether
due to a reduction or termination in any Commitments in accordance with this
Agreement, or otherwise), Borrower shall immediately upon demand prepay the
principal of the Loans (and/or provide cash collateral for Letters of Credit) in
an amount at least equal to such excess in accordance with clause (g) below.

(b) If at any time the Facility Usage is less than the Aggregate Commitments but
in excess of the Borrowing Base (such excess being herein called a “Borrowing
Base Deficiency”), Borrower shall, within five Business Days after Agent gives
notice of such fact to Borrower, either:

 

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(i) prepay the principal of the Loans (and/or provide cash collateral for
Letters of Credit) in accordance with clause (g) below in an aggregate amount at
least equal to such Borrowing Base Deficiency; or

(ii) give notice to Agent electing to prepay the principal of the Loans (and/or
provide cash collateral) in accordance with clause (g) below in up to three
monthly installments in an aggregate amount at least equal to such Borrowing
Base Deficiency, with each such installment equal to or in excess of one-third
of such Borrowing Base Deficiency, and with the first such installment to be
paid one month after the giving of such notice and the subsequent installments
to be due and payable at one month intervals thereafter until such Borrowing
Base Deficiency has been eliminated; or

(iii) give notice to Agent that Borrower desires to provide Agent with deeds of
trust, mortgages, chattel mortgages, security agreements, financing statements
and other security documents in form and substance satisfactory to Agent,
granting, confirming, and perfecting first and prior liens or security interests
in collateral acceptable to Required Lenders, to the extent needed to allow
Required Lenders to increase the Borrowing Base (as they in their reasonable
discretion deem consistent with prudent oil and gas banking industry lending
standards at the time) to an amount which eliminates such Borrowing Base
Deficiency, and then provide such security documents within thirty days after
Agent specifies such collateral to Borrower. If, prior to any such specification
by Agent, Required Lenders determine that the giving of such security documents
will not serve to eliminate such Borrowing Base Deficiency, then, within five
Business Days after receiving notice of such determination, Borrower will elect
to make, and thereafter make, the prepayments specified in either of the
preceding subsections (i) or (ii) of this subsection (b);

provided, however, that if a Borrowing Base Deficiency is existing as a result
of any Subject Sale or other sale, and the corresponding reduction of the
Borrowing Base (including the Initial Availability Amount), pursuant to
Section 7.5, the Borrower shall instead immediately prepay the Loans (and/or
provide cash collateral for Letters of Credit) in accordance with Section 7.5
from the proceeds of such Subject Sale or sale, as appropriate, to the extent of
the Borrowing Base Deficiency that resulted from such sale and reduction.

(c) [Reserved].

(d) [Reserved].

(e) Upon the occurrence of a Borrowing Base Deficiency resulting from a Casualty
Event pursuant to Section 2.9 (subject to the Borrower’s and the applicable
Subsidiaries’ rights contained in the second paragraph of Section 2.9), the
Borrower will forthwith utilize the Net Cash Proceeds of such Casualty Event to
prepay the principal of the Loans (and/or provide cash collateral for Letters of
Credit) in an amount sufficient to cure such Deficiency in accordance with
clause (g) below.

 

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(f) The Borrower will prepay the Loans (and/or provide cash collateral) to the
extent otherwise required by the other provisions of this Agreement.

(g) In the event that the Borrower is required to prepay the Loans (and/or
provide cash collateral) pursuant to clause (a), (b) or (e) above, the Borrower
shall prepay the Loans (and/or provide cash collateral) in the following order
of priority: (i) first, to the prepayment of Revolving Loans that are ABR Loans
and then to the prepayment of Revolving Loans that are Eurodollar Loans, and
(ii) second, to provide cash collateral to the applicable Issuer in the
applicable amount in respect of any outstanding Letters of Credit in accordance
with the general provisions of Section 2.1 l(g);

(h) Each prepayment of principal of a Loan under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.

Section 2.8. Initial Availability Amount. The parties hereto agree that the
“Initial Availability Amount” for purposes of the definition of “Borrowing Base”
shall be an amount equal to $525,000,000; provided, however, that on the Fairway
Acquisition Effective Date, the Borrowing Base will automatically increase to
$575,000,000 provided that each of the conditions precedent set forth in
Section 4.2 are met on or before 90 days after the Closing Date.

Section 2.9. Determinations of Borrowing Base.

By each Evaluation Date (or in the case of an Evaluation Date pursuant to clause
(a) of the definition of “Evaluation Date”, within thirty days after such
Evaluation Date), Borrower shall furnish to each Lender all information, reports
and data which Agent has then requested concerning Restricted Persons’
businesses and properties (including their oil and gas properties and interests
and the reserves and production relating thereto), together with the Engineering
Report described in Section 6.2 which is then due, if any; provided that in the
case of any “Evaluation Date” pursuant to clause (a) of the definition thereof,
Borrower shall deliver to Agent an Engineering Report of the type described in
Section 6.2(e) within thirty days after such Evaluation Date. Within thirty days
after receiving such information, reports and data, Required Lenders shall agree
upon an amount for the Borrowing Base, and Agent shall by notice to Borrower
designate such amount as the new Borrowing Base available to Borrower hereunder,
which designation shall take effect immediately on the date such notice is sent
(herein called a “Determination Date”) and shall remain in effect until but not
including the next date as of which the Borrowing Base is redetermined in
accordance with the provisions of this Agreement. If Borrower does not furnish
all such information, reports and data by the date specified in the first
sentence of this section, Agent may nonetheless designate the Borrowing Base at
any amount which Required Lenders determine and may redesignate the Borrowing
Base from time to time thereafter until each Revolving Loan Lender receives all
such information, reports and data, whereupon Required Lenders shall designate a
new Borrowing Base as described above. Required Lenders shall determine the
amount of the Borrowing Base based upon the loan collateral value which they in
their discretion assign to the various oil and gas properties included in the
Collateral at the time in question and based upon such other credit factors

 

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(including without limitation the assets, liabilities, cash flow, hedged and
unhedged exposure to price, foreign exchange rate, and interest rate changes,
business, properties, prospects, management and ownership of Borrower and its
Affiliates) as they in their discretion deem significant. It is expressly
understood that Required Lenders and Agent have no obligation to agree upon or
designate the Borrowing Base at any particular amount, whether in relation to
the Commitments or otherwise, and that Revolving Loan Lenders’ commitments to
extend credit hereunder is determined by reference to the Borrowing Base from
time to time in effect, which Borrowing Base shall be used to the extent
permitted by Law and regulatory authorities, for the purposes of capital
adequacy determination and reimbursements under Section 3.2. Should the last day
for Required Lenders to redetermine the Borrowing Base in connection with a
particular Evaluation Date be a day other than a Business Day, the period for
such redetermination shall be extended to the next succeeding Business Day.

In the event that a Casualty Event has occurred with respect to any properties
or assets of any Restricted Person, to the extent that the Net Cash Proceeds
received by the Borrower or any of its Subsidiaries with respect to such
Casualty Event (together with all other Net Cash Proceeds received during such
calendar year) exceeds 5% of the Borrowing Base then in effect and have not been
applied or budgeted to be applied by the Borrower or any such Subsidiary to
repair, restore or replace the property or asset affected by such Casualty Event
within 180 days after the occurrence thereof, which actions the Borrower or such
Subsidiary shall hereby be permitted to take, the Agent, at the request of the
Required Lenders, shall have the right to reduce the Borrowing Base, in its
reasonable discretion based on its review of such Casualty Event, by the value
of the property or asset so affected by such Casualty Event as set forth in the
most recent Engineering Report; provided that, if an Event of Default has
occurred and is continuing, (i) such repair, restoration or replacement may
occur only with the written consent of the Agent, (ii) the Agent may, at the
request of the Required Lenders, reduce the Borrowing Base in the manner set
forth above without regard to the 180 day period referenced above and (iii) such
Net Cash Proceeds shall be applied in accordance with Section 2.7 to the extent
required thereby. The Agent shall provide notice to the Borrower and the Lenders
of the reduction in the Borrowing Base, which reduction shall be effective as of
the date of such notice.

Section 2.10. Maturity Date. Borrower shall repay in full in cash the unpaid
principal amount of all Revolving Loans on the Revolving Loan Maturity Date, or
such earlier date as may be required in accordance with the terms hereof.

Section 2.11. Letters of Credit. From time to time on any Business Day prior to
the end of the Commitment Period, each Issuer will issue, and each Revolving
Loan Lender will participate in, to the extent of each Revolving Loan Lender’s
Revolving Loan Percentage Share, the Letters of Credit, in accordance with the
following terms:

(a) Issuance Requests. By delivering to the Agent and the applicable Issuer an
Issuance Request on or before 11:00 a.m., Central time, the Borrower may
request, from time to time during the Commitment Period and on not less than
three (3) nor more than ten (10) Business Days’ notice, that such Issuer issue
an irrevocable standby letter of credit in such form as may be mutually agreed
to by the Borrower and such Issuer (each a “Letter of Credit”), in support of
financial obligations of the Borrower incurred in the Borrower’s ordinary course
of business and which are described in such Issuance

 

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Request. Upon receipt of an Issuance Request, the Agent shall promptly notify
the Revolving Loan Lenders thereof. Each Letter of Credit shall by its terms:
(i) be issued in a Stated Amount which (A) together with all Letter of Credit
Outstandings and all outstanding Revolving Loans does not exceed (or would not
exceed) the lesser of (1) the then current Borrowing Base or (2) the aggregate
Revolving Loan Commitments of all Revolving Loan Lenders or (B) together with
all Letter of Credit Outstandings would not exceed the Letter of Credit
Commitment Amount; (ii) be stated to expire on a date (its “Stated Expiry Date”)
no later than the earlier of (A) one year from its date of issuance and (B) the
end of the Commitment Period. So long as no Default has occurred and is
continuing, by delivery to the applicable Issuer and the Agent of an Issuance
Request at least three (3) but not more than ten (10) Business Days prior to the
Stated Expiry Date of any Letter of Credit, the Borrower may request such Issuer
to, at such Issuer’s option, extend the Stated Expiry Date of such Letter of
Credit for an additional period not to exceed the earlier of (x) one year from
its date of extension or (y) the end of the Commitment Period.

No Issuer is under any obligation to issue any Letter of Credit if: (i) any
order, judgment or decree of any government agency or arbitrator shall by its
terms purport to enjoin or restrain such Issuer from issuing such Letter of
Credit, or any requirement of applicable Law or any request or directive
(whether or not having the force of law) from any government agency with
jurisdiction over such Issuer shall prohibit, or request that the Issuer refrain
from, the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon such Issuer with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which such Issuer is
not otherwise compensated hereunder) not in effect on the date hereof, or shall
impose upon such Issuer any unreimbursed loss, cost or expense which was not
applicable on the date hereof and which such Issuer in good faith deems material
to it; (ii) one or more of the applicable conditions contained in Article IV is
not then satisfied; (iii) the expiry date of any requested Letter of Credit is
prior to the maturity date of any financial obligation to be supported by the
requested Letter of Credit; (iv) any requested Letter of Credit does not provide
for drafts, or is not otherwise in form and substance acceptable to such Issuer,
or the issuance of a Letter of Credit shall violate any applicable policies of
such Issuer; (v) any standby Letter of Credit is for the purpose of supporting
the issuance of any letter of credit by any other Person; or (vi) such Letter of
Credit is in a face amount denominated in a currency other than Dollars. The
Uniform Customs and Practice for Documentary Credits most recently published by
the International Chamber of Commerce at the time of issuance of any Letter of
Credit shall (unless otherwise expressly provided in the Letter of Credit) apply
to all Letters of Credit.

(b) Issuances and Extensions. On the terms and subject to the conditions of this
Agreement (including Article IV), the applicable Issuer shall issue Letters of
Credit, and extend the Stated Expiry Dates of outstanding Letters of Credit, in
accordance with the Issuance Requests made therefor. Each Issuer will make
available the original of each Letter of Credit which it issues in accordance
with the Issuance Request therefor to the beneficiary thereof (and will promptly
provide each of the Revolving Loan Lenders and the Borrower with a copy of such
Letter of Credit) and will notify the beneficiary under any Letter of Credit of
any extension of the Stated Expiry Date thereof.

 

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(c) Existing Letter of Credit. The parties acknowledge and agree that each
letter of credit issued by The Toronto Dominion Bank, New York Branch under the
Existing Credit Agreement identified on Item 2.11(c) of the Disclosure Schedule
shall be deemed to be a Letter of Credit issued hereunder by The Toronto
Dominion Bank, as an Issuer hereunder, having the same face amount, maturity
date and general terms.

(d) Other Revolving Loan Lenders’ Participation. Each Letter of Credit issued
pursuant to Section 2.11(b) shall, effective upon its issuance and without
further action, be issued on behalf of all Revolving Loan Lenders (including the
Issuer thereof) pro rata according to their respective Revolving Loan Percentage
Shares. Each Revolving Loan Lender shall, to the extent of its Percentage Share,
be deemed irrevocably to have participated in the issuance of such Letter of
Credit and shall be responsible to reimburse promptly the Issuer thereof for
Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with Section 2.11(e), or which have been reimbursed by the Borrower
but must be returned, restored or disgorged by such Issuer for any reason, and
each Revolving Loan Lender shall, to the extent of its Revolving Loan Percentage
Share, be entitled to receive from the Agent a ratable portion of the Letter of
Credit Fee received by the Agent pursuant to Section 2.5(c), with respect to
each Letter of Credit. In the event that the Borrower shall fail to reimburse
any Issuer, or if for any reason Loans shall not be made to fund any
Reimbursement Obligation, all as provided in Section 2.11(e) and in an amount
equal to the amount of any drawing honored by such Issuer under a Letter of
Credit issued by it, or in the event such Issuer must for any reason return or
disgorge such reimbursement, such Issuer shall promptly notify each Revolving
Loan Lender of the unreimbursed amount of such drawing and of such Revolving
Loan Lender’s respective participation therein. Each Revolving Loan Lender shall
make available to such Issuer, whether or not any Default shall have occurred
and be continuing, an amount equal to its respective participation in same day
or immediately available funds at the office of such Issuer specified in such
notice not later than 11:00 a.m., Central time, on the Business Day (under the
laws of the jurisdiction of such Issuer) after the date notified by such Issuer.
In the event that any Revolving Loan Lender fails to make available to such
Issuer the amount of such Revolving Loan Lender’s participation in such Letter
of Credit as provided herein, such Issuer shall be entitled to recover such
amount on demand from such Revolving Loan Lender together with interest at the
daily average Federal Funds Rate for three (3) Business Days (together with such
other compensatory amounts as may be required to be paid by such Revolving Loan
Lender to the Agent pursuant to the Rules for Interbank Compensation of the
council on International Banking or the Clearinghouse Compensation Committee, as
the case may be, as in effect from time to time) and thereafter at the interest
rate applicable to ABR Loans plus two percent (2%). Nothing in this Section
shall be deemed to prejudice the right of any Revolving Loan Lender to recover
from any Issuer any amounts made available by such Revolving Loan Lender to such
Issuer pursuant to this Section in the event that it is determined by a court of
competent jurisdiction that the payment with respect to a Letter of Credit by
such Issuer in respect of which payment was made by such Revolving Loan Lender
constituted gross negligence or willful misconduct on the part of such Issuer.
Each Issuer shall distribute to each other Revolving Loan Lender which has paid
all amounts payable by it under this Section with respect to any Letter of
Credit issued by such Issuer such other Revolving Loan Lender’s Percentage Share
of all payments received by such Issuer from the Borrower in reimbursement of
drawings honored by such Issuer under such Letter of Credit when such payments
are received.

 

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(e) Disbursements. Each Issuer will notify the Borrower and the Agent promptly
of the presentment for payment of any Letter of Credit issued by such Issuer,
together with notice of the date (the “Disbursement Date”) such payment shall be
made. Subject to the terms and provisions of such Letter of Credit, the
applicable Issuer shall make such payment to the beneficiary (or its designee)
of such Letter of Credit. Prior to 11:00 a.m., Central time, on the Disbursement
Date (or 11:00 a.m., Central time, on the Business Day following the
Disbursement Date if the Borrower shall have received such notice after 10:00
a.m. on the Disbursement Date), the Borrower will reimburse the applicable
Issuer for all amounts which it has disbursed under or in respect of such Letter
of Credit. In the event the applicable Issuer is not reimbursed by the Borrower
on the Disbursement Date, or if such Issuer must for any reason return or
disgorge such reimbursement, the Revolving Loan Lenders shall, on the terms and
subject to the conditions of this Agreement, fund the Reimbursement Obligation
therefor by making, on the next Business Day, Revolving Loans which are ABR
Loans as provided in Section 2.1 (the Borrower being deemed to have given a
timely Borrowing Notice therefor for such amount); provided, however, for the
purpose of determining the availability of the Revolving Loan Commitments to
make Revolving Loans immediately prior to giving effect to the application of
the proceeds of such Revolving Loans, such Reimbursement Obligation shall be
deemed not to be outstanding at such time. To the extent the applicable Issuer
is not reimbursed in full in accordance with the preceding sentences, the
Borrower’s Reimbursement Obligation shall accrue interest at a fluctuating rate
determined by reference to the interest rate applicable to ABR Loans, plus a
margin of two percent (2%) per annum, payable on demand.

(f) Reimbursement. The Borrower’s obligation (a “Reimbursement Obligation”)
under Section 2.11(e) to reimburse an Issuer with respect to each Disbursement
(including interest thereon), and each Revolving Loan Lender’s obligation to
make participation payments in each drawing which has not been reimbursed by the
Borrower, shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim, or defense to payment which the
Borrower may have or have had against any Revolving Loan Lender or any
beneficiary of a Letter of Credit, including any defense based upon the
occurrence of any Default, any draft, demand or certificate or other document
presented under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient, the failure of any disbursement to conform to the terms of the
applicable Letter of Credit (if, in the applicable Issuer’s good faith opinion,
such disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such disbursement, or the
legality, validity, form, regularity, or enforceability of such Letter of
Credit; provided, however, that nothing herein shall adversely affect the right
of the Borrower or any Revolving Loan Lender to commence any proceeding against
the applicable Issuer for any wrongful disbursement made by such Issuer under a
Letter of Credit as a result of acts or omissions constituting gross negligence
or willful misconduct on the part of such Issuer.

 

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(g) Deemed Disbursements. Upon either (i) the occurrence and during the
continuation of an Event of Default pursuant to Section 8.1(j) or the occurrence
of the end of the Commitment Period or (ii) the declaration by the Agent of all
or any portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable and/or the commitments (if not theretofore
terminated) to be terminated as provided in Section 8.1, an amount equal to that
portion of Letter of Credit Outstandings attributable to outstanding and undrawn
Letters of Credit shall, at the election of the applicable Issuer acting on
instructions from the Required Lenders, and without demand upon or notice to the
Borrower, be deemed to have been paid or disbursed by such Issuer under such
Letters of Credit (notwithstanding that such amount may not in fact have been so
paid or disbursed), and, upon notification by such Issuer to the Agent and the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse such Issuer the amount deemed to have been so
paid or disbursed by such Issuer. Any amounts so received by such Issuer from
the Borrower pursuant to this Section shall be held as collateral security for
the repayment of the Borrower’s obligations in connection with the Letters of
Credit issued by such Issuer. All amounts on deposit pursuant to this
Section 2.11(g) shall, until their application to any Obligation or their return
to the Borrower, as the case may be, at the Borrower’s written request, be
invested in high grade short term liquid investments as such Issuer may choose
in its sole discretion reasonably exercised, which interest shall be held by the
applicable Issuer as additional collateral security for the repayment of the
Borrower’s Obligations under and in connection with the Letters of Credit and
all other Obligations. Any losses, net of earnings, and reasonable fees and
expenses of such investments shall be charged against the principal amount
invested. No Lender Party shall be liable for any loss resulting from any
investment made by such Issuer at the Borrower’s request. Such Issuer is not
obligated hereby, or by any other Loan Document, to make or maintain any
investment, except upon written request by the Borrower. At any time when such
Letters of Credit shall terminate and all Obligations to each Issuer are either
terminated or paid or reimbursed to such Issuer in full, the Obligations of the
Borrower under this Section shall be reduced accordingly (subject, however, to
reinstatement in the event any payment in respect of such Letters of Credit is
recovered in any manner from such Issuer), and such Issuer will return to the
Borrower the excess, if any, of (A) the aggregate amount held by such Issuer and
not theretofore applied by such Issuer to any Reimbursement Obligation over
(B) the aggregate amount of all Reimbursement Obligations to such Issuer
pursuant to this Section, as so adjusted. At such time when all Events of
Default shall have been cured or waived, if the end of the Commitment Period
shall not have occurred for any reason, each Issuer shall return to the Borrower
all amounts then on deposit with such Issuer pursuant to this Section. Borrower
hereby assigns and grants to such Issuer a continuing security interest in all
such collateral security paid by it to such Issuer, all investments purchased
with such collateral security, and all proceeds thereof to secure its
Obligations under this Agreement, the Notes, and the other Loan Documents, and
Borrower agrees that collateral security and investments shall be subject to all
of the terms and conditions of the Security Documents. Borrower further agrees
that such Issuer shall have all of the rights and remedies of a secured party
under the Uniform Commercial Code as adopted in the State of New York with
respect to such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security interest.

 

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(h) Nature of Reimbursement Obligations. The Borrower shall assume all risks of
the acts, omissions, or misuse of any Letter of Credit by the beneficiary
thereof. Neither any Issuer nor any Lender (except to the extent of its own
gross negligence or willful misconduct) shall be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness, or legal effect of any Letter of
Credit or any document submitted by any party in connection with the application
for and issuance of a Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent, or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness, or legal effect of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) failure of the beneficiary to comply fully with conditions required in
order to demand payment under a Letter of Credit; (iv) errors, omissions,
interruptions, or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, facsimile or otherwise; (v) any loss or delay in the
transmission or otherwise of any document or draft required in order to make a
Disbursement under a Letter of Credit or of the proceeds thereof; (vi) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the obligations of the Borrower in respect of any Letter of Credit;
(vii) the existence of any claim, set-off, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuer (if other than a Lender or its Affiliates)
or any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the Letter of Credit or any unrelated transaction;
(viii) any payment by an Issuer under any Letter of Credit against presentation
of a draft or certificate that does not strictly comply with the terms of any
Letter of Credit; or any payment made by an Issuer under any Letter of Credit to
any Person purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of any
Letter of Credit, including any arising in connection with any insolvency
proceeding; or (ix) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrower or
a guarantor. None of the foregoing shall affect, impair, or prevent the vesting
of any of the rights or powers granted any Issuer or any Lender hereunder. In
furtherance and extension, and not in limitation or derogation, of any of the
foregoing, any action taken or omitted to be taken by any Issuer in good faith
shall be binding upon the Borrower and shall not put such Issuer under any
resulting liability to the Borrower.

(i) Increased Costs; Indemnity. If by reason of (i) any change in applicable
law, regulation, rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory authority of any
law, regulation, rule, decree or regulatory requirement, or (ii) compliance by
any Issuer or any Revolving Loan Lender with any direction, or requirement of
any governmental or monetary authority, including, without limitation,
Regulation D: (1) any Issuer or any Revolving Loan Lender

 

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shall be subject to any tax (other than Indemnified Taxes, Other Taxes and
Excluded Taxes), levy, charge or withholding of any nature or to any variation
thereof or to any penalty with respect to the maintenance or fulfillment of its
obligations under this Section 2.11, whether directly or by such being imposed
on or suffered by such Issuer or such Revolving Loan Lender; (2) any reserve,
deposit or similar requirement is or shall be applicable, increased, imposed or
modified in respect of any Letters of Credit issued by any Issuer or
participations therein purchased by any Revolving Loan Lender; or (3) there
shall be imposed on any Issuer or any Revolving Loan Lender any other condition
regarding this Section 2.11, any Letter of Credit or any participation therein,
and the result of the foregoing is directly to increase the cost to such Issuer
or such Revolving Loan Lender of issuing or maintaining any Letter of Credit or
of purchasing or maintaining any participation therein, or to reduce any amount
receivable in respect thereof by such Issuer or such Revolving Loan Lender, then
and in any such case such Issuer or such Revolving Loan Lender may, at any time
after the additional cost is incurred or the amount received is reduced, notify
the Agent and the Borrower thereof, and the Borrower shall pay within ten
(10) days of demand such amounts as such Issuer or Revolving Loan Lender may in
good faith specify to be necessary to compensate such Issuer or Revolving Loan
Lender for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the Alternate Base Rate per annum. The determination by such
Issuer or Revolving Loan Lender, as the case may be, of any amount due pursuant
to this Section, as set forth in a statement setting forth the calculation
thereof in reasonable detail, shall be rebuttable presumptive evidence of such
amounts.

In addition to amounts payable as elsewhere provided in this Section 2.11, the
Borrower hereby indemnifies, exonerates and holds each Issuer, the Agent and
each other Lender Party harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether such Issuer, the Agent or such
Lender Party is a party to the action for which indemnification is sought),
including reasonable attorneys’ fees and disbursements, which such Issuer, the
Agent or such Lender Party may incur or be subject to as a consequence, direct
or indirect, of the issuance of the Letters of Credit, other than, as to each
such indemnified party, as a result of the gross negligence or willful
misconduct of such indemnified party, as the case may be, as determined by a
court of competent jurisdiction, or the failure of such Issuer to honor a
drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority.

(j) Notwithstanding anything herein to the contrary, no Issuer shall be
obligated to issue, renew or extend a Letter of Credit if such Issuer has a good
faith belief that any Lender is at such time a Defaulting Lender hereunder,
unless such Issuer has entered into arrangements reasonably satisfactory to such
Issuer with the Borrower or such Defaulting Lender to eliminate such Issuer’s
risk with respect to such Defaulting Lender. If any Letter of Credit
Outstandings exist at the time a Lender is an Defaulting Lender, the Borrower
shall within one Business Day following notice by the Agent cash collateralize
such Defaulting Lender’s portion of such Letter of Credit Outstandings in a
manner reasonably satisfactory to such Issuer for so long as such Lender is an
Defaulting Lender and such Letter of Credit Outstandings exist.

 

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Section 2.12. Interest. So long as no Event of Default has occurred and is
continuing, all ABR Loans (exclusive of any past due principal or interest) from
time to time outstanding shall bear interest on each day outstanding at the
Alternate Base Rate in effect on such day. If an Event of Default has occurred
and is continuing, all ABR Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Default Rate in effect on such day. On each ABR Payment Date
Borrower shall pay to the holder hereof all unpaid interest which has accrued on
the ABR Loans to but not including such ABR Payment Date. So long as no Event of
Default has occurred and is continuing, each Eurodollar Loan (exclusive of any
past due principal or interest) shall bear interest on each day during the
related Interest Period at the related Eurodollar Rate in effect on such day. If
an Event of Default has occurred and is continuing, each Eurodollar Loan
(exclusive of any past due principal or interest) from time to time outstanding
shall bear interest on each day outstanding at the Default Rate in effect on
such day. On each Eurodollar Rate Payment Date relating to such Eurodollar Loan,
Borrower shall pay to the holder hereof all unpaid interest which has accrued on
such Eurodollar Loan to but not including such Eurodollar Rate Payment Date. All
past due principal of and past due interest on the Loans and all other past due
Obligations shall bear interest on each day outstanding at the Default Rate in
effect on such day until repaid, and such interest shall be due and payable
daily as it accrues.

Section 2.13. Register; Notes. The Register shall be maintained on the following
terms.

(a) The Borrower hereby designates the Agent to serve as the Borrower’s agent,
solely for the purpose of this clause, to maintain a register (the “Register”)
on which the Agent will record each Lender’s Commitments, the Loans made by each
Lender and each repayment in respect of the principal amount of the Loans,
annexed to which the Agent shall retain a copy of each Assignment and Acceptance
delivered to the Agent pursuant to Section 10.6. Failure to make any
recordation, or any error in such recordation, shall not affect any Restricted
Person’s Obligations. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Lenders shall
treat each Person in whose name a Loan is registered as the owner thereof for
the purposes of all Loan Documents, notwithstanding notice or any provision
herein to the contrary. Any assignment or transfer of a Commitment or the Loans
made pursuant hereto shall be registered in the Register only upon delivery to
the Agent of a Assignment and Acceptance that has been executed by the requisite
parties pursuant to Section 10.6. No assignment or transfer of a Lender’s
Commitment or Loans shall be effective unless such assignment or transfer shall
have been recorded in the Register by the Agent as provided in this Section.

(b) [Reserved].

(c) [Reserved].

 

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(d) The Borrower agrees that, upon the request of any Revolving Loan Lender, the
Borrower will execute and deliver to such Lender a Revolving Loan Note
evidencing the Revolving Loans made by, and payable to, such Revolving Loan
Lender in a maximum principal amount equal to such Revolving Loan Lender’s
Revolving Loan Percentage Share of the original aggregate Revolving Loan
Commitments. The Borrower hereby irrevocably authorizes each Revolving Loan
Lender to make (or cause to be made) appropriate notations on the grid attached
to such Revolving Loan Lender’s Note (or on any continuation of such grid),
which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest Period
applicable to the Revolving Loans evidenced thereby. Such notations shall, to
the extent not inconsistent with notations made by the Agent in the Register, be
conclusive and binding on each Restricted Person absent manifest error; provided
that, the failure of any Revolving Loan Lender to make any such notations shall
not limit or otherwise affect any Obligations of any Restricted Person.

(e) Interest on each Note shall accrue and be due and payable as provided herein
and therein, with Eurodollar Loans bearing interest at the Eurodollar Rate and
ABR Loans bearing interest at the Alternate Base Rate (subject to the
applicability of the Default Rate as provided for herein or in the Notes and
limited by the provisions of Section 10.9).

Section 2.14. Defaulting Lenders. 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:

(a) fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.5(a);

(b) the Commitment of such Defaulting Lender shall not be included in
determining whether all Lenders, the Majority Lenders or the Required Lenders
have taken or may take any action hereunder (including any consent to any
amendment, waiver or other modification pursuant to Section 10.1); provided,
that (i) such Defaulting Lender’s Commitment may not be increased or extended
without its consent and (ii) the principal amount of, or interest or fees
payable on, Loans may not be reduced or excused or the scheduled date of payment
may not be postponed as to such Defaulting Lender without such Defaulting
Lender’s consent;

(c) if any Letter of Credit Outstandings exist at the time such Lender becomes a
Defaulting Lender then:

(i) all or any part of the Letter of Credit Outstandings of such Defaulting
Lender shall be reallocated among the non-Defaulting Lenders in accordance with
their respective Percentage Shares but only to the extent the sum of all
non-Defaulting Lenders’ Facility Usage plus such Defaulting Lender’s Letter of
Credit Outstandings does not exceed the total of all non-Defaulting Lenders’
Commitments;

 

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(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrower shall within one Business Day following
notice by the Administrative Agent cash collateralize for the benefit of any
Issuing Bank only the Borrower’s obligations corresponding to such Defaulting
Lender’s Letter of Credit Outstandings (after giving effect to any partial
reallocation pursuant to clause (i) above) in accordance with the procedures set
forth in Section 2.11(g) for so long as such Letter of Credit Outstandings are
outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting
Lender’s Letter of Credit Outstandings pursuant to clause (ii) above, the
Borrower shall not be required to pay any fees to such Defaulting Lender
pursuant to Section 2.5(c) with respect to such Defaulting Lender’s Letter of
Credit Outstandings during the period such Defaulting Lender’s Letter of Credit
Outstandings is cash collateralized;

(iv) if the Letter of Credit Outstandings of the non-Defaulting Lenders is
reallocated pursuant to clause (i) above, then the fees payable to the Lenders
pursuant to Section 2.5(a) and Section 2.5(c) shall be adjusted in accordance
with such non-Defaulting Lenders’ Percentage Shares; and

(v) if all or any portion of such Defaulting Lender’s Letter of Credit
Outstandings are neither reallocated nor cash collateralized pursuant to clause
(i) or (ii) above, then, without prejudice to any rights or remedies of any
Issuing Bank or any other Lender hereunder, all letter of credit fees payable
under Section 2.5(c) with respect to such Defaulting Lender’s Letter of Credit
Outstandings shall be payable to such Issuing Bank until and to the extent that
such Letter of Credit Outstandings is reallocated and/or cash collateralized;
and

(d) so long as such Lender is a Defaulting Lender, no Issuing Bank shall be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure and the Defaulting Lender’s then outstanding
Letter of Credit Outstandings 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 2.14(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 2.14(c)(i) (and such
Defaulting Lender shall not participate therein).

In the event that the Administrative Agent, the Borrower and the Issuing Banks
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 of the
other Lenders as the Administrative Agent shall determine may be necessary in
order for such Lender to hold such Loans in accordance with its Applicable
Percentage.

Section 2.15. Reduction of Aggregate Commitments.

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

 

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(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 Commitments; provided that (i) any such reduction shall apply
proportionately and permanently to reduce the Commitments of each of the
Lenders, (ii) each reduction of the Aggregate Commitments shall be in an amount
that is an integral multiple of $1,000,000 and (iii) the Borrower shall not
terminate or reduce the Aggregate Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.6, the Facility
Usage shall not exceed the lowest of (1) the Borrowing Base in effect as of the
date on which the requested reduction is to be made, (2) the Aggregate
Commitments or (3) the Facility Amount.

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Commitments under Section 2.15(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 2.15(b)(ii) shall be irrevocable; provided that a notice of
termination of the Aggregate Commitments 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. Each reduction of the Aggregate Commitments shall be
made ratably among the Lenders in accordance with each Lender’s Revolving Loan
Percentage Shares.

ARTICLE III - Payments to Lenders

Section 3.1. General Procedures. Unless otherwise expressly provided in a Loan
Document, Borrower will make each payment which it owes under the Loan Documents
to Agent at its New York office (in accordance with the then effective wire
instructions provided by Agent to Borrower) for the account of the Lender Party
to whom such payment is owed. Each such payment must be received by Agent not
later than 12:00 noon, New York City time, on the date such payment becomes due
and payable, in lawful money of the United States of America, without set-off,
deduction (except for any deduction for Taxes as described in Section 3.6(a)) or
counterclaim, and in immediately available funds. Any payment received by Agent
after such time will be deemed to have been made on the next following Business
Day. Should any such payment become due and payable on a day other than a
Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day, and, in the case of a payment of principal or past due
interest, interest shall accrue and be payable thereon for the period of such
extension as provided in the Loan Document under which such payment is due. Each
payment under a Loan Document shall be due and payable at the place provided
therein and, if no specific place of payment is provided, shall be due and
payable at the place of payment of Agent’s New York office or as otherwise
directed by Agent. Agent shall promptly remit in same day funds to

 

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each Lender Party its share, if any, of such payments received by Agent for the
account of such Lender Party. Agent may, and upon direction of the Required
Lenders shall, apply all amounts received pursuant to any exercise of remedies
under the Loan Documents (including from proceeds of collateral securing the
Obligations) or under applicable law upon receipt thereof to the Obligations as
follows:

(a) first, for the payment of all fees and expenses of Agent and its counsel
which are then due;

(b) then for the payment of all other Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section 6.9 or 10.4, second to the payment of all
interest on the Loans then due on a pro rata basis, third to the payment of all
principal on the Loans and Reimbursement Obligations or cash collateralization
in respect of Letters of Credit and all reasonably calculated net credit
exposure of any Lender Party under a Hedging Contract with any Restricted Person
then due, on a pro rata basis, and fourth to the payment of all other
Obligations then due in proportion to the amounts thereof, or as Lender Parties
shall otherwise agree);

(c) then for the prepayment of principal on any remaining Loans, if any,
together with accrued and unpaid interest on the principal so prepaid;

(d) then for the prepayment of any other Obligations, if any; and

(e) last, to the Borrower or any other Person as directed by a court of
competent jurisdiction.

All payments applied to principal or interest on any Loan shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to each Lender Party then owed
Obligations described in such subsection (or subclause thereof) in proportion to
all amounts owed to all Lender Parties which are described in such subsection
(or subclause thereof).

Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party (or any assignee of such Lender Party) or any corporation
controlling any Lender Party (or its assignee), then, upon demand by such Lender
Party, Borrower will pay to Agent for the benefit of such Lender Party, from
time to time as specified by such Lender Party, such additional amount or
amounts which such Lender Party shall reasonably determine to be appropriate to
compensate such Lender Party or any corporation controlling such Lender Party in
light of such circumstances, to the extent that such Lender Party reasonably
determines that the amount of any such capital would be increased or the rate of
return on any such capital would be reduced by or in whole or in part based on
the existence of the face amount of such Lender Party’s Loans or commitments
under this Agreement.

 

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Section 3.3. Increased Cost of Eurodollar Loans. If any applicable Law (whether
now in effect or hereinafter enacted or promulgated, including Regulation D) or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not having
the force of Law) (“Change in Law”):

(a) shall change the basis of taxation of payments to any Lender Party of any
principal, interest, or other amounts attributable to any Eurodollar Loan or
otherwise due under this Agreement in respect of any Eurodollar Loan (other than
Indemnified Taxes, Other Taxes and Excluded Taxes); or

(b) shall change, impose, modify, apply or deem applicable any reserve, special
deposit or similar requirements in respect of any Eurodollar Loan (excluding
those for which such Lender Party is fully compensated pursuant to adjustments
made in the definition of Eurodollar Rate) or against assets of, deposits with
or for the account of, or credit extended by, such Lender Party; or

(c) shall impose on any Lender Party or the interbank eurocurrency deposit
market any other condition affecting any Eurodollar Loan, the result of which is
to increase the cost to any Lender Party of funding or maintaining any
Eurodollar Loan or to reduce the amount of any sum receivable by any Lender
Party in respect of any Eurodollar Loan by an amount deemed by such Lender Party
to be material,

then such Lender Party shall promptly notify Agent and Borrower in writing of
the happening of such event and of the amount required to compensate such Lender
Party for such event, whereupon (i) Borrower shall pay such amount to Agent for
the account of such Lender Party and (ii) Borrower may elect, by giving to Agent
and such Lender Party not less than three Business Days’ notice, to convert all
(but not less than all) of any such Eurodollar Loans into ABR Loans; provided,
that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (ii) all requests,
rules, guidelines or directives promulgated by any Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed to be a Change in
Law, regardless of the date enacted, adopted or issued.

Section 3.4. Availability. If (a) any change in applicable Laws, or in the
interpretation or administration thereof or in any jurisdiction whatsoever,
domestic or foreign, shall make it unlawful or impracticable for any Lender
Party to fund or maintain Eurodollar Loans (or to participate in, issue or
maintain any Letter of Credit), or shall materially restrict the authority of
any Lender Party to purchase or take offshore deposits of dollars (i.e.,
“eurodollars”), or (b) any Lender Party determines that matching deposits
appropriate to fund or maintain any Eurodollar Loan (or to participate in, issue
or maintain any Letter of Credit) are not available to it, or (c) any Lender
Party determines that the formula for calculating the Eurodollar Rate does not
fairly reflect the cost to such Lender Party of making or maintaining Loans (or
of participating in,

 

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issuing or maintaining any Letter of Credit) based on such rate, then, upon
notice by such Lender Party to Borrower and Agent, Borrower’s right to elect
Eurodollar Loans from such Lender Party shall be suspended to the extent and for
the duration of such illegality, impracticability or restriction and all
Eurodollar Loans (or participations in, issuances of or maintenance of any
Letter of Credit) of such Lender Party which are then outstanding or are then
the subject of any Borrowing Notice (or Issuance Request) and which cannot
lawfully or practicably be maintained or funded shall immediately become or
remain, or shall be funded as, ABR Loans of such Lender Party. Borrower agrees
to indemnify each Lender Party and hold it harmless against all costs, expenses,
claims, penalties, liabilities and damages which may result from any such change
in Law, interpretation or administration. Such indemnification shall be on an
after-tax basis, taking into account any taxes imposed on the amounts paid as
indemnity.

Section 3.5. Funding, Losses. In addition to its other obligations hereunder,
Borrower will indemnify each Lender Party against, and reimburse each Lender
Party on demand for, any loss or expense incurred or sustained by such Lender
Party (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by a Lender Party to fund or
maintain Eurodollar Loans), as a result of (a) any payment or prepayment
(whether authorized or required hereunder or otherwise) of all or a portion of a
Eurodollar Loan on a day other than the day on which the applicable Interest
Period ends, (b) any payment or prepayment, whether required hereunder or
otherwise, of a Loan made after the delivery, but before the effective date, of
a Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of any Restricted Person, or (d) any conversion (whether authorized or
required hereunder or otherwise) of all or any portion of any Eurodollar Loan
into an ABR Loan or into a different Eurodollar Loan on a day other than the day
on which the applicable Interest Period ends. Such indemnification shall be on
an after-tax basis, taking into account any taxes imposed on the amounts paid as
indemnity.

Section 3.6. Taxes.

(a) Any and all payments by or on account of any obligation of the Borrower
hereunder shall be made free and clear of and without deduction for any Taxes
except as required by applicable law. If any applicable law requires the
deduction or withholding of any Taxes from such payments, then (i) in the case
of Indemnified Taxes or Other Taxes, the sum payable shall be increased as
necessary so that after making all required deductions of Indemnified Taxes or
Other Taxes (including deductions applicable to additional sums payable under
this Section 3.6(a)), the Agent, Lender or Issuer (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 shall make all deductions required by applicable law and
(iii) the Borrower shall pay the full amount deducted to the relevant
governmental authority in accordance with applicable law.

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

 

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(c) The Borrower shall indemnify the Agent, each Lender and each Issuer within
10 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Agent, such Lender or Issuer, 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) 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 as to the amount of such payment or liability delivered to the
Borrower by a Lender or Issuer, or by the Agent on its own behalf or on behalf
of a Lender or the Issuer, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower to a governmental authority, the Borrower shall deliver to the
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 Agent.

(e) Any Lender that is entitled to an exemption from or reduction of withholding
tax with respect to payments made under any Loan Document shall deliver to the
Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower or the Agent, 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. In addition, any Lender, if requested
by the Borrower or the Agent, shall deliver such other documentation prescribed
by applicable law or reasonably requested by the Borrower or the Agent as will
enable the Borrower or the Agent to determine whether or not such Lender is
subject to backup withholding or information reporting requirements.

Without limiting the generality of the foregoing, any Foreign Lender shall
deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Borrower or the Agent, but only if such Foreign Lender is legally
entitled to do so), whichever of the following is applicable:

(A) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(B) executed originals of IRS Form W-8ECI;

 

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(C) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate to the
effect that (i) such Foreign is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code and (ii) the interest
payments in question are not effectively connected with a U.S. trade or business
conducted by such Foreign Lender and (y) executed originals of IRS Form W-8BEN;
and

(D) executed originals of any other form prescribed by applicable law as a basis
for claiming exemption from or a reduction in U.S. federal withholding Tax, duly
completed, together with such supplementary documentation as may be prescribed
by applicable law to permit the Borrower or the Agent to determine the
withholding or deduction required to be made.

(E) If a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Agent at the time or times prescribed by
law and at such time or times reasonably requested by the Borrower or the Agent
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrower or the Agent as may be necessary for the
Borrower and the Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment.

(f) If the Agent, a Lender or an Issuer determines, in its reasonable
discretion, that it has received a refund of any Indemnified 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 3.6, 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 3.6 with respect to the Indemnified Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Agent, such Lender or
such Issuer 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 Agent, such Lender, or such Issuer 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 Agent, such
Lender or such Issuer in the event the Agent or such Lender is required to repay
such refund to such governmental authority.

 

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Section 3.7. Change of Applicable Lending Office. Each Lender Party agrees that,
upon the occurrence of any event giving rise to the operation of any of Sections
3.2, 3.3, 3.4, 3.5 or 3.6 with respect to such Lender Party, it will, if
requested by Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender Party) to designate another Lending Office,
provided that such designation is made on such terms that such Lender Party and
its Lending Office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the operation
of any such section. Nothing in this section shall affect or postpone any of the
obligations of Borrower or the rights of any Lender Party provided in any of
Sections 3.2, 3.3, 3.4, 3.5 or 3.6.

Section 3.8. Replacement of Lenders. If any Lender Party seeks reimbursement for
increased costs under any of Sections 3.2, 3.3, 3.4, 3.5 or 3.6, or if any
Lender Party becomes a Non-Consenting Lender pursuant to Section 10.1 or a
Defaulting Lender, then within ninety days thereafter and provided no Event of
Default then exists, Borrower shall have the right (unless such Lender Party
withdraws its request for additional compensation) to replace such Lender Party,
Non-Consenting Lender or Defaulting Lender by requiring such Lender Party,
Non-Consenting Lender or Defaulting Lender to assign its Loans, Notes and its
Commitments hereunder to an Eligible Transferee reasonably acceptable to Agent
and to Borrower, provided that: (i) all Obligations of Borrower owing to such
Lender Party, Non-Consenting Lender or Defaulting Lender being replaced
(including such increased costs, but excluding principal and accrued interest on
the Notes being assigned) shall be paid in full to such Lender Party,
Non-Consenting Lender or Defaulting Lender concurrently with such assignment,
and (ii) the replacement Eligible Transferee shall purchase the Loans, Notes and
Commitments being assigned by paying to such Lender Party, Non-Consenting Lender
or Defaulting Lender a price equal to the principal amount thereof plus
applicable reimbursement obligations in respect of Letters of Credit, if any,
plus accrued and unpaid interest thereon. In connection with any such assignment
Borrower, Agent, such Lender Party, Non-Consenting Lender or Defaulting Lender
and the replacement Eligible Transferee shall otherwise comply with
Section 10.6. Notwithstanding the foregoing rights of Borrower under this
section, however, Borrower may not replace any Lender Party which seeks
reimbursement for increased costs under any of Sections 3.2, 3.3, 3.4, 3.5 or
3.6, unless Borrower is at the same time replacing all Lender Parties which are
then seeking such compensation. In connection with any such replacement of a
Lender Party, Non-Consenting Lender or Defaulting Lender, Borrower shall pay all
outstanding and unpaid costs and expenses due to such Lender Party,
Non-Consenting Lender or Defaulting Lender hereunder (including costs and
expenses that would have been due to such Lender Party pursuant to Section 3.5
if such Lender Party’s, Non-Consenting Lender’s or Defaulting Lender’s Loans had
been prepaid) at the time of such replacement.

Section 3.9. Participants. If a Lender has assigned a participation in its Loans
or commitment hereunder to another Person in accordance with Section 10.6, any
amount otherwise payable by Borrower to such Lender under Section 3.3 through
3.6 (in this section called “Increased Costs”), shall include that portion of
the Increased Costs determined by such Lender to be allocable to the amount of
any interest or participation transferred by such Lender in such Lender’s Loan
or commitments under this Agreement; provided that, for the avoidance of doubt,
the amount of the Increased Costs shall not exceed the amount that would be due
if such Lender had not assigned any participation.

 

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ARTICLE IV - Conditions Precedent to Lending

Section 4.1. Closing Date. The obligations of the Lenders to make Loans and of
the Issuers to issue Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 10.1):

(a) The Agent (or its counsel) shall have received:

(A) This Agreement and any other Loan Documents that the Restricted Persons are
to execute in connection herewith.

(B) Each Note.

(C) Each Security Document listed in the Security Schedule.

(D) Certain certificates of Borrower including:

i. An “Omnibus Certificate” of the Secretary and of the Chairman of the Board or
President of Borrower, which shall contain the names and signatures of the
officers of Borrower authorized to execute Loan Documents and which shall
certify to the truth, correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by the Board of
Directors of Borrower and in full force and effect at the time this Agreement is
entered into, authorizing the execution of this Agreement and the other Loan
Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (2) a copy of
the charter documents of Borrower and all amendments thereto, certified by the
appropriate official of Borrower’s state of organization, and (3) a copy of any
bylaws of Borrower; and

ii. A “Compliance Certificate” of the Chairman of the Board or President and of
the chief financial officer of Borrower, of even date with such Loan, in which
such officers certify to the satisfaction of the conditions set out in
Section 4.1 and subsections (a), (b), (c) and (d) of Section 4.3.

(E) A certificate (or certificates) of the due formation, valid existence and
good standing of Borrower in its state of organization, issued by the
appropriate authorities of such jurisdiction, and certificates of Borrower’s
good standing and due qualification to do business, issued by appropriate
officials in any states in which Borrower owns property subject to Security
Documents.

(F) Documents similar to those specified in subsections (D)(i) and (E) of this
section with respect to each other Restricted Person that is a party to the Loan
Documents and the execution by it of such Loan Document.

(G) A favorable opinion of Vinson & Elkins L.L.P., special New York and Texas
counsel for Restricted Persons, in form and substance satisfactory to Agent, as
to customary matters, including without limitation, due incorporation, due
authorization, execution and delivery, enforceability, compliance with
applicable laws, non-contravention, perfection, and investment company act
matters.

 

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(H) The Initial Engineering Report(s), the Initial Financial Statements and any
reserve reports, lease operating statements, and other standard and customary
reports associated with the properties to be acquired pursuant to the Fairway
Acquisition, each satisfactory to Arrangers, in their sole discretion.

(I) Certificates or binders evidencing insurance for each of the Restricted
Persons in effect on the Closing Date in form and substance satisfactory to the
Agent.

(J) Favorable title opinions and environmental reports, in scope and results
acceptable to Agent.

(K) Solvency certificates by each of the Restricted Persons in form and
substance acceptable to the Agent.

(L) All documentation and other information required by regulatory authorities
under applicable “know your customer” and anti-money laundering rules and
regulations, including without limitation the Patriot Act.

(M) A certificate of an Authorized Officer of each Restricted Person dated as of
the Closing Date either (i) attaching copies of all consents, licenses and
approvals required in connection with the execution, delivery and performance by
such Restricted Person and the validity against such Restricted Person of the
Loan Documents to which it is a party, and such consents, licenses and approvals
shall be in full force and effect, or (ii) stating that no such consents,
licenses or approvals are so required (except as have already been obtained by
the appropriate Restricted Person).

(N) Certified copies of UCC Requests for Information or Copies (Form UCC-11), or
a similar search report certified by a party acceptable to the Agent, dated a
date reasonably near to the Closing Date, listing all effective financing
statements that name any Restricted Person (under its present name and any
previous names) as the debtor, together with copies of such financing
statements, evidence a Lien on any collateral described in any Loan Document.

(O) A completed Disclosure Schedule and a completed Insurance Schedule, in each
case in form and substance satisfactory to the Agent.

(b) Agent shall have completed its due diligence with respect to the Restricted
Persons and their properties and shall have received such reports and data as it
shall have deemed necessary in connection therewith, and such due diligence,
reports and data shall be satisfactory to Agent, in its sole discretion.

 

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(c) Agent and Arrangers shall have received payment of all commitment, facility,
agency and other fees required to be paid to any Lender Party pursuant to any
Loan Documents or any commitment or fee letters between or among the Borrower
and any of the Agent or Arrangers heretofore entered into and all fees and
disbursements of their counsel then due such counsel.

(d) No Material Adverse Change shall have occurred to, and no event or
circumstance shall have occurred that could cause a Material Adverse Change to,
Borrower’s Consolidated financial condition or businesses since December 31,
2010.

(e) There shall be no litigation pending or, to the knowledge of the Borrower or
any of its Subsidiaries, threatened litigation, action, proceeding,
investigation or labor controversy which purports to affect the legality,
validity or enforceability of any Loan Document.

Section 4.2. Conditions Precedent to Increase in Initial Availability Amount.
The increase in the Initial Availability Amount from $525,000,000 to
$575,000,000 shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.1)
(the “Fairway Acquisition Effective Date”):

(a) The Agent shall have received a certificate of the Borrower (i) certifying
that the Borrower has or is concurrently consummating the Fairway Acquisition,
(ii) certifying as to the final purchase price for the Fairway Acquisition after
giving effect to all adjustments as of the Fairway Acquisition Effective Date,
and specifying, by category, the amount of such adjustment; (iii) certifying
that attached thereto is a true and complete executed copy of the purchase
agreement and conveyance documents for the Fairway Acquisition and such other
related documents and information as the Agent shall have reasonably requested,
and (iv) certifying that the Mortgaged Properties shall constitute at least
eighty percent (80%) of the total value of the oil and gas reserves of the
Restricted Persons and at least eighty percent (80%) of the total value of the
proved developed producing reserves of the Restricted Persons (it being
understood that such total value of the oil and gas reserves of the Restricted
Persons shall include the properties being acquired pursuant to the Fairway
Acquisition).

(b) The Fairway Acquisition shall have been, or shall contemporaneously with the
Fairway Acquisition Effective Date be, consummated substantially pursuant to the
terms approved by the Agent.

(c) If Borrower mortgages any property being acquired pursuant to the Fairway
Acquisition, the Agent shall have received (i) favorable title opinions and
environmental reports, in scope and results acceptable to Agent on the
properties to be acquired pursuant to the Fairway Acquisition, (ii) a favorable
opinion of Alabama counsel for Borrower, reasonably acceptable to the Agent,
which shall in any event include an opinion that the Mortgages delivered in
connection with the Fairway Acquisition, and any corresponding UCC financing
statements to be filed in the State of Alabama are effective to create a valid,
perfected Lien in favor of the Agent on the Mortgaged Properties that constitute
real property located in the State of Alabama, and are in proper form for
recordation in the State of Alabama, (iii) the Agent shall have received reserve
reports, lease operating statements, and other standard and customary

 

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reports associated with the Fairway Acquisition reasonably requested by the
Agent and (iv) arrangements satisfactory to the Agent shall have been made for
the termination and release of all Liens encumbering the properties to be
acquired pursuant to the Fairway Acquisition.

(d) The Agent and the Lenders shall have received all fees and other amounts due
and payable pursuant to this Agreement or any other Loan Document on or prior to
the Fairway Acquisition Effective Date, including, to the extent invoiced,
reimbursement or payment of all reasonable out-of-pocket expenses (including
reasonable fees, charges and disbursements of counsel) required to be reimbursed
or paid by any Restricted Person hereunder or under any other Loan Document.

Section 4.3. Additional Conditions Precedent to All Loans and Letters of Credit.
No Lender has any obligation to make any Loan (including its first) and no
Issuer has any obligation to issue any Letter of Credit (including its first),
unless the following conditions precedent have been satisfied:

(a) All representations and warranties made by any Restricted Person in any Loan
Document shall be true on and as of the date of such Loan or the date of
issuance of such Letter of Credit (except to the extent that the facts upon
which such representations are based have been changed by the extension of
credit hereunder) as if such representations and warranties had been made as of
the date of such Loan or the date of issuance of such Letter of Credit.

(b) No Default shall exist at the date of such Loan or the date of issuance of
such Letter of Credit.

(c) No Material Adverse Change shall have occurred to, and no event or
circumstance shall have occurred that could cause a Material Adverse Change to,
Borrower’s Consolidated financial condition or businesses since the date of this
Agreement.

(d) Each Restricted Person shall have performed and complied in all material
respects with all agreements and conditions required in the Loan Documents to be
performed or complied with by it on or prior to the date of such Loan or the
date of issuance of such Letter of Credit.

(e) The making of such Loan or the issuance of such Letter of Credit shall not
be prohibited by any Law and shall not subject any Lender or any Issue to any
penalty or other onerous condition under or pursuant to any such Law.

ARTICLE V - Representations and Warranties

To confirm each Lender Party’s understanding concerning Restricted Persons and
Restricted Persons’ businesses, properties and obligations and to induce each
Lender Party to enter into this Agreement and to extend credit hereunder,
Borrower represents and warrants to each Lender Party that:

 

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Section 5.1. No Default. No Restricted Person is in default in the performance
of any of the covenants and agreements contained in any Loan Document. No event
has occurred and is continuing which constitutes a Default.

Section 5.2. Organization and Good Standing. Each Restricted Person is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers and governmental approvals
required to carry on its business and enter into and carry out the transactions
contemplated hereby. Each Restricted Person is duly qualified, in good standing,
and authorized to do business in all other jurisdictions within the United
States wherein the character of the properties owned or held by it or the nature
of the business transacted by it makes such qualification necessary. Each
Restricted Person has taken all actions and procedures customarily taken in
order to enter, for the purpose of conducting business or owning property, each
jurisdiction outside the United States wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
actions and procedures desirable.

Section 5.3. Authorization. Each Restricted Person has duly taken all action
necessary to authorize the execution and delivery by it of the Loan Documents to
which it is a party and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations thereunder. Borrower
is duly authorized to borrow funds hereunder.

Section 5.4. No Conflicts or Consents. The execution and delivery by the various
Restricted Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (a) conflict with any provision of (i) any Law, (ii) the
organizational documents of any Restricted Person, or (iii) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person other than, in the case of (i) and (iii), such conflicts that could not
reasonably be expected to cause a Material Adverse Change, (b) result in the
acceleration of any Indebtedness owed by any Restricted Person, or (c) result in
or require the creation of any Lien upon any assets or properties of any
Restricted Person except as expressly contemplated in the Loan Documents. Except
for those which have already been obtained or as expressly contemplated in the
Loan Documents, no consent, approval, authorization or order of, and no notice
to or filing with, any Tribunal or third party is required in connection with
the execution, delivery or performance by any Restricted Person of any Loan
Document or to consummate any transactions contemplated by the Loan Documents.

Section 5.5. Enforceable Obligations. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Restricted Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors’ rights.

Section 5.6. Initial Financial Statements. Borrower has heretofore delivered to
each Lender Party true, correct and complete copies of the Initial Financial
Statements. The Initial Financial Statements fairly present Borrower’s
Consolidated financial position at the respective dates thereof and the
Consolidated results of Borrower’s operations and Borrower’s

 

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Consolidated cash flows for the respective periods thereof. Since the date of
the audited Initial Financial Statements no Material Adverse Change has
occurred, except as reflected in the quarterly Initial Financial Statements or
in the Disclosure Schedule. All Initial Financial Statements were prepared in
accordance with GAAP.

Section 5.7. Other Obligations and Restrictions. No Restricted Person has any
outstanding Liabilities of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is, in the
aggregate, material to Borrower or material with respect to Borrower’s
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule or a Disclosure Report.
Except as shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule or a Disclosure Report, no Restricted Person is subject to
or restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which could cause a Material Adverse Change.

Section 5.8. Full Disclosure. No certificate, statement or other information
delivered herewith or heretofore by any Restricted Person to any Lender Party in
connection with the negotiation of this Agreement or in connection with any
transaction contemplated hereby contains any untrue statement of a material fact
or omits to state any material fact known to any Restricted Person (other than
industry-wide risks normally associated with the types of businesses conducted
by Restricted Persons) necessary to make the statements contained herein or
therein not misleading in any material respect as of the date made or deemed
made. There is no fact known to any Restricted Person (other than industry-wide
risks normally associated with the types of businesses conducted by Restricted
Persons) that has not been disclosed to each Lender Party in writing which could
cause a Material Adverse Change. There are no statements or conclusions in any
Engineering Report which are based upon or include misleading information or
fail to take into account material information regarding the matters reported
therein, it being understood that each Engineering Report is necessarily based
upon professional opinions, estimates and projections and that Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate. Borrower has heretofore delivered to each Lender Party true,
correct and complete copies of the Initial Engineering Reports.

Section 5.9. Litigation. Except as disclosed in the Initial Financial Statements
or in the Disclosure Schedule: (a) there are no actions, suits or legal,
equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (b) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person’s stockholders,
partners, directors or officers which could cause a Material Adverse Change.

Section 5.10. Labor Disputes and Acts of God. Except as disclosed in the
Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Restricted Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.

 

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Section 5.11. ERISA Plans and Liabilities. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule or a Disclosure Report, no
Termination Event has occurred with respect to any ERISA Plan and all ERISA
Affiliates are in compliance with ERISA except for any non-compliance that would
not cause a Material Adverse Change. No ERISA Affiliate is required to
contribute to, or has any other absolute or contingent liability in respect of,
any “multiemployer plan,” as defined in Section 4001 of ERISA, which could cause
a Material Adverse Change. Except as set forth in the Disclosure Schedule or a
Disclosure Report: (i) no “waived funding deficiency” (as defined in
Section 412(c)(3) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, and (ii) the current value of each ERISA Plan’s
benefits does not exceed the current value of such ERISA Plan’s assets available
for the payment of such benefits by more than $2,000,000.

Section 5.12. Environmental Matters. Except as disclosed in the Disclosure
Schedule or that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change: (a) Restricted Persons are
conducting their businesses in compliance with all Environmental Laws, and have
and are in compliance with all material licenses and permits required under any
such Environmental Laws; (b) none of the Restricted Persons has received express
notice that any of their operations or properties is the subject of a pending
Environmental Claim and to the best of Borrower’s knowledge no Environmental
Claims have been threatened; (c) no Restricted Person (and to the best knowledge
of Borrower, no other Person) has filed any notice under any Environmental Law
that any Restricted Person improperly Released, or improperly stored or
disposed, of any Hazardous Materials or that any Hazardous Materials have been
improperly Released, or are improperly stored or disposed of, upon any real
property of any Restricted Person which alleged improper matter referenced in
such notice has not been fully resolved consistent with Environmental Laws;
(d) no Restricted Person has transported or arranged for the transportation of
any Hazardous Material to any location which to the knowledge of Borrower is
(i) listed on the National Priorities List (“Superfund List”) under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or listed on any analogous state Superfund List; and (e) no Restricted
Person otherwise has any known contingent liability under any Environmental Laws
or as a result of a Release of any Hazardous Materials.

Section 5.13. Names and Places of Business and State of Incorporation or
Formation. No Restricted Person has, during the preceding five years, had, been
known by, or used any other trade or fictitious name, except as disclosed in the
Disclosure Schedule. Except as otherwise indicated in the Disclosure Schedule or
a Disclosure Report, the chief executive office and principal place of business
of each Restricted Person are (and for the preceding five years have been)
located at the address of Borrower set out in Section 10.3. Except as indicated
in the Disclosure Schedule or a Disclosure Report, no Restricted Person has any
other office or place of business. The Disclosure Schedule identifies the true
and correct states of incorporation or formation of each Restricted Person.

Section 5.14. Borrower’s Subsidiaries. Borrower does not presently have any
Subsidiary or own any stock in any other corporation or association, except
those listed in the Disclosure Schedule or a Disclosure Report (which shall
identify whether or not a Subsidiary is a Non-Guarantor Subsidiary). Neither
Borrower nor any Restricted Person is a member of any general or limited
partnership, joint venture or association of any type whatsoever except

 

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(a) those listed in the Disclosure Schedule or a Disclosure Report, and
(b) associations, joint ventures or other relationships whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships. Except as otherwise revealed in a Disclosure
Report, Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule. All Subsidiaries
of Borrower as of the Closing Date of this Agreement are identified in the
Disclosure Schedule and all Non-Guarantor Subsidiaries of Borrower as of the
Closing Date of this Agreement are specified as such in the Disclosure Schedule.

Section 5.15. Title to Properties; Licenses. Each Restricted Person has good and
defensible title to all of its material properties and assets, free and clear of
all Liens other than Permitted Liens and of all material impediments to the use
of such properties and assets in such Restricted Person’s business, except that
no representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. Each Restricted Person possesses all licenses, permits, franchises,
patents, copyrights, trademarks and trade names, and other intellectual property
(or otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property.

Section 5.16. Government Regulation. Neither Borrower nor any other Restricted
Person owing Obligations is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 (as any of the preceding acts have been amended) or any other Law which
regulates the incurring by such Person of Indebtedness, including Laws relating
to common contract carriers or the sale of electricity, gas, steam, water or
other public utility services.

Section 5.17. Insider. No Restricted Person, nor any Person having “control” (as
that term is defined in 12 U.S.C. § 375b(9) or in regulations promulgated
pursuant thereto) of any Restricted Person, is a “director” or an “executive
officer” or “principal shareholder” (as those terms are defined in 12 U.S.C. §
375b(8) or (9) or in regulations promulgated pursuant thereto) of any Lender
Party, of a bank holding company of which any Lender Party is a Subsidiary or of
any Subsidiary of a bank holding company of which any Lender Party is a
Subsidiary.

Section 5.18. Insurance. Each Restricted Person has obtained insurance by
financially sound and reputable insurers covering its property in accordance
with the Insurance Schedule.

Section 5.19. Solvency. Upon giving effect to the issuance of the Notes, the
execution of the Loan Documents by Borrower and the consummation of the
transactions contemplated hereby and the making of each Advance, each of
Borrower and the Restricted Persons will be solvent (as such term is used in
applicable bankruptcy, liquidation, receivership, insolvency or similar laws).

 

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Section 5.20. Taxes. The Borrower and each of its Subsidiaries has filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes due and owing and has paid all taxes shown to be due on any assessment
received to the extent that such taxes have become due and payable (except any
such taxes that are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books), except where the failure to file any such returns
or reports or to pay any such taxes would not give rise to a Material Adverse
Change.

Section 5.21. Gas Imbalances, Prepayments. Except as set forth on Item 5.21 of
the Disclosure Schedule or as disclosed in writing to the Agent and the Lenders
in connection with the most recently delivered Engineering Report, on a net
basis there are no gas imbalances, take or pay or other prepayments that would
require the Borrower or any of the Subsidiaries to deliver Hydrocarbons produced
from their respective Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor exceeding five percent (5%) of the
aggregate volumes of Hydrocarbons (on an Mcf equivalent basis) listed in the
most recent Engineering Report.

Section 5.22. Marketing of Production. Except for contracts listed and in effect
on the date hereof on Item 5.22 of the Disclosure Schedule, and thereafter
either disclosed in writing to the Agent or included in the most recently
delivered Engineering Report (with respect to all of which contracts the
Borrower represents that it or the Subsidiaries are receiving a price for all
production sold thereunder that is computed substantially in accordance with the
terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property’s production delivery capacity except
as set forth on Item 5.22 of the Disclosure Schedule or the most recently
delivered Engineering Report), no material agreements exist that are not
cancelable on 60 days notice or less without penalty or detriment for the sale
of production from the Borrower’s or the Subsidiaries’ Hydrocarbons (including,
without limitation, calls on or other rights to purchase, production, whether or
not the same are currently being exercised) and 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 5.23. Hedging Transactions. Item 5.23 of the Disclosure Schedule sets
forth, as of the Closing Date, a true and complete list of all Hedge Contracts
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Borrower and each 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 5.24. Restriction on Liens. Neither the Borrower nor any of its
Subsidiaries is a party to any material agreement or arrangement or subject to
any order, judgment, writ or decree, that 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 Obligations and the Loan
Documents.

Section 5.25. Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to result in a Material Adverse Change, the
Oil and Gas Properties (and properties unitized therewith) have been maintained,
operated and developed in a good and

 

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workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of all duly constituted authorities having jurisdiction
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; specifically in this
connection, except for those as could not be reasonably expected to result in a
Material Adverse Change, (i) after the Closing Date, no Oil and Gas Property 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) prior to
the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas
Properties (or properties unitized therewith) owned by the Borrower or any of
the Subsidiaries is deviated from the vertical more than the maximum permitted
by applicable laws, regulations, rules and orders, 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) owned by the Borrower or any of the
Subsidiaries.

Section 5.26. Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority (except for Environmental Laws covered under
Section 5.12) applicable to it or its property and all material obligations it
is required to perform under the terms of each indenture, mortgage, deed of
trust, security agreement, lease, franchise, agreement, contract or other
instrument or obligation to which it is a party or by which it or any of its
properties is bound, in all material respects.

Section 5.27. OFAC. Neither the Borrower nor any of its Subsidiaries, nor any
director, officer, agent, employee or Affiliate of the Borrower or any of its
Subsidiaries is currently subject to any material U.S. sanctions administered by
OFAC, and the Borrower will not directly or indirectly use the proceeds from the
Loans or lend, contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person, for the purpose of financing
the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.

ARTICLE VI - Affirmative Covenants of Borrower

To conform with the terms and conditions under which each Lender Party is
willing to have credit outstanding to Borrower, and to induce each Lender Party
to enter into this Agreement and extend credit hereunder, Borrower warrants,
covenants and agrees to the following (and Borrower agrees to cause all of its
Subsidiaries to comply with the following) until the full and final payment of
the Obligations, the termination of all Commitments and the termination or
expiration of all Letters of Credit, unless Required Lenders have previously
agreed otherwise:

Section 6.1. Payment and Performance. Each Restricted Person will pay all
amounts due under the Loan Documents in accordance with the terms thereof and
will observe, perform and comply with every covenant, term and condition
expressed or implied in the Loan Documents. Borrower will cause each other
Restricted Person to observe, perform and comply with every such term, covenant
and condition applicable to such Restricted Person.

 

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Section 6.2. Books’ Financial Statements and Reports. Each Restricted Person
will at all times maintain full and accurate books of account and records.
Borrower will maintain and will cause its Subsidiaries to maintain a standard
system of accounting, will maintain its Fiscal Year, and will furnish the
following statements and reports to Agent (with sufficient copies for each
Lender Party or otherwise in a format suitable for posting on the Platform) at
Borrower’s expense:

(a) As soon as available, and in any event by the ninetieth (90th) day after the
end of each Fiscal Year, complete Consolidated financial statements of Borrower
together with all notes thereto, prepared in reasonable detail in accordance
with GAAP, together with an unqualified opinion, based on an audit using
generally accepted auditing standards, by Ernst & Young LLP or other independent
certified public accountants selected by Borrower and acceptable to Agent,
stating that such Consolidated financial statements have been so prepared. These
financial statements shall contain Consolidated balance sheet as of the end of
such Fiscal Year and Consolidated statements of earnings, of cash flows, and of
changes in owners’ equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal Year.
Together with such financial statements, Borrower will furnish a report signed
by such accountants (i) stating that they have read this Agreement, and
(ii) further stating that in making their examination and reporting on the
Consolidated financial statements described above they did not conclude that any
Default existed at the end of such Fiscal Year or at the time of their report,
or, if they did conclude that a Default existed, specifying its nature and
period of existence. Concurrently with any delivery of financial statements
under this Section 6.2(a), a certificate of an Authorized Officer of Borrower,
in form and substance satisfactory to the Agent, setting forth as of the last
Business Day of such Fiscal Year, a true and complete list of all Hedging
Contracts of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date, notional amounts or
volumes, and the counterparty to each such Hedging Contract). Concurrently with
the furnishing of Consolidated financial statements under this Section 6.2(a),
Borrower will deliver an environmental report pursuant to the terms of
Section 6.12(e).

(b) As soon as available, and in any event by the earlier of the forty-fifth
(45th) day after the end of each of the first three Fiscal Quarters in each
Fiscal Year, Borrower’s Consolidated balance sheet as of the end of such Fiscal
Quarter and Consolidated statements of Borrower’s earnings and cash flows for
the period from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, and setting forth in comparative form the corresponding figures
for the corresponding Fiscal Quarter of the preceding Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments. In addition Borrower will, together
with each such set of financial statements and each set of financial statements
furnished under subsection (a) of this section, furnish (i) a certificate in the
form of Exhibit D signed by the chief financial officer of Borrower stating that
such financial statements are accurate and complete (subject to normal year-end
adjustments), stating that he has reviewed the Loan Documents, specifying the
ratios at the end of such Fiscal Quarter required pursuant to Sections 7.11 and
7.12, and stating that no Default exists at the end of such Fiscal Quarter or at
the time of such certificate or specifying the nature and period of existence of
any such Default, together with a

 

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certificate signed by the chief financial officer of Borrower to be delivered to
the Agent setting forth the calculations of such foregoing ratios in detail
acceptable to the Agent (acting reasonably), and (ii) notice of any new Hedging
Contracts entered into after the Closing Date of this Agreement by the Borrower
pursuant to Section 7.3 and a summary of the material terms thereof in form and
substance satisfactory to the Agent.

(c) Promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent by any Restricted Person to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by any Restricted Person with any securities
exchange, the SEC or any similar governmental authority.

(d) By March 1 of each year, commencing on March 1, 2011, an engineering report
dated as of January 1 of such year, prepared by Netherland Sewell and
Associates, Inc., or other independent petroleum engineers chosen by Borrower
and acceptable to the Required Lenders, concerning all oil and gas properties
and interests owned by any Restricted Person which are located in or offshore of
the United States and which have attributable to them proved oil or gas
reserves. This report shall be satisfactory to Agent, shall take into account
any “over-produced” status under gas balancing arrangements, and shall contain
information and analysis comparable in scope to that contained in the Initial
Engineering Report. This report shall distinguish (or shall be delivered
together with a certificate from an appropriate officer of Borrower which
distinguishes) those properties treated in the report which are Collateral from
those properties treated in the report which are not Collateral.

(e) By September 1 of each year, an engineering report dated as of July 1 of
such year, prepared by Borrower’s in-house petroleum engineering staff,
concerning all oil and gas properties and interests owned by any Restricted
Person which are located in or offshore of the United States and which have
attributable to them proved oil or gas reserves. This report shall be
satisfactory to Agent, shall take into account any “over-produced” status under
gas balancing arrangements, and shall contain information and analysis
comparable in scope to that contained in the Initial Engineering Report. This
report shall distinguish (or shall be delivered together with a certificate from
an appropriate officer of Borrower which distinguishes) those properties treated
in the report which are Collateral from those properties treated in the report
which are not Collateral.

(f) With the delivery of each Engineering Report, the Borrower shall provide to
each Lender Party, a certificate from the president or chief financial officer
of Borrower certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in such Engineering Report and any other
information delivered in connection therewith is true and correct, (ii) Borrower
and the Restricted Persons own good and defensible title to the oil and gas
properties evaluated in such Engineering Report (in this section called the
“Covered Properties”) and are free of all Liens except for Liens permitted by
Section 7.2, (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 with
respect to its oil and gas properties evaluated in such Engineering Report
(other than those permitted by the Security Documents) which would require
Borrower or such Subsidiary

 

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to deliver hydrocarbons produced from such oil and gas properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
the Covered Properties has been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of such properties sold and in such detail as
reasonably required by Agent, (v) attached to the certificate is a list of all
Persons disbursing proceeds to Borrower or such Subsidiary from its oil and gas
properties, and (vi) set forth on a schedule attached to the certificate is the
present discounted value of all Covered Properties that are part of the
Mortgaged Properties, (vii) oil and gas properties which comprise at least
eighty percent (80%) of the total value of the reserves which are included
within the Covered Properties are part of the Mortgaged Properties, and
(viii) oil and gas properties which comprise at least eighty percent (80%) of
the total value of the proved developed producing reserves which are included
within the Covered Properties are part of the Mortgaged Properties; provided
that with respect to clauses (vii) and (viii) above, to the extent that the
Borrower cannot make the certifications in (vii) and (viii) above and provided
that the Borrower in good faith believed that it was not in breach of
Section 6.15 immediately prior to receiving a copy of such Engineering Report,
the Borrower shall have a period of thirty (30) days following the delivery of
such Engineering Report to provide such additional mortgages, deeds of trust and
other security instruments so that it can make such certifications, and the
Borrower shall provide a certificate to Agent making such certifications upon
delivering all such additional mortgages, deeds of trust and other security
instruments.

(g) [Reserved],

(h) [Reserved],

(i) As soon as possible and in any event within fifteen (15) days after Borrower
or any other Restricted Person or any of their Subsidiaries becomes aware or
could reasonably have become aware of (i) the occurrence of any adverse
development with respect to any litigation, action, proceeding, or labor
controversy described in Section 5.9 or (ii) the commencement of any labor
controversy, litigation, action or proceeding that, if adversely determined,
could reasonably be expected to result in liability in excess of $20,000,000
(not covered by insurance satisfactory to Agent in its discretion), notice
thereof and copies of all documentation relating thereto.

(j) At least fifteen (15) business days prior to the formation or acquisition
thereof, notice of the formation or acquisition of any Subsidiary.

Section 6.3. Other Information and Inspections. Each Restricted Person will
furnish to Agent (with sufficient copies for each Lender Party or otherwise in
suitable form for posting onto the Platform) any information which Agent or any
Lender may from time to time reasonably request in writing concerning any
covenant, provision or condition of the Loan Documents (including any
information as may be required under the Patriot Act) or any matter in
connection with Restricted Persons’ businesses and operations. Each Restricted
Person will permit representatives appointed by Agent (including independent
accountants, auditors, agents, attorneys, appraisers and any other Persons) to
visit and inspect during normal business hours any of such Restricted Person’s
property, including its books of account, other books and

 

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records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and each Restricted Person shall
permit Agent or its representatives to investigate and verify the accuracy of
the information furnished to Agent or any Lender in connection with the Loan
Documents and to discuss all such matters with its officers, employees and
representatives.

Section 6.4. Notice of Material Events and Change of Address. Borrower will
promptly notify Agent in writing (with sufficient copies for each Lender Party
or otherwise in suitable form for posting onto the Platform), stating that such
notice is being given pursuant to this Agreement, of:

(a) the occurrence of any Material Adverse Change,

(b) the occurrence of any Default,

(c) the acceleration of the maturity of any Indebtedness owed by any Restricted
Person or of any default by any Restricted Person under any indenture, mortgage,
agreement, contract or other instrument to which any of them is a party or by
which any of them or any of their properties is bound, if such acceleration or
default could cause a Material Adverse Change,

(d) the occurrence of any Termination Event,

(e) any matter for which notice is required under Section 6.12(d),

(f) the filing of any suit or proceeding against any Restricted Person in which
an adverse decision could cause a Material Adverse Change, and

(g) the occurrence of any material change or disruption under or with respect to
any material contract of Borrower.

Upon the occurrence of any of the foregoing Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent’s counsel in writing at least twenty Business Days prior to the
date that any Restricted Person changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Agent and its counsel to
prepare the same.

Section 6.5. Maintenance of Properties. Each Restricted Person will maintain,
preserve, protect, and keep all Collateral and all other property used or useful
in the conduct of its business in good condition in accordance with oil and gas
industry standards and in compliance in all material respects with all
applicable Laws, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be promptly and advantageously conducted at all times.

 

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Section 6.6. Maintenance of Existence and Qualifications. Except as otherwise
permitted in Section 7.4, each Restricted Person will maintain and preserve its
existence and its rights and franchises in full force and effect and will
qualify to do business in all states or jurisdictions where required by
applicable Law, except where the failure so to qualify will not cause a Material
Adverse Change.

Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted Person
will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; (c) timely pay in the ordinary course of its
business consistent with past practices all Liabilities owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
used by it in the ordinary course of its business; (d) pay and discharge when
due all other Liabilities now or hereafter owed by it; and (e) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
GAAP. Each Restricted Person may, however, delay paying or discharging any of
the foregoing so long as it is in good faith contesting the validity thereof by
appropriate proceedings (promptly instituted and diligently concluded) and has
set aside on its books adequate reserves therefor, or to the extent any such
failure to pay or discharge any of the foregoing would not result in a Material
Adverse Change.

Section 6.8. Insurance. Each Restricted Person will keep or cause to be kept
insured by financially sound and reputable insurers its property in accordance
with the Insurance Schedule and will at all times maintain or cause to be
maintained insurance covering such risks as are customarily carried, or
self-insured, by businesses similarly situated. All loss payable clauses or
provisions in all policies of insurance maintained by the Borrower described in
the Insurance Schedule shall be endorsed in favor of and made payable to the
Agent for the ratable benefit of the Lender Parties, as their interests may
appear. In addition, the Agent on behalf of the Lender Parties shall be named
(a) as additional insured with a waiver of subrogation on all of the Restricted
Persons’ liability insurance policies maintained by the Borrower with respect to
all or any portion of the Collateral, and (b) as loss payee on all of the
Restricted Persons’ casualty and property insurance policies covering all or any
portion of the Collateral. Except as provided in the immediately following
sentence or as provided in Section 2.7 or 2.9 or as otherwise provided in this
Agreement, any and all monies that may become payable to the Agent as loss payee
by reason of a Casualty Event shall be made available by Agent to the Borrower
for the purpose of repairing, restoring or otherwise replacing the affected
property or asset. Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, the Agent
(i) shall have the right, for the benefit of the Lender Parties, to retain, and
the Borrower hereby assigns to the Agent for the benefit of the Lender Parties,
any and all monies that may become payable under any such policies of insurance
by reason of damage, loss or destruction of any Collateral for the Obligations
or any part thereof, and (ii) may, at its election, either apply for the benefit
of the Lender Parties all or any part of the sums so collected in accordance
with the Loan Documents toward payment of the Obligations, whether or not such
Obligations are then due and payable, in such manner as the Agent may elect, or
release same to the applicable Restricted Person.

Section 6.9. Performance on Borrower’s Behalf. If any Restricted Person fails to
pay any taxes, insurance premiums, expenses, attorneys’ fees or other amounts it
is required to pay under any Loan Document, Agent may pay the same. Borrower
shall immediately reimburse Agent for any such payments and each amount paid by
Agent shall constitute an Obligation owed hereunder which is due and payable on
the date such amount is paid by Agent.

 

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Section 6.10. [Reserved].

Section 6.11. Compliance with Agreements and Law. Each Restricted Person will
perform all material obligations it is required to perform under the terms of
each indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound, in all material respects. Each
Restricted Person will conduct its business and affairs in compliance with all
Laws applicable thereto, in all material respects.

Section 6.12. Environmental Matters; Environmental Reviews.

(a) Each Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person and
shall obtain, at or prior to the time required by applicable Environmental Laws,
all environmental permits, licenses and other authorizations required under
Environmental Laws and necessary for its operations and will maintain such
authorizations as necessary in full force and effect.

(b) The Restricted Persons will not Release any Hazardous Materials on, under or
from any of their real properties, or permit others to Release any Hazardous
Materials on, under or from any of their real properties, in a manner that could
reasonably result in material liability under Environmental Laws.

(c) The Borrower will promptly, but in no event later than five (5) Business
Days after the occurrence thereof, notify the Agent in writing of Borrower’s
initial written receipt of a citation, civil or criminal penalty assessment or
compliance order from any Tribunal or of a lawsuit from any Person with respect
to an alleged violation of Environmental Law or an alleged violation of a
permit, license or other authorizations required under Environmental Law by the
Restricted Persons for their respective businesses or with respect to an alleged
Release of Hazardous Materials arising out of the operations of any of the
Restricted Persons (including any costs to investigate or remediate such
Release) if the Borrower reasonably anticipates that any of such actions will
result in liability to the Restricted Persons of $5,000,000 or more, not fully
covered by insurance, subject to normal deductibles.

(d) The Borrower will provide to Agent environmental assessments and tests in
accordance with the most current version of applicable American Society of
Testing Materials standards upon the reasonable request by the Agent upon an
Event of Default under this Agreement (or as otherwise required to be obtained
by the Agent or the Lenders by any Tribunal), in connection with any material
real properties of the Restricted Persons.

(e) Concurrent with the furnishing of financial statements pursuant to
Section 6.2(a), Borrower will furnish to Agent a reasonably detailed written
description of all material: (i) citations, civil or criminal penalty
assessments, or compliance orders with

 

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respect to violations of Environmental Laws for which the Borrower reasonably
anticipates will result in liability to the Restricted Persons of $5,000,000 or
more, not fully covered by insurance, subject to normal deductibles; and
(ii) lawsuits with respect to an alleged Release of Hazardous Materials arising
out of the operations of any of the Restricted Persons (including any costs to
investigate or remediate such Release) if the Borrower reasonably anticipates
that any of such actions will result in liability to the Restricted Persons of
$5,000,000 or more, not fully covered by insurance, subject to normal
deductibles.

Section 6.13. Evidence of Compliance. Each Restricted Person will furnish to
each Agent (with sufficient copies for each relevant Lender Party or otherwise
in suitable form for posting onto the Platform) at such Restricted Person’s or
Borrower’s expense all evidence which Agent or any other Lender Party from time
to time reasonably requests in writing as to the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
Restricted Person in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.

Section 6.14. Hedging Program. Subject to the provisions of Section 7.3, the
Borrower shall not assign, terminate or unwind any of the Hedging Contracts
reflected in the hedging positions set forth on a certificate delivered pursuant
to Section 6.2(a) or sell any of such Hedging Contracts if the effect of such
action (when taken together with any other Hedging Contracts executed
contemporaneously with the taking of such action) would have the effect of
canceling its positions under such Hedging Contracts unless such actions (a) are
undertaken (i) with prior written notice to and approval from (which approval
shall not be unreasonably withheld or delayed) the Agent and (ii) for the
purpose of repositioning volumes for later or earlier months, for the purpose of
eliminating production obligations in anticipation of temporary production
shutdowns due to storms or other force majeure events, for the purpose of
eliminating production obligations while maintaining hedge volumes and minimum
prices for the Borrower or any of its Subsidiaries or for the purpose of placing
such obligations under other Hedging Contracts that provide higher minimum
prices for the Borrower or any of its Subsidiaries, and (b) are in compliance
with the restrictions set forth in Section 7.3. As of the date of any
determination or redetermination of the Borrowing Base, the Borrower shall
maintain hedging positions that are acceptable to the Agent, acting reasonably.

Section 6.15. Maintenance of Liens on Properties. The Mortgaged Properties shall
constitute at least eighty percent (80%) of the total value of the oil and gas
reserves of the Restricted Persons and at least eighty percent (80%) of the
total value of the proved developed producing reserves of the Restricted Persons
(in this section called the “Required Percentages”); provided that if,
immediately following the delivery of an Engineering Report and only to the
extent that the Borrower in good faith believed that it was not in breach of
this Section 6.15 immediately prior to receiving a copy of such Engineering
Report, Borrower shall determine that the Mortgaged Properties do not constitute
the Required Percentages of oil and gas reserves or proved developed producing
reserves as required in this Section 6.15, Borrower shall have the thirty
(30) day period described in Section 6.2(f) to execute and deliver documentation
in form and substance satisfactory to Agent, granting to Agent first perfected
Liens subject to Permitted Liens on oil and gas properties that are not then
part of the Mortgaged Properties, sufficient to cause the Mortgaged Properties
to include the Required Percentages. In addition, Borrower will furnish to Agent
title due diligence in form and substance satisfactory to Agent and will furnish
all other documents and information relating to such properties as Agent may
reasonably request.

 

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Section 6.16. Perfection and Protection of Security Interests and Lions.
Borrower will from time to time deliver, and will cause each other Restricted
Person from time to time to deliver, to Agent any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Restricted Persons in
form and substance satisfactory to Agent, which Agent requests for the purpose
of perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations. At the time of recording of the Security Documents,
counsel for Borrower shall conduct searches of the lien, judgment, litigation
and UCC records of the counties and offices where such documents are filed and
promptly upon receipt thereof from such offices forward such searches to Agent’s
counsel together with the original recorded Security Documents and file stamped
copies of the related financing statements.

Section 6.17. Bank Accounts; Offset. To secure the repayment of the Obligations
Borrower hereby grants to each Lender Party a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of any Lender Party at common law, under the Loan Documents,
or otherwise, and each of which shall be upon and against (a) any and all
moneys, securities or other property (and the proceeds therefrom) of Borrower
now or hereafter held or received by or in transit to any Lender Party from or
for the account of Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower with any Lender
Party, and (c) any other credits and claims of Borrower at any time existing
against any Lender Party, including claims under certificates of deposit. At any
time and from time to time after the occurrence of any Default, each Lender
Party is hereby authorized to foreclose upon, or to offset against the
Obligations then due and payable (in either case without notice to Borrower),
any and all items herein above referred to. The remedies of foreclosure and
offset are separate and cumulative, and either may be exercised independently of
the other without regard to procedures or restrictions applicable to the other.

Section 6.18. Production Proceeds. Notwithstanding that, by the terms of the
various Security Documents, the grantors thereunder are and will be assigning to
Agent for the benefit of the Lender Parties all of the “Production Proceeds” (as
defined therein and in this section collectively called “Proceeds”) accruing to
the property covered thereby, so long as no Default has occurred such Persons
may continue to receive from the purchasers of production all such Proceeds,
subject, however, to the Liens created under the Security Documents, which Liens
are hereby affirmed and ratified. Upon the occurrence of a Default, Agent and
Lenders may exercise all rights and remedies granted under the Security
Documents, including the right to obtain possession of all Proceeds then held by
Restricted Persons or to receive directly from the purchasers of production all
other Proceeds. In no case shall any failure, whether purposed or inadvertent,
by Agent or Lenders to collect directly any such Proceeds constitute in any way
a waiver, remission or release of any of their rights under the Security
Documents, nor shall any release of any Proceeds by Agent or Lenders to
Restricted Persons constitute a waiver, remission, or release of any other
Proceeds or of any rights of Agent or Lenders to collect other Proceeds
thereafter.

 

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Section 6.19. Guaranties of Borrower’s Subsidiaries; Joinder; Non-Guarantor
Subsidiaries. (a) Each Subsidiary of Borrower (other than a Non-Guarantor
Subsidiary) shall, promptly upon request by Agent, execute and deliver to Agent
an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Borrower
hereunder, which guaranty shall be satisfactory to Agent in form and substance.
Borrower will cause each of its Subsidiaries to deliver to Agent, simultaneously
with its delivery of such a guaranty, written evidence satisfactory to Agent and
its counsel that such Subsidiary has taken all action necessary to duly approve
and authorize its execution, delivery and performance of such guaranty and any
other documents which it is required to execute and to cause each of its
Subsidiaries (other than Non-Guarantor Subsidiaries) to execute a joinder to the
Subsidiary Security Agreement (as defined in the Security Schedule) or otherwise
provide a security agreement in form and substance acceptable to the Agent.

(b) No Subsidiary of Borrower shall be a Non-Guarantor Subsidiary unless it is
designated as such in the Disclosure Schedule as of the Closing Date of this
Agreement or otherwise designated as such in a written notice by Borrower to
Agent in compliance with Section 6.19(b). Borrower may designate by written
notification thereof to the Agent, any Subsidiary, including a newly formed or
newly acquired Subsidiary, as a Non-Guarantor Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base
Deficiency would exist, and (ii) such Subsidiary has assets of less than
$5,000,000 as of the later to occur of the last day of the immediately preceding
Fiscal Quarter and the date such Subsidiary was acquired or formed by Borrower.
Borrower shall not permit the aggregate principal amount of all Non-Recourse
Debt of all Non-Guarantor Subsidiaries outstanding at any one time to exceed
$50,000,000.

Section 6.20. Casualty and Condemnation. The Borrower will furnish to the Agent
promptly, and in any event within fifteen (15) Business Days, after an
Authorized Officer of the Borrower becoming aware of the occurrence, written
notice of any Casualty Event to any Collateral or the commencement of any action
or proceeding for the taking of any material portion of the Collateral or any
part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding, to the extent the fair market value of such
Collateral so affected, when aggregated with the fair market value of all other
Collateral so affected by a Casualty Event occurring in the same calendar year,
exceeds 5% of the Borrowing Base then in effect.

Section 6.21. ERISA Information. As soon as available, and in any event, within
10 days after the Borrower obtains knowledge of any of the following, the
Borrower will furnish and will cause each ERISA Affiliate to promptly furnish to
the Agent with sufficient copies to the Lenders (a) a written notice signed by
an Authorized Officer describing the occurrence of any Termination Event in
connection with any ERISA Plan or any trust created thereunder, and specifying
what action the Borrower 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, the Department of Labor or the PBGC with respect
thereto, (b) copies of any notice of the PBGC’s institution of proceedings to
terminate or to have a trustee appointed to administer any ERISA Plan and (c) a
written notice of the Borrower’s or an ERISA Affiliate’s participation in a
“multiemployer plan” as defined in Section 4001 of ERISA.

 

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ARTICLE VII - Negative Covenants of Borrower

To conform with the terms and conditions under which each Lender Party is
willing to have credit outstanding to Borrower, and to induce each Lender Party
to enter into this Agreement and extend credit hereunder, Borrower warrants,
covenants and agrees to the following (and Borrower agrees to cause all of its
Subsidiaries to comply with the following) until the full and final payment of
the Obligations, the termination of all Commitments and the termination or
expiration of all Letters of Credit, unless Required Lenders have previously
agreed otherwise:

Section 7.1. Indebtedness. No Restricted Person will in any manner owe or be
liable for Indebtedness except:

(a) the Obligations;

(b) unsecured Indebtedness among the Restricted Persons (other than any
Restricted Person that is a Non-Guarantor Subsidiary);

(c) Indebtedness outstanding under the instruments and agreements described on
the Disclosure Schedule, and any renewals or extensions thereof provided that
the amount of such Liabilities is not increased nor the terms thereof changed in
any manner which is less favorable to such Restricted Person than the original
terms of such Liabilities;

(d) Indebtedness arising under Hedging Contracts that are permitted under
Section 6.14 or 7.3;

(e) obligations arising with respect to sale and lease-back transactions and
operating leases entered into in the ordinary course of such Restricted Person’s
business in arm’s length transactions at competitive market rates under
competitive terms and conditions in all respects, provided that the obligations
required to be paid in any Fiscal Year under or with respect to such sale and
lease-back transactions and any such operating leases do not in the aggregate
exceed $100,000,000 for all Restricted Persons;

(f) 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;

(g) Indebtedness associated with bonds or surety obligations required by
governmental authorities in connection with the operation of the oil and gas
properties of Borrower and its Subsidiaries;

(h) provided that no Default is existing or shall occur as a result of the
incurrence thereof, Indebtedness (including the Existing Senior Notes) incurred
under senior unsecured notes and related guarantees thereof (collectively, the
“Bonds”) issued pursuant to one or more indentures or note purchase agreements
(each an “Indenture”);

 

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provided, that such Indebtedness (A) is unsecured, (B) does not have an
aggregate outstanding principal amount in excess of $650,000,000 (excluding for
the purpose of determining the aggregate outstanding principal amount of
outstanding Indebtedness any Bonds that are repurchased or redeemed by the
Borrower substantially contemporaneously with the new issuance of Bonds using
net proceeds from such new issuance of Bonds), (C) does not have a maturity date
that is earlier than the Maturity Date, (D) has covenants not materially more
onerous to the Restricted Persons than those contained in the preliminary
Confidential Offering Memorandum of the Borrower for the proposed        %
Senior Notes due 2019 (draft dated March 17, 2011) furnished to Agent and
Lenders (the “Preliminary Bond Memorandum”) and (E) contains such other default
terms, prepayment terms, change in control provisions and asset sales provisions
that are substantially similar in all material respects to those provided in the
Preliminary Bond Memorandum and Borrower is in pro forma compliance with the
covenants under this Agreement after the incurrence of such Indebtedness; and
provided further that if the Borrower shall issue or shall have issued Bonds
(including Existing Senior Notes) that results in an aggregate outstanding
principal amount of Bonds in excess of $450,000,000 (excluding for the purpose
of determining the aggregate principal amount of Bonds so issued any Bonds that
are repurchased or redeemed by the Borrower substantially contemporaneously with
the new issuance of such Bonds using net proceeds from the new issuance of
Bonds), the Borrowing Base shall automatically and simultaneously from time to
time without further action reduce by an amount equal to 25% of such excess, in
each case until such time as the Borrowing Base is redetermined or otherwise
adjusted pursuant to the terms of the Agreement; and

(i) unsecured Indebtedness and related guarantees thereof not described in
subsections (a) through (h) above arising after the date hereof in an aggregate
principal amount not to exceed $10,000,000 for all Restricted Persons.

Section 7.2. Limitation on Liens. No Restricted Person will create, assume or
permit to exist any Lien upon any of the properties or assets which it now owns
or hereafter acquires, except, to the extent not otherwise forbidden by the
Security Documents the following (“Permitted Liens”):

(a) Liens which secure Obligations;

(b) statutory Liens for taxes, assessments and other governmental charges or
levies, provided such Liens secure only obligations (i) which are not delinquent
or (ii) which are being contested as provided in Section 6.7 and which do not
exceed $5,000,000 in the aggregate for all Restricted Persons;

(c) as to property which is Collateral, any Liens expressly permitted to
encumber such Collateral under any Security Document covering such Collateral;

(d) purchase money security interests in equipment acquired by the Restricted
Persons, provided that such security interests secure only the Indebtedness
incurred for the purchase of such equipment and such security interests encumber
only the equipment acquired with the proceeds of such Indebtedness;

 

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(e) deposits made to counterparties in connection with Hedging Contracts;
provided that the aggregate amount of such deposits shall not exceed $2,000,000
for all Restricted Persons;

(f) Liens existing on the Closing Date that are disclosed in the Disclosure
Schedule; and

(g) Excepted Liens.

Section 7.3. Hedging Contracts. No Restricted Person will be a party to or in
any manner be liable on any Hedging Contract other than Hedging Contracts with
Approved Counterparties required pursuant to Section 6.14, except:

(a) Any Restricted Person may enter into contracts for the purpose and effect of
fixing prices on oil or gas which is expected to be produced by Restricted
Persons or which the Restricted Persons are legally obligated to purchase under
purchase contracts then in effect, provided that at all times: (i) the aggregate
monthly oil production covered by all such contracts (determined, in the case of
contracts that are not settled on a monthly basis, by a monthly proration
acceptable to Agent) for any single month does not in the aggregate exceed the
sum of seventy-five percent (75%) of Projected Oil Production anticipated to be
sold in the ordinary course of Restricted Persons’ businesses for such month set
forth in Schedule 7.3, (ii) the aggregate monthly gas production covered by all
such contracts (determined, in the case of contracts that are not settled on a
monthly basis, by a monthly proration acceptable to Agent) for any single month
does not in the aggregate exceed the sum of seventy-five percent (75%) of
Projected Gas Production anticipated to be sold in the ordinary course of
Restricted Persons’ businesses for such month, (iii) no such contract requires
any Restricted Person to put up money (except as provided in Section 7.2(e)),
assets, letters of credit (unless the Indebtedness arising with respect thereto
is permitted under Section 7.1(f)), or other security against the event of its
nonperformance prior to actual default by such Restricted Person in performing
its obligations thereunder (except that any such contract that is with a Lender
or an Affiliate of a Lender may be secured pursuant to the Security Documents
and entitled to the benefits of Security Documents and the provisions of this
Agreement and the other Loan Documents relating to the Collateral in accordance
with Section 10.14), and (iv) each such contract is with a counterparty or has a
guarantor of the obligation of the counterparty who (unless such counterparty is
a Lender Party or one of its Affiliates) at the time the contract is made has
long-term obligations rated BBB- or Baa3 or better, respectively, by either
Rating Agency or is an investment grade-rated industry participant; and

(b) Any Restricted Person may enter into contracts for the purpose and effect of
fixing interest rates on a principal amount of indebtedness of such Restricted
Person that is accruing interest at a variable rate, provided that each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Lender Party or one of its
Affiliates) at the time the contract is made has long-term obligations rated
BBB- or Baa3 or better, respectively, by either Rating Agency or is an
investment grade-rated industry participant.

 

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Section 7.4. Limitation on Mergers, Issuances of Securities. Except as expressly
provided in this subsection no Restricted Person will merge or consolidate with
or into any other business entity. Provided that no Default is existing or shall
occur as a result thereof, (a) any Subsidiary of Borrower may, however, be
merged into or consolidated with (i) another Subsidiary of Borrower, or
(ii) Borrower, so long as Borrower is the surviving business entity; and
(b) Borrower may merge or consolidate with another Person so long as the
Borrower is the surviving business entity. Borrower will not issue any
securities other than shares of its common stock, preferred stock and any
options or warrants giving the holders thereof only the right to acquire such
shares or debt securities permitted to be incurred under Section 7.1; provided,
however, that the net proceeds of any such issuance shall first be applied as a
mandatory prepayment of the Loans under Section 2.7, if, at the time of such
issuance, the Facility Usage exceeds the Borrowing Base. No Subsidiary of
Borrower will issue any additional shares of its Capital Stock or other
securities or any options, warrants or other rights to acquire such additional
shares or other securities except to Borrower.

Section 7.5. Limitation on Sales of Property. No Restricted Person will sell,
transfer, lease, exchange, alienate or dispose of any of its material assets or
properties or any material interest therein except, to the extent not otherwise
forbidden under the Security Documents:

(a) farmouts of undeveloped acreage and transfers of interest in oil and gas
properties as a result of non-consent under operating agreements, in each case,
in the ordinary course of business and upon customary industry terms and
assignments in connection with such farmouts;

(b) equipment which is worthless or obsolete or which is replaced by equipment
of equal suitability and value;

(c) inventory (including oil, natural gas, natural gas liquids or hydrocarbons
or mineral products and seismic data) which is sold in the ordinary course of
business on ordinary trade terms;

(d) interests in oil and gas properties, or portions thereof, that are sold for
fair consideration; provided that Borrower shall notify Agent in writing
(including notice by email) at least five (5) Business Days prior to the date on
which any such interests are expected to be sold, and if the aggregate
consideration for such sale made pursuant to this subsection (c), together with
the aggregate consideration of all other sales made (i) if prior to the initial
Determination Date, since the Closing Date or (ii) if on or after the initial
Determination Date, since the most recent Determination Date, exceeds
$50,000,000 net of reasonably-estimated future plug and abandonment costs (any
sale that causes the aggregate consideration of all sales made since the Closing
Date (if prior to the initial Determination Date) or since the most recent
Determination Date (if on or after the initial Determination Date), as the case
may be, exceeds $50,000,000 net of reasonably-estimated future plug and
abandonment costs, and any sale occurring after such sale that causes such
excess, herein a “Subject Sale”), the Borrowing Base shall automatically reduce
in connection with each such Subject Sale by the value attributable to the
property (net of any asset retirement obligation relieved as a result of the
Subject Sale) in the Borrowing Base so sold pursuant to such Subject Sale, such
reduced

 

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Borrowing Base to be effective upon the date of each such Subject Sale (and the
Borrower shall immediately repay or prepay the Loans and/or cash collateralize
all Letters of Credit to the extent of any Borrowing Base Deficiency caused as a
result of such Subject Sale and subsequent reduction from the proceeds of such
Subject Sale); and

(e) other property (excluding Collateral) which is sold for fair consideration
not in the aggregate in excess of $10,000,000 in any Fiscal Year, so long as
property sold is not attributed any value in the Borrowing Base.

Neither Borrower nor any of Borrower’s Subsidiaries will sell, transfer or
otherwise dispose of Capital Stock of any of Borrower’s Subsidiaries except that
any Subsidiary of Borrower may sell or issue its own Capital Stock to the extent
not otherwise prohibited hereunder. Notwithstanding the foregoing sentence, the
Borrower may sell the Capital Stock or all or substantially all of the assets of
any Subsidiary with the Agent’s consent if as to each and all such sales, each
of the following conditions is satisfied as determined by Agent: (i) the
consideration received in connection with any such sale shall be at least equal
to the fair market value of such Capital Stock or assets (as the case may be),
(ii) such sale shall be on commercially reasonable prices and terms in a bona
fide arm’s length transaction, (iii) subject to clause (iv) below, not less than
seventy-five (75%) percent of the consideration received by the Borrower or the
relevant Restricted Person for such sale shall be in cash or Cash Equivalents,
(iv) in the event of the sale of the Capital Stock of any Subsidiary of Borrower
which is a Restricted Person, or in the event of the sale by any Restricted
Person of its assets as provided above, if the value of any applicable property
being sold and/or transferred in connection with such transaction has been
included in the Borrowing Base, the Borrowing Base shall automatically be
reduced by the value of such property or assets so sold or transferred
attributed to them in the then current Borrowing Base (as determined by the
Required Lenders), and the Borrower shall forthwith repay or prepay the Loans
and/or cash collateralize all Letters of Credit to the extent of any Borrowing
Base Deficiency caused thereby from the proceeds of such sale, (v) Agent shall
have received not less than ten (10) Business Days prior written notice of any
such sale of assets or Capital Stock, which notice shall set forth in reasonable
detail satisfactory to Agent, the parties to such sale, the consideration to be
paid for the sale of such assets or Capital Stock, the terms and manner of the
payment of such consideration, the assets or Capital Stock to be sold the
liabilities being assumed by the purchaser pursuant to such sale, and such other
information with respect thereto as Agent may request, and (vi) as of the date
of such sale and after giving effect thereto, no Default or Event of Default
shall have occurred and remain continuing.

No Restricted Person will discount, sell, pledge or assign any notes payable to
it, accounts receivable or future income except to the extent expressly
permitted under the Loan Documents.

Section 7.6. Limitation on Distributions; Redemptions and Prepayments of
Indebtedness. No Restricted Person will make any Distribution or will redeem,
purchase, retire, prepay, repay or defease any Indebtedness (other than the
Obligations) prior to the original maturity thereof, except:

(a) Distributions by Borrower to any of its shareholders on any date, provided
that all Distributions made pursuant to this clause (a) in any Fiscal Year shall
not exceed the Available Distribution Amount,

 

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(b) Distributions by Subsidiaries of Borrower without limitation to Borrower, or

(c) (x) the purchase, redemption, acquisition or retirement of common stock of
the Borrower and/or (y) the redemption, purchase, prepayment, repayment or
defeasance of all or any portion of the Bonds described in Section 7.1(h), in an
aggregate amount not to exceed $100,000,000; provided, that such $100,000,000
limitation shall not apply to (and shall not be reduced for) the redemption,
purchase, prepayment, repayment or defeasance of all or any of the Existing
Senior Notes in an aggregate principal amount equal to the aggregate principal
amount of any new issuance of notes issued on or before December 31, 2011;

provided that no such Distribution, redemption, purchase, acquisition,
retirement, prepayment, repayment or defeasance described in this Section 7.6
(including pursuant to the immediately following proviso) shall be permitted if
(i) an Event of Default has occurred and is continuing, (ii) an Event of Default
would occur as a result of such Distribution, redemption, purchase, acquisition,
retirement, prepayment, repayment or defeasance, or (iii) a Borrowing Base
Deficiency has occurred and is continuing or would result therefrom; provided,
further that, in addition to Section 7.6(c) but subject to the immediately
preceding proviso, (A) the Borrower may pay interest on the Bonds on the stated,
scheduled dates for payment of interest set forth in the applicable Indenture
and (B) the Borrower may redeem, repurchase, prepay or defease the Bonds (x) on
the scheduled maturity date for the Bonds, (y) in the principal amount that is
required to be repaid or prepaid under the applicable Indenture on each stated,
scheduled date for repayment or prepayment of principal thereunder or (z) with
the written consent of the Required Lenders.

Section 7.7. Limitation on Investments and New Businesses. No Restricted Person
will

(a) make any expenditure or commitment or incur any obligation or enter into or
engage in any transaction except in the ordinary course of business or except as
otherwise expressly permitted hereunder,

(b) engage directly or indirectly in any business or conduct any operations
except the exploration, development and production of oil and gas,

(c) make any acquisitions of or Investments in any Person, except
(i) Investments in Cash Equivalents and Investments in Wholly-owned Subsidiaries
of Borrower or in a Person that as a result of such Investment pursuant to this
Section 7.7(c)(i), the Borrower or any other Restricted Person making such an
Investment would have at least thirty percent (30%) ownership interest in such
Person, provided that the Investments made by the Borrower or any other
Restricted Person in a Non-Guarantor Subsidiary and any Person that is not a
Subsidiary may not exceed $15,000,000 in the aggregate at any one time
outstanding, or (ii) Investments in a Person, provided that (A) as a result of
such Investment (x) the Borrower or any other Restricted Person making such an
Investment would have at least ten percent (10%) ownership interest in such
Person, and (y) substantially all the assets of such Person would consist of oil
and gas

 

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properties, (B) the Borrower or any other Restricted Person making such an
Investment would be the operator of such oil and gas properties and (C) such
Person does not incur any Indebtedness other than Non-Recourse Debt; provided
that the Investments made by the Borrower or any other Restricted Person in all
Persons under subsection (ii) may not exceed $50,000,000 in the aggregate at any
one time outstanding unless the Borrower has caused the Investment Percentage of
all of the oil and gas properties of such Person to be Mortgaged Property, or

(d) make any significant acquisition of or Investments in any properties except
oil and gas properties; provided that no acquisition or investment permitted
under the immediately preceding clause (c) may be made if a Default, Event of
Default or Borrowing Base Deficiency exists at the time such acquisition or
Investment is made or will occur as a result thereof;

provided that this Section 7.7 shall not apply to any Restricted Person’s entry
into operating agreements, working interests, royalty interests, mineral leases,
processing agreements, farm-out agreements, contracts for the sale,
transportation or exchange of oil and natural gas, unitization agreements,
pooling arrangements, area of mutual interest agreements, production sharing
agreements or other similar or customary agreements, transactions, properties,
interests or arrangements, and Investments and expenditures in connection
therewith or pursuant thereto, in each case made or entered into in the ordinary
course of the oil and gas business on customary industry terms, excluding,
however, Investments in other Persons.

Section 7.8. Limitation on Credit Extensions. Except for Investments permitted
by Section 7.7, no Restricted Person will extend credit, make advances or make
loans other than (a) normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated in
a normal and prudent manner, and (b) loans to other Restricted Persons, so long
as no Default, Event of Default or Borrowing Base Deficiency exists at the time
such loan is made.

Section 7.9. Transactions with Affiliates; Creation and Dissolution of
Subsidiaries. No Restricted Person will (a) engage in any material transaction
with any of its Affiliates on terms which are less favorable to it than those
which would have been obtainable at the time in arm’s-length dealing with
Persons other than such Affiliates; or (b) except as permitted under
Section 7.7(c) and provided that the Borrower shall have complied with, or
caused the relevant Restricted Person to comply with, Section 6.19, create or
acquire any Subsidiary after the date hereof. Any Restricted Person (other than
the Borrower) may wind up, liquidate or dissolve, and the Borrower may cause any
Restricted Person (other than itself) to wind up, liquidate or dissolve, in
connection with any merger or consolidation to the extent permitted under
Section 7.4 hereof; or, with the consent of the Agent, so long as (i) such
winding up, liquidation or dissolution shall not result in or give rise to any
obligation, liability or Indebtedness of any Restricted Person, (ii) no Default
or Event of Default shall have occurred and remain continuing as a result of,
and after giving effect to, such transaction, (iii) all properties of such
Restricted Person has been duly transferred to another Restricted Person to the
reasonable satisfaction of the Agent, and (iv) the required Mortgaged Properties
remain encumbered in accordance with Section 6.15.

 

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Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans. Except
as expressly provided for in the Loan Documents, no Restricted Person will,
directly or indirectly, enter into, create, or otherwise allow to exist any
contractual or other consensual restriction on the ability of any Subsidiary of
Borrower to: (a) pay dividends or make other distributions to Borrower,
(b) redeem equity interests held in it by Borrower, (c) repay loans and other
indebtedness owing by it to Borrower, (d) transfer any of its assets to Borrower
or (e) grant any Liens on its properties, revenues or assets in favor of the
Agent for the benefit of the Lenders, the Issuers and the counterparties to
Hedging Contracts. No Restricted Person will enter into any “take-or-pay”
contract or other contract or arrangement for the purchase of goods or services
which obligates it to pay for such goods or service regardless of whether they
are delivered or furnished to it. No Restricted Person will amend or permit any
amendment to any other contract or lease which releases, qualifies, limits,
makes contingent or otherwise detrimentally affects the rights and benefits of
Agent or any Lender under or acquired pursuant to any Security Documents. No
ERISA Affiliate will incur any obligation to contribute to any “multiemployer
plan” as defined in Section 4001 of ERISA which could cause a Material Adverse
Change. The Borrower will not, and will not permit any of its Subsidiaries to,
consent to any amendment, supplement, waiver or other modification of, or enter
into any forbearance from exercising any rights with respect to the terms or
provisions contained in an Indenture or the Bonds related thereto that results
or causes or has the effect of doing any of the following: (i) contravening the
provisions of this Agreement, (ii) increasing the interest, premium or the yield
on such Bonds beyond the interest, yield or premium currently specified in such
Indenture as of the effective date of such Indenture, (iii) providing for dates
for payment of principal, interest, premium (if any), yield or fees which are
earlier than the dates specified in such Indenture as in effect on the effective
date of such Indenture, (iv) providing for any covenant, event of default or
remedy which is more restrictive on any Restricted Person than that set forth in
such Indenture as in effect on the effective date of such Indenture,
(v) providing for redemption, prepayment or defeasance provisions that are more
burdensome on any Restricted Person than those set forth in such Indenture as in
effect on the effective date of such Indenture, (vi) providing for collateral
securing Indebtedness under such Bonds or such Indenture, or (vii) increasing
the obligations of the Borrower or any of its Subsidiaries or conferring any
additional rights on any holder of such Bonds than those set forth in such
Indenture as in effect on the effective date of such Indenture which could
reasonably be expected to be adverse to the Lender Parties.

Section 7.11. Current Ratio. Commencing with the Fiscal Quarter ending on
June 30, 2011, the ratio of Borrower’s Consolidated current assets to Borrower’s
Consolidated current liabilities at the last day of any Fiscal Quarter will not
be less than 1.0 to 1.0. For purposes of this section, (i) Borrower’s
Consolidated current assets will include any unused portion of the Borrowing
Base which is then available for borrowing, and Borrower’s Consolidated current
liabilities will be calculated without including any payments of principal on
the Notes which are required to be repaid within one year from the time of
calculation and (ii) the calculation of the Borrower’s Consolidated current
assets and Consolidated current liabilities for purposes of this Section 7.11
shall exclude any non-cash assets or liabilities described in, and calculated
pursuant to, FASB Accounting Standards Codification Topics 410 (Asset Retirement
Obligations) and 815 (Hedge Accounting), each as amended (provided that, for the
avoidance of doubt, such calculation shall include any current assets or current
liabilities in respect of the termination of any Hedging Contract).

 

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Section 7.12. Leverage Ratio. The Borrower will not permit its Leverage Ratio as
of the last day each Fiscal Quarter thereafter (commencing with the Fiscal
Quarter ending June 30, 2011) to be greater than 3.00 to 1.00; provided that the
calculation of the Borrower’s Leverage Ratio for purposes of this Section 7.12
shall exclude any unrealized gains or losses or non-cash assets or liabilities
in respect of asset retirement obligations and Hedging Contracts described in,
and calculated pursuant to, FASB Accounting Standards Codification Topics 410
(Asset Retirement Obligations) and 815 (Hedge Accounting), each as amended
(provided that, for the avoidance of doubt, the calculation of Leverage Ratio
shall include any gains, losses, assets or liabilities resulting from the
termination of any Hedging Contracts).

Section 7.13. Fiscal Year. No Restricted Person will change its fiscal year.

ARTICLE VIII - Events of Default and Remedies

Section 8.1. Events of Default. Each of the following events constitutes an
Event of Default under this Agreement:

(a) Any Restricted Person fails to pay the principal component of any Obligation
when due and payable, whether at a date for the payment of a fixed installment
or as a contingent or other payment becomes due and payable or as a result of
acceleration or otherwise;

(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in clause (a) above) when due and payable, whether at a date for the
payment of a fixed installment or as a contingent or other payment becomes due
and payable or as a result of acceleration or otherwise, within three Business
Days after the same becomes due;

(c) Any “default” or “event of default” occurs under any Loan Document which
defines either such term, and the same is not remedied within the applicable
period of grace (if any) provided in such Loan Document;

(d) Any Restricted Person fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 6.4 or Article VII;

(e) Any Restricted Person fails (other than as referred to in subsections (a),
(b), (c) or (d) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of any Loan Document, and such failure remains
unremedied for a period of thirty (30) days after notice of such failure is
given by Agent to Borrower;

(f) Any representation or warranty previously, presently or hereafter made in
writing by or on behalf of any Restricted Person in connection with any Loan
Document shall prove to have been false, misleading or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 5.5 for any
reason other than its release or subordination by Agent;

(g) [Reserved];

 

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(h) Any Restricted Person (i) fails to pay any portion, when such portion is
due, of any of its Indebtedness having a principal or stated amount in excess of
$5,000,000, or (ii) breaches or defaults in the performance of any agreement or
instrument by which any such Indebtedness is issued, evidenced, governed, or
secured, and any such failure, breach or default continues beyond any applicable
period of grace provided therefor;

(i) Either (i) any “waived funding deficiency” (as defined in Section 412(c)(3)
of the Internal Revenue Code of 1986, as amended) in excess of $1,000,000 exists
with respect to any ERISA Plan, (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA Plan’s benefit
liabilities exceeds the then current value of such ERISA Plan’s assets available
for the payment of such benefit liabilities by more than $2,000,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer’s proportionate share of such excess exceeds such
amount) or (iii) any Termination Event occurs with respect to a “multiemployer
plan” (as defined in Section 4001 of ERISA) which results in any ERISA Affiliate
being assessed withdrawal liability in excess of $2,000,000;

(j) Any Restricted Person:

(i) suffers the entry against it of a judgment, decree or order for relief by a
Tribunal of competent jurisdiction in an involuntary proceeding commenced under
any applicable bankruptcy, insolvency or other similar Law of any jurisdiction
now or hereafter in effect, including the federal Bankruptcy Code, as from time
to time amended, or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or

(ii) commences a voluntary case under any applicable bankruptcy, insolvency or
similar Law now or hereafter in effect, including the federal Bankruptcy Code,
as from time to time amended; or applies for or consents to the entry of an
order for relief in an involuntary case under any such Law; or makes a general
assignment for the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or takes
corporate or other action to authorize any of the foregoing; or

(iii) suffers the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of all or a
substantial part of its assets or of any part of the Collateral in a proceeding
brought against or initiated by it, and such appointment or taking possession is
neither made ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or

 

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(iv) suffers the entry against it of a final judgment (including with respect to
any Environmental Claim) for the payment of money individually or in the
aggregate in excess of $25,000,000 (not covered by insurance satisfactory to
Agent in its discretion), unless the same is discharged within thirty days after
the date of entry thereof or an appeal or appropriate proceeding for review
thereof is taken within such period and a stay of execution pending such appeal
is obtained; or

(v) suffers a writ or warrant of attachment or any similar process to be issued
by any Tribunal against all or any substantial part of its assets or any part of
the Collateral, and such writ or warrant of attachment or any similar process is
not stayed or released within thirty days after the entry or levy thereof or
after any stay is vacated or set aside; and

(k) [Reserved];

(l) Any Change in Control occurs;

(m) Any Material Adverse Change occurs; or

(n) Any Loan Document or any Lien created thereby shall be invalid, or any
Restricted Person shall have asserted that such Loan Document or Lien is
invalid.

Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Lender to make any further Loans hereunder and any obligation of any
Issuer to issue Letters of Credit hereunder shall be permanently terminated.
During the continuance of any other Event of Default, Agent at any time and from
time to time may (and upon written instructions from Required Lenders, Agent
shall), without notice to Borrower or any other Restricted Person, do either or
both of the following: (1) terminate any obligation of Lender to make Loans
hereunder and any obligation of any Issuer to issue Letters of Credit hereunder,
and (2) declare any or all of the Obligations immediately due and payable, and
all such Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement.

Section 8.2. Remedies. If any Default shall occur and be continuing, each Lender
Party may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender Party may
enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.

 

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ARTICLE IX - Agent and Issuers

Section 9.1. Appointment and Authority of Agent. Each Lender Party hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to receive payments
of principal, interest and other amounts due hereunder as specified herein and
to take all other actions and to exercise such powers under the Loan Documents
as are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to the other Lender Parties is only that of one commercial lender acting as
administrative agent for others, and nothing in the Loan Documents shall be
construed to constitute Agent a trustee or other fiduciary for any holder of any
of the Notes or of any participation therein nor to impose on Agent duties and
obligations other than those expressly provided for in the Loan Documents. With
respect to any matters not expressly provided for in the Loan Documents and any
matters which the Loan Documents place within the discretion of Agent, Agent
shall not be required to exercise any discretion or take any action, and it may
request instructions from Lenders with respect to any such matter, in which case
it shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Lenders in so acting or refraining from
acting) upon the instructions of Required Lenders (including itself), provided,
however, that Agent shall not be required to take any action which exposes it to
a risk of personal liability that it considers unreasonable or which is contrary
to the Loan Documents or to applicable Law. Upon receipt by Agent from Borrower
of any communication calling for action on the part of Lenders or upon notice
from any other Lender Party to Agent of any Default or Event of Default, Agent
shall promptly notify each other Lender Party thereof.

Section 9.2. Exculpation, Agent’s Reliance, Etc. Neither Agent nor any Issuer
nor any of their directors, officers, agents, attorneys, or employees shall be
liable for any action taken or omitted to be taken by any of them under or in
connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND,
except that each shall be liable for its own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, Agent and Issuers
(a) may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof in accordance with this
Agreement, signed by such payee and in form satisfactory to Agent; (b) may
consult with legal counsel (including counsel for Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any other Lender Party and shall not be responsible to any
other Lender Party for any statements, warranties or representations made in or
in connection with the Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of the Loan Documents on the part of any Restricted Person or to
inspect the property (including the books and records) of any Restricted Person;
(e) shall not be responsible to any other Lender Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any instrument or document furnished in connection therewith;
(f) may rely upon the representations and warranties of each Restricted Person
and the Lenders in exercising its powers hereunder; and (g) shall incur no
liability under or in respect of the Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (including any telecopy)
believed by it to be genuine and signed or sent by the proper Person or Persons.

 

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Section 9.3. Credit Decisions. Each Lender Party acknowledges that it has,
independently and without reliance upon any other Lender Party, made its own
analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.

Section 9.4. Indemnification. Each Lender agrees to indemnify Agent (to the
extent not reimbursed by Borrower within ten (10) days after demand) from and
against such Lender’s Aggregate Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called “liabilities and costs”) which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated with
any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement thereof) at any time associated therewith or
contemplated therein (including any Environmental Claims or violation or
noncompliance with any Environmental Laws by any Person or any liabilities or
duties of any Person with respect to the presence or Release of Hazardous
Materials found in or released into the environment). Each Lender agrees to
indemnify Issuers (to the extent not reimbursed by Borrower within ten (10) days
after demand) from and against such Lender’s Aggregate Percentage Share of any
and all liabilities and costs which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against such Issuer growing out of,
resulting from or in any other way associated with the Letters of Credit issued
by such Issuer. For the avoidance of doubt, any indemnification relating to
Taxes shall be covered exclusively by Section 3.6 and shall not be covered by
this Section 9.4.

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT OR ISSUER,

provided only that no Lender shall be obligated under this section to indemnify
Agent and any Issuer for that portion, if any, of any liabilities and costs
which is proximately caused by Agent’s own individual gross negligence or
willful misconduct, as determined in a final judgment. Cumulative of the
foregoing, each Lender agrees to reimburse Agent and such Issuer promptly upon
demand for such Lender’s Aggregate Percentage Share of any costs and expenses to
be paid to Agent or such Issuer by Borrower under Section 10.4(a) to the extent
that Agent or such Issuer is not timely reimbursed for such expenses by Borrower
as provided in such section. As used in this section the terms “Agent” and
“Issuer” shall refer not only to the Person designated as such in Section 1.1
but also to each director, officer, agent, attorney, employee, representative
and Affiliate of such Person.

 

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Section 9.5. Rights as Lender. In its capacity as a Lender, Agent and each
Issuer shall have the same rights and obligations as any Lender and may exercise
such rights as though it were not Agent. Agent or any Issuer may accept deposits
from, lend money to, act as Trustee under indentures of, and generally engage in
any kind of business with any Restricted Person or their Affiliates, all as if
it were not Agent or an Issuer hereunder and without any duty to account
therefor to any other Lender.

Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party agrees
that if it shall, whether through the exercise of rights under Security
Documents or rights of banker’s lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 3.1,
causes such Lender Party to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and
(b) such other adjustments shall be made from time to time as shall be equitable
to ensure that Agent and all Lenders share all payments of Obligations as
provided in Section 3.1; provided, however, that nothing herein contained shall
in any way affect the right of any Lender Party to obtain payment (whether by
exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law exercise any
and all rights of banker’s lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to Tribunal order to be paid on account of
the possession of such funds prior to such recovery.

Section 9.7. Investments. Whenever Agent in good faith determines that it is
uncertain about how to distribute to Lenders any funds which it has received, or
whenever Agent in good faith determines that there is any dispute among Lenders
about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending distribution, and
all interest on any such investment shall be distributed upon the distribution
of such investment and in the same proportion and to the same Persons as such
investment; provided that Agent shall not be liable to Lenders for any loss on
such investment except for its gross negligence or willful misconduct (BUT
INCLUDING FOR ITS NEGLIGENCE), as determined in a final judgment. All moneys
received by Agent for distribution to Lenders (other than to the Person who is
Agent in its separate capacity as a Lender) shall be held by Agent pending such
distribution solely as Agent for such Lenders, and Agent shall have no equitable
title to any portion thereof.

Section 9.8. Benefit of Article IX. The provisions of this Article (other than
the following Section 9.9) are intended solely for the benefit of Lender
Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Lender
Party. Lender Parties may waive or amend such provisions as they desire without
any notice to or consent of Borrower or any Restricted Person.

 

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Section 9.9. Resignation. Agent or any Issuer may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set forth
the date of such resignation. Required Lenders shall have the right to appoint a
successor Agent or, if such resigning Issuer is the sole issuer hereunder,
Issuer. A successor must be appointed for any retiring Agent (or a retiring
Issuer if such Issuer is the sole Issuer hereunder), and such Agent’s (or
Issuer’s) resignation shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the retiring Agent’s (or
Issuer’s) resignation, no successor Agent (or Issuer, if such Issuer is the sole
Issuer hereunder) has been appointed and has accepted such appointment, then the
retiring Agent (or Issuer) may appoint a successor Agent (or Issuer), which
shall be a financial institution organized under the Laws of the United States
of America or of any state thereof. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent or Issuer, the retiring Agent or Issuer
shall be discharged from its duties and obligations under this Agreement and the
other Loan Documents. After any retiring Agent’s or Issuer’s resignation
hereunder the provisions of this Article IX shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
or Issuer under the Loan Documents.

ARTICLE X - Miscellaneous

Section 10.1. Waivers and Amendments; Acknowledgments.

(a) Waivers and Amendments. No failure or delay (whether by course of conduct or
otherwise) by any Lender Party in exercising any right, power or remedy which
such Lender Party may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by any Lender Party of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Restricted Person shall
in any case of itself entitle any Restricted Person to any other or further
notice or demand in similar or other circumstances. This Agreement and the other
Loan Documents set forth the entire understanding between the parties hereto
with respect to the transactions contemplated herein and therein and supersede
all prior discussions and understandings with respect to the subject matter
hereof and thereof, and no waiver, consent, release, modification or amendment
of or supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
(i) if such party is Borrower, by Borrower, (ii) if such party is Agent, by such
party, (iii) if such party is a Lender, by such Lender or by Agent on behalf of
Lenders with the written consent of Majority Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in
Section 10.14) and (iv) if such party is Issuer, by Issuer. Notwithstanding the
foregoing or anything to the contrary herein, Agent shall not,

 

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without the prior consent of each individual Lender, execute and deliver on
behalf of such Lender any waiver or amendment which would: (1) waive any of the
conditions specified in Article IV (provided that Agent may in its discretion
withdraw any request it has made under Section 4.2(e)), (2) increase the
Commitment of such Lender or subject such Lender to any additional obligations,
(3) reduce any fees payable to such Lender hereunder, or the principal of, or
interest on, such Lender’s Note, (4) postpone any date fixed for any payment of
any such fees, principal or interest, (5) increase the Facility Amount or the
Aggregate Commitments of the Lenders to an amount in either case in excess of
$900,000,000 or increase the aggregate amount of the Revolving Loan Commitments
or amend the definition herein of “Majority Lenders” or “Required Lenders” or
otherwise change the aggregate amount of applicable Percentage Shares which is
required for Agent, Lenders or any of them to take any particular action under
the Loan Documents, (6) release Borrower from its obligation to pay such
Lender’s Note, (7) release all or substantially all of the Collateral or
(8) amend this Section 10.1, or (9) amend Section 9.6. Notwithstanding the
foregoing, (A) to the extent that the Borrower or any Restricted Person
transfers, sells or otherwise assigns any Collateral in accordance with the Loan
Documents, the Agent is authorized to release the Agent’s and Lenders’ Liens on
such Collateral without any further consent by any of the Lender Parties;
(B) any amendment of the definition of “Initial Availability Amount” or any
proposed amendment, modification, waiver or termination of any provision with
respect to any determination or redetermination of the Borrowing Base, or in
connection with any matter directly relating to the Borrowing Base (including
matters in respect of any Borrowing Base Deficiency and in respect of the
relevant provisions of Section 7.5 relating to the Borrowing Base), shall only
require the consent of the Revolving Loan Lenders whose Revolving Loan
Percentage Shares equal or exceed sixty-six and two-thirds percent (66-2/3%)
(except that any amendment that increases the Initial Availability Amount or
then current Borrowing Base shall require the consent of all of the Revolving
Loan Lenders; provided, however that the increase in the Initial Availability
Amount in connection with the Fairway Acquisition pursuant to Section 2.8 of
this Agreement shall be automatic and shall not require the consent of any
Lender); (C) no waiver, consent, release, modification or amendment of or
supplement to any Hedging Contract, fee letter between any Restricted Person or
any Arranger or Agent, or any letter of credit application shall be valid or
effective against any party thereto without the consent of such party, and any
such documents may be waived, consented to, released, modified or amended in
accordance with the terms of such documents; and (D) in connection with any
proposed amendment, modification, waiver or termination (a “Proposed Change”)
requiring the consent of all Lenders, if the consent of Required Lenders is
obtained, but the consent of the other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained being referred to as a
“Non-Consenting Lender”), then so long as the Agent is not a Non-Consenting
Lender, at the Borrower’s request the Agent, or one or more Eligible
Transferees, shall have the right (but not the obligation and in each case with
the Agent’s consent and in the Agent’s sole discretion) to purchase from such
Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall,
upon the Agent’s request, sell and assign to the Agent or such Person, all of
the Loans, Notes and Commitments of such Non-Consenting Lenders in accordance
with Section 3.8, such purchase and sale to be consummated pursuant to an

 

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executed Assignment and Acceptance. Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such
Lender may not be increased or extended without the consent of such Lender.

(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Lender Party,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Lender Party as to the Loan Documents except as expressly set
out in this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Lender Party has any fiduciary obligation toward Borrower with
respect to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower and the other
Restricted Persons, on one hand, and each Lender Party, on the other hand, is
and shall be solely that of debtor and creditor, respectively, (vi) no
partnership or joint venture exists with respect to the Loan Documents between
any Restricted Person and any Lender Party, (vii) Agent is not Borrower’s Agent,
but Agent for Lenders in the capacity described in the second sentence of
Section 9.1, (viii) should an Event of Default or Default occur or exist, each
Lender Party will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time,
(ix) without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender Party, or any representative thereof,
and no such representation or covenant has been made, that any Lender Party
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or Default or
any other provision of the Loan Documents, and (x) all Lender Parties have
relied upon the truthfulness of the acknowledgments in this section in deciding
to execute and deliver this Agreement and to become obligated hereunder.

(c) Representation by Lenders. Each Lender hereby represents that it will
acquire its Note for its own account in the ordinary course of its commercial
lending business; however, the disposition of such Lender’s property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Notes, Loans, Letters
of Credit and Commitments, any participation interest or other interest in its
Notes, Loans, Letters of Credit or Commitments, or any of its other rights and
obligations under the Loan Documents.

(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

 

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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 10.2. Survival of Agreements; Cumulative Nature. All of Restricted
Persons’ various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other Loan
Documents, and shall further survive until all of the Obligations are paid in
full to each Lender Party and all of Lender Parties’ obligations to Borrower are
terminated. All statements and agreements contained in any certificate or other
instrument delivered by any Restricted Person to any Lender Party under any Loan
Document shall be deemed representations and warranties by Borrower or
agreements and covenants of Borrower under this Agreement. The representations,
warranties, indemnities, and covenants made by Restricted Persons in the Loan
Documents, and the rights, powers, and privileges granted to Lender Parties in
the Loan Documents, are cumulative, and, except for expressly specified waivers
and consents, no Loan Document shall be construed in the context of another to
diminish, nullify, or otherwise reduce the benefit to any Lender Party of any
such representation, warranty, indemnity, covenant, right, power or privilege.
In particular and without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein contained shall
apply to any similar representation, warranty, indemnity, or covenant contained
in any other Loan Document, and each such similar representation, warranty,
indemnity, or covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various Loan Documents.

Section 10.3. Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lender Parties), and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to Borrower and Restricted
Persons at the address of Borrower specified on the signature pages hereto and
to each Lender Party at its address specified in the Lenders Schedule as its
lending offices for ABR Loans (unless changed by similar notice in writing given
by the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery during
normal business hours at the address provided herein, (b) in the case of
telecopy, upon receipt, or (c) in the case of registered or certified United
States mail, three days after deposit in the mail; provided, however, that no
Borrowing Notice shall become effective until actually received by Agent.

Section 10.4. Payment of Expenses; Indemnity.

(a) Payment of Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, Borrower will promptly (and in any event, within 30
days after any invoice or other statement or notice) pay: (i) all transfer,
stamp, mortgage, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
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any other document referred to herein or therein, (ii) all reasonable costs and
expenses incurred by or on behalf of Agent (including attorneys’ fees,
consultants’ fees and engineering fees, travel costs and miscellaneous expenses)
in connection with (l)the negotiation, preparation, execution and delivery of
the Loan Documents, and any and all consents, waivers, amendments or
modifications or other documents or instruments relating thereto, (2) the
filing, recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or re-recorded by the terms of any Loan Document, (3) the borrowings
hereunder and other action reasonably required in the course of administration
hereof, (4) monitoring or confirming (or preparation or negotiation of any
document related to) Borrower’s compliance with any covenants or conditions
contained in this Agreement or in any Loan Document, and (iii) all reasonable
costs and expenses incurred by or on behalf of any Lender Party (including
reasonable attorneys’ fees, consultants’ fees and accounting fees) in connection
with the defense or enforcement of any of the Loan Documents (including this
section) or the defense of any Lender Party’s exercise of its rights thereunder.
In addition to the foregoing, until all Obligations have been paid in full,
Borrower will also pay or reimburse Agent for all reasonable out-of-pocket costs
and expenses of Agent or its agents or employees in connection with the
continuing administration of the Loans and the related due diligence of Agent,
including travel and miscellaneous expenses and fees and expenses of Agent’s
outside counsel, reserve engineers and consultants engaged in connection with
the Loan Documents.

(b) Indemnity. Borrower agrees to indemnify each Lender Party, upon demand, from
and against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section collectively called
“liabilities and costs”) which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against such Lender Party by the Borrower
or any Restricted Person or by any third party growing out of, resulting from or
in any other way associated with any of the Collateral, the Loan Documents and
the transactions and events (including the enforcement or defense thereof) at
any time associated therewith or contemplated therein (including any
Environmental Claims or violation or noncompliance with any Environmental Laws
by any Restricted Person or any liabilities or duties of any Restricted Person
or any Lender Party with respect to the presence or Release of Hazardous
Materials found in or released into the environment). For the avoidance of
doubt, any indemnification relating to Taxes shall be covered exclusively by
Section 3.6 and shall not be covered by this Section 10.4.

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY,

 

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provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including Borrower
or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term “Lender Parties” shall
refer not only to the Persons designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Persons.

Section 10.5. Joint and Several Liability; Parties in Interest. All Obligations
which are incurred by two or more Restricted Persons shall be their joint and
several obligations and liabilities. All grants, covenants and agreements
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Restricted Person may assign or transfer any of its rights or delegate
any of its duties or obligations under any Loan Document without the prior
consent of Required Lenders. Except as otherwise provided in this Agreement,
neither Borrower nor any Affiliates of Borrower shall directly or indirectly
purchase or otherwise retire any Obligations owed to any Lender nor will any
Lender accept any offer to do so, unless each Lender shall have received
substantially the same offer with respect to the same Aggregate Percentage Share
of the Obligations owed to it. If Borrower or any Affiliate of Borrower at any
time purchases some but less than all of the Obligations owed to all Lender
Parties, such purchaser shall not be entitled to any rights of any Lender Party
under the Loan Documents unless and until Borrower or its Affiliates have
purchased all of the Obligations.

Section 10.6. Assignments.

(a) Participations

(A) Any Lender may sell a participation interest in its commitments hereunder or
any of its rights under its Loans or under the Loan Documents to any Person,
provided that the agreement between such Lender and such participant must at all
times provide: (i) that such participation exists only as a result of the
agreement between such participant and such Lender and that such transfer does
not give such participant any right to vote as a Lender or any other direct
claims or rights against any Person other than such Lender, (ii) that such
participant is not entitled to payment from any Restricted Person under any of
Sections 3.2, 3.3, 3.4, 3.5 or 3.6 of amounts in excess of those payable to such
Lender under such sections (determined without regard to the sale of such
participation), and (iii) unless such participant is an Affiliate of such
Lender, that such participant shall not be entitled to require such Lender to
take any action under any Loan Document or to obtain the consent of such
participant prior to taking any action under any Loan Document, except for
actions which would require the consent of all Lenders under the next-to-last
sentence of subsection (a) of Section 10.1. No Lender selling such a
participation shall, as between the other parties hereto and such Lender, be
relieved of any of its obligations hereunder as a result of the sale of such
participation. Each Lender which sells any such participation to any Person
(other than an Affiliate of such Lender) shall give prompt notice thereof to
Agent and Borrower.

 

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(B) Each Lender that sells a participation shall, acting solely for this purpose
as a non-fiduciary agent of the Borrower, maintain a register on which it enters
the name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the Loans or other obligations under
the Loan Documents (the “Participant Register”); provided that no Lender shall
have any obligation to disclose all or any portion of the Participant Register
to any Person (including the identity of any Participant or any information
relating to a Participant’s interest in any commitments, loans, letters of
credit or its other obligations under any Loan Document) except to the extent
that such disclosure is necessary to establish that such commitment, loan,
letter of credit or other obligation is in registered form under
Section 5f.l03-l(c) of the United States Treasury Regulations. Unless otherwise
required by the Internal Revenue Service, any disclosure required by the
foregoing sentence shall be made by the relevant Lender directly and solely to
the Internal Revenue Service. The entries in the Participant Register shall be
conclusive absent manifest error, and such Lender shall treat each Person whose
name is recorded in the Participant Register as the owner of such participation
for all purposes of this Agreement notwithstanding any notice to the contrary.

(b) Except for sales of participations under the immediately preceding
subsection (a), no Lender shall make any assignment or transfer of any kind of
its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, and then only if
such assignment is made in accordance with the following requirements:

(i) Unless otherwise consented to in writing by Agent and so long as no Default
or Event of Default is continuing by Borrower, which consents in each case shall
be made in the sole and absolute discretion of Agent and Borrower, as
applicable, in the case of an assignment of Revolving Loans and Revolving Loan
Commitments, (1) each such assignment shall apply to all Revolving Loans owing
to the assignor and to the unused portion of the assignor Revolving Loan
Commitments and (2) immediately after giving effect to such assignment, the
assignor’s Revolving Loan Commitment shall not be less than $5,000,000 and the
assignee’s Revolving Loan Commitment shall equal or exceed $5,000,000 (unless
such assignor is assigning all of its Revolving Loan Commitments and Revolving
Loans or unless such assignment is to an Affiliate of such assignor or an
Approved Fund administered or managed by such assignor or an Affiliate of such
assignor).

(ii) The parties to each such assignment shall execute and deliver to Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
appropriately completed, together with the Note subject to such assignment and a
processing fee payable to Agent of $3,500. Upon such execution, delivery, and
payment and upon the satisfaction of the conditions set

 

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out in such Assignment and Acceptance, then (A) Borrower shall, if requested by
the assignor and/or assignee, issue new Revolving Loan Notes, to such assignor
and assignee in exchange for the return of the old Notes to Borrower, and (B) as
of the “Effective Date” specified in such Assignment and Acceptance the assignee
thereunder shall be a party hereto and a Lender hereunder and Agent shall
thereafter deliver or make available to Borrower and each Lender one or more
schedules showing the revised Percentage Shares of all other Lenders.

(iii) Each assignee Lender shall (to the extent it has not already done so)
provide Agent and Borrower with the documentation referred to in Section 3.6(e).

(c) Nothing contained in this section shall prevent or prohibit any Lender from
assigning or pledging all or any portion of its Loans and Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors and any Operating Circular issued by such Federal Reserve Bank or to
any central bank having jurisdiction over such Lender or to one of its
Affiliates or as otherwise required by applicable Law; provided that no such
assignment or pledge shall relieve such Lender from its obligations hereunder.

(d) By executing and delivering an Assignment and Acceptance, each assignee
Lender thereunder will be confirming to and agreeing with Borrower, Agents and
each other Lender hereunder that such assignee understands and agrees to the
terms hereof, including Article IX hereof.

Section 10.7. Confidentiality. Each Lender Party agrees that it will follow its
customary procedures to keep confidential any proprietary information given to
it by any Restricted Person, provided, however, that this restriction shall not
apply to information which (a) has at the time in question entered the public
domain, (b) is required to be disclosed by Law (whether valid or invalid) of any
Tribunal or is disclosed pursuant to Section 10.18, (c) is disclosed to any
Lender Party’s Affiliates, auditors, attorneys, agents or to any credit
insurance provider relating to the Borrower and its obligations, (d) is
furnished to any other Lender Party or to any purchaser or prospective purchaser
of participations or other interests in any Loan or Loan Document or to any
direct, indirect, actual or prospective counterparty (and its advisor) to any
swap, derivative or securitization transaction related to the obligations under
this Agreement (provided each such purchaser, prospective purchaser,
counterparty or prospective counterparty first agrees to hold such information
in confidence on the terms provided in this section), (e) is furnished to S&P or
Moody’s or any similar organization or any nationally recognized rating agency
in connection with ratings issued with respect to such Lender Party or with
respect to any Restricted Person, or (f) is disclosed in the course of enforcing
its rights and remedies during the existence of an Event of Default; provided,
however, that this obligation of confidence shall not apply to, and each of
Agent and the other Lender Parties (and each Person employed or retained by them
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans) may disclose to any Tribunal, without limitation of
any kind, the tax treatment and tax structure of the transactions contemplated
by this Agreement and the other Loan Documents, and all materials of any kind
(including opinions or other tax analyses) related thereto that are or have been
provided to the Agent or such Lender Party relating to such tax treatment or tax
structure.

 

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Section 10.8. Governing Law; Submission to Process. Except to the extent that
the law of another jurisdiction is expressly elected in a Loan Document, the
Loan Documents shall be deemed contracts and instruments made under and governed
by the laws of the State of New York (including for such purposes Sections
5-1401 AND 5-1402 of the General Obligations Law of the State of New York). In
any legal proceeding relating to the Loan Documents or the Obligations, each of
the parties hereto hereby irrevocably submits itself to the exclusive
jurisdiction of the state and federal courts sitting in Harris County, Texas and
agrees and consents that service of process may be made upon it in any legal
proceeding relating to the Loan Documents or the Obligations by any means
allowed under applicable Law.

Section 10.9. Limitation on Interest. Lender Parties, Restricted Persons and any
other parties to the Loan Documents intend to contract in strict compliance with
applicable usury Law from time to time in effect. In furtherance thereof such
Persons stipulate and agree that none of the terms and provisions contained in
the Loan Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum amount
of interest permitted to be charged by applicable Law from time to time in
effect. Neither any Restricted Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. Lender Parties
expressly disavow any intention to charge or collect excessive unearned interest
or finance charges in the event the maturity of any Obligation is accelerated.
If (a) the maturity of any Obligation is accelerated for any reason, (b) any
Obligation is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the legal maximum, or (c) any Lender or any
other holder of any or all of the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase the
interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Lender’s or holder’s option, promptly returned
to US Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, characterize any non-principal
payment as an expense, fee or premium rather than as interest, exclude voluntary
prepayments and the effects thereof, and amortize, prorate, allocate, and spread
the total amount of interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of interest
from time to time in effect under applicable Law in order to lawfully charge the
maximum amount of interest permitted under applicable Law. As used in this
section the term “applicable Law” means the Laws of the State of New York or the
Laws of the United States of America, whichever Laws allow the greater interest,
as such Laws now exist or may be changed or amended or come into effect in the
future.

 

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Section 10.10. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Restricted Person in any Loan Document, any Obligations under any of
Sections 3.2, 3.3, 3.4, 3.5 or 3.6, and any obligations which any Person may
have to indemnify or compensate any Lender Party shall survive any termination
of this Agreement or any other Loan Document. At the request and expense of
Borrower, Agent shall prepare and execute all necessary instruments to reflect
and effect such termination of the Loan Documents. Agent is hereby authorized to
execute all such instruments on behalf of all Lenders, without the joinder of or
further action by any Lender.

Section 10.11. Severability. If any term or provision of any Loan Document shall
be determined to be illegal or unenforceable all other terms and provisions of
the Loan Documents shall nevertheless remain effective and shall be enforced to
the fullest extent permitted by applicable Law.

Section 10.12. Counterparts. This Agreement may be separately executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Agreement.

Section 10.13. Waiver of Jury Trial, Punitive Damages, etc. Borrower and each
Lender Party hereby knowingly, voluntarily, intentionally, and irrevocably
(a) waives, to the maximum extent not prohibited by Law, any right it may have
to a trial by jury in respect of any litigation based hereon, or directly or
indirectly at any time arising out of, under or in connection with the Loan
Documents or any transaction contemplated thereby or associated therewith,
before or after maturity; (b) waives, to the maximum extent not prohibited by
Law, any right it may have to claim or recover in any such litigation any
“Special Damages”, as defined below, (c) certifies that no party hereto nor any
representative or agent or counsel for any party hereto has represented,
expressly or otherwise, or implied that such party would not, in the event of
litigation, seek to enforce the foregoing waivers, and (d) acknowledges that it
has been induced to enter into this Agreement, the other Loan Documents and the
transactions contemplated hereby and thereby by, among other things, the mutual
waivers and certifications contained in this section. As used in this section,
“Special Damages” includes all special, consequential, exemplary, or punitive
damages (regardless of how named), but does not include any payments or funds
which any party hereto has expressly promised to pay or deliver to any other
party hereto.

Section 10.14. Release of Collateral; Collateral Matters; Hedging. Agent and
each Lender Party hereby agree that so long as no Event of Default shall have
occurred and be continuing, Agent shall release from the Security Documents,
upon written request by Borrower and at Borrower’s expense, interests in oil and
gas properties sold or otherwise transferred by any Restricted Person in
compliance with Section 7.5, upon receipt of the indefeasible

 

93

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prepayment of the Loans and Letter of Credit Outstandings required in connection
with such sale, if any. The benefit of the Security Documents and the provisions
of this Agreement and the other Loan Documents relating to the Collateral shall
also extend to and be available on a pro rata basis to each Lender and such
Lender’s Affiliates in respect of any obligations under a Hedging Contract with
any Restricted Person, but only so long as such Lender remains a party to this
Agreement and this Agreement remains in effect. No Lender or Affiliate of a
Lender shall have any voting or consent right under any Loan Document as a
result of the existence of obligations owed to it under a Hedging Contract.

Section 10.15. Amendment and Restatement. On the Closing Date, this Agreement
shall be deemed to restate and amend the Existing Credit Agreement in its
entirety, whereupon all of the terms and provisions hereof shall supersede the
terms and conditions thereof. The parties hereto further agree that, on the
Closing Date, this Agreement and the Notes shall serve to extend, renew and
continue, but not to extinguish or novate, the Existing Notes and the
corresponding loans and to amend, restate and supersede, but not to extinguish
or cause to be novated the Indebtedness under, the Existing Credit Agreement.
Borrower hereby agrees that, on the Closing Date, (a) the Loans outstanding
under the Existing Credit Agreement and all accrued and unpaid interest thereon,
and (b) all accrued and unpaid fees under the Existing Credit Agreement shall be
deemed to be outstanding under and payable by this Agreement; provided that
changes in the Percentage Shares, interest rates, or fee rates shall not change
the amounts then accrued and owing to each Lender Party under the Existing
Credit Agreement immediately prior to the Closing Date.

Section 10.16. Other Agents. None of the Persons identified in this Agreement as
the “Arrangers” or “Co-Bookrunners” or the “Syndication Agent” or the
“Co-Documentation Agents” shall have any right, power, obligation, liability,
responsibility or duty under this Agreement or any other Loan Document other
than (a) except in the case of the Arrangers, those applicable to all Lenders as
such or (b) as expressly provided for herein or therein. Without limiting the
foregoing, none of the Other Agents shall have or be deemed to have any
fiduciary relationship with any Restricted Person or any Lender. Each of the
Lenders and Borrower, on behalf of itself and the other Restricted Persons,
acknowledges that it has not relied, and will not rely, on any of the Other
Agents in deciding to enter into this Agreement or in taking or not taking any
action hereunder or under the Loan Documents.

Section 10.17. USA Patriot Act Notice. The Agent 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 “Patriot Act”), it is required
to obtain, verify and record information that identifies the Borrower and its
partners, which includes the names and addresses of the Borrower and its
partners and other information that will allow the Agent to identify the
Borrower and its Subsidiaries and partners in accordance with the Patriot Act.
This notice is given in accordance with the requirements of the Patriot Act and
is effective as to Agent and each Lender Party.

Section 10.18. Posting of Approved Electronic Communications. (a) In addition to
providing the Agent with all originals or copies of all Communications (as
defined below) in the manner specified by Section 10.3, Borrower hereby also
agrees, unless directed otherwise by the Agent or unless the electronic mail
address referred to below has not been provided by the Agent to Borrower, that
it will, or will cause its Subsidiaries to, provide to the Agent all
information,

 

94

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documents and other materials that it is obligated to furnish to the Agent or to
the Lender Parties pursuant to the Loan Documents, including all notices,
requests, financial statements, financial and other reports, certificates and
other information materials (all such communications being referred to herein
collectively as “Communications”), by transmitting the Communications in an
electronic/soft medium that is properly identified in a format acceptable to the
Agent to an electronic mail address as directed by the Agent.

(b) Borrower further agrees that (i) the Agent may make the Communications
available to the Lender Parties by posting the Communications on Intralinks or a
substantially similar electronic transmission system (the “Platform”) and
(ii) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do
not wish to receive material non-public information with respect to the Borrower
or its securities) (each, a “Public Lender”). Borrower hereby agrees that
(A) all Communications that are to be made available to Public Lenders shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that
the word “PUBLIC” shall appear prominently on the first page thereof; (B) by
marking Communications “PUBLIC,” the Borrower shall be deemed to have authorized
the Agent and each Lender Party to treat such Communications as either publicly
available information or not material information (although it may be sensitive
and proprietary) with respect to the Restricted Persons or their securities for
purposes of United States Federal and state securities laws; (C) all
Communications marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated “Public Investor” or other similar
designation; and (D) the Agent shall be entitled to treat any Communications
that are not marked “PUBLIC” as being suitable only for posting on a portion of
the Platform not designated “Public Investor” or otherwise not designated as
public.

(c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE LENDER PARTIES DO
NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY
OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE
COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS IS MADE BY THE LENDER PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR
THE PLATFORM. IN NO EVENT SHALL THE LENDER PARTIES HAVE ANY LIABILITY TO ANY
RESTRICTED PERSON, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND,
WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN
TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY RESTRICTED PERSON’S OR THE
AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE
EXTENT THE LIABILITY OF ANY LENDER PARTY IS FOUND IN A FINAL RULING BY A COURT
OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH LENDER PARTY’S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(d) The Agent agrees that the receipt of the Communications by the Agent at its
e-mail address set forth above shall constitute effective delivery of the
Communications to the Agent for purposes of the Loan Documents. Each Lender
Party agrees that receipt of notice to it

 

95

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(as provided in the next sentence) specifying that the Communications have been
posted to the Platform shall constitute effective delivery of the Communications
to such Lender Party for purposes of the Loan Documents. Each Lender Party
agrees to notify the Agent in writing (including by electronic communication)
from time to time of such Lender Party’s e-mail address to which the foregoing
notice may be sent by electronic transmission and that the foregoing notice may
be sent to such e-mail address.

(e) Nothing herein shall prejudice the right of the Agent or any Lender Party to
give any notice or other communication pursuant to any Loan Document in any
other manner specified in such Loan Document.

Section 10.19. Assignment and Reallocation of Existing Loans, Etc. On the
Closing Date, each of the lenders under the Existing Credit Agreement (each, an
“Existing Lender”) hereby sells, assigns, transfers and conveys to the Lenders
hereto, and each of the Lenders hereto hereby purchases and accepts, so much of
the aggregate commitments under, and loans and participations in letters of
credit outstanding under, the Existing Credit Agreement such that, immediately
after giving effect to the effectiveness of this Agreement (including any
increase of the commitments effectuated hereby), the Percentage Share of each
Lender to this Agreement, the Loans of each Lender, and the portion of the
relevant Commitment of each Lender, shall be as set forth on Schedule 3 hereto
(it being understood that if any letters of credit are outstanding under the
Existing Credit Agreement as of the Closing Date of this Agreement, then each of
the Revolving Loan Lenders shall have purchased and accepted from the Existing
Lenders, a participation in such outstanding letters of credit based on its
respective Revolving Loan Percentage Share). The foregoing assignments,
transfers and conveyances are without recourse to any Existing Lender and
without any warranties whatsoever by the Agent, the Issuers or any Existing
Lender as to title, enforceability, collectibility, documentation or freedom
from liens or encumbrances, in whole or in part, other than that the warranty of
any such Existing Lender that it has not previously sold, transferred, conveyed
or encumbered such interests. The Existing Lenders and the Lenders shall, if
appropriate, make all appropriate adjustments in payments under the Existing
Credit Agreement, the “Notes” and the other “Loan Documents” thereunder for
periods prior to the adjustment date among themselves.

 

96

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IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.

 

BORROWER:

 

W&T OFFSHORE, INC.

By:   /s/ John D. Gibbons   Name:   John D. Gibbons   Title:   Senior Vice
President and Chief Financial Officer   Address:  

Nine Greenway Plaza

Suite 300

Houston, TX 70046

  Telephone:   (713) 624-7393   Fax:   (713) 624-7324   Attn:   John D. Gibbons

 

S-1

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

LENDER PARTIES: TORONTO DOMINION (TEXAS) LLC, as Agent and Lender By:   /s/ Bebi
Yasin   Name:   BEBI YASIN   Title:   AUTHORIZED SIGNATORY

 

S-2

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

BNP PARIBAS, as Lender By:   /s/ Edward Pak   Name:   Edward Pak   Title:  
Director   /s/ Courtney Kubesch   COURTNEY KUBESCH   VICE PRESIDENT

 

S-3

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

NATIXIS,

as Lender

By:   /s/ Donovan C. Broussard   Name:   Donovan C. Broussard   Title:  
Managing Director By:   /s/ Louis P. Laville III   Name:   Louis P. Laville, III
  Title:   Managing Director

 

S-4

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

BANK OF SCOTLAND plc,

as Lender

By:   /s/ Julia R. Franklin   Name:   JULIA R. FRANKLIN   Title:   ASSISTANT
VICE PRESIDENT

 

S-5

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

MORGAN STANLEY BANK, N.A.,

as Lender

By:   /s/ Sherrese Clarke   Name:   Sherrese Clarke   Title:   Authorized
Signatory

 

S-6

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

THE BANK OF NOVA SCOTIA,

as Lender

By:   /s/ John Frazell   Name:   John Frazell   Title:   Director

 

S-7

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

AMEGY BANK NATIONAL ASSOCIATION,

as Lender

By:   /s/ Charles W. Patterson   Charles W. Patterson   Senior Vice President

 

S-8

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

ING CAPITAL LLC,

as Lender

By:   /s/ Charles Hall   Name:   Charles Hall   Title:   Managing Director

 

S-9

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

GENERAL ELECTRIC CAPITAL CORPORATION,

as Lender

By:   /s/ Raymond Edgar   Name:   RAYMOND EDGAR   Title:   AUTHORIZED SIGNATORY

 

S-10

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

IBERIABANK,

as Lender

By:   /s/ Cameron D. Jones   Name:   Cameron D. Jones   Title:   Vice President

 

S-11

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

THE TORONTO-DOMINION BANK, NEW YORK BRANCH, as Issuer By:   /s/ David Perlman
Name:   David Perlman Title:   AVP, Credit Management

 

S-12

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

ACKNOWLEDGED AND AGREED: W&T ENERGY VI, LLC By:  

W&T Offshore, Inc.

Sole Member

By:   /s/ John D. Gibbons   Name:   John D. Gibbons   Title:   Authorized
Officer W&T ENERGY VII LLC By:  

W&T Offshore, Inc.

Sole Member

By:   /s/ John D. Gibbons   Name:   John D. Gibbons   Title:   Authorized
Officer

 

S-13

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

SCHEDULE 1

DISCLOSURE SCHEDULE

 

ITEM 2.11(c).

 

Existing Letters of Credit

ITEM 5.6.

 

No Material Adverse Change regarding Financial Statements

ITEM 5.7.

 

Liabilities, Obligations and Restrictions

ITEM 5.9.

 

Litigation Matters

ITEM 5.10

 

Extraordinary Events, Labor Disputes and Acts of God

ITEM 5.11.

 

ERISA Plans and Liabilities

ITEM 5.12.

 

Environmental Matters

ITEM 5.13.

 

Names and Places of Business and State of Incorporation or Formation

ITEM 5.14.

 

Subsidiaries

ITEM 6.19.

 

Non-Guarantor Subsidiaries

ITEM 7.1(c).

 

Permitted Existing Indebtedness

 

CREDITOR

  

OUTSTANDING PRINCIPAL AMOUNT

 

ITEM 7.2(f). Permitted Existing Liens

 

Schedule 1 Page 1

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

ITEM 2.11(c)

Existing Letters of Credit

 

LC#    Current
Amount      Original
Amount      CCY    Effective
Date      Expiry      Auto
Clause    Beneficiary

2114

   $ 55,000.00       $ 150,000.00       USD      1-May-08         3-May-l2      
Yes-30    ANR Pipeline

E2Z8J4RN7

   $ 100,000.00       $ 150,000.00       USD      11-May-09         2-Sep-11   
   No    Discovery Gas Trans
Transcontinental

E2Z8J4S6Q

   $ 200,000.00       $ 265,000.00       USD      11May-09         11-May-11   
   No    Gas

ExxonMobil

GNN9A529G

   $ 41,400.00       $ 41,400.00       USD      15-Oct-10         15-Oct-11   
   Yes-90    Corporation
Southern Natural
Gas and/or
Tennessee Gas

F1Z9JPHKC

   $ 140,000.00       $ 140,000.00       USD      19-Apr-11         12-Apr-!2   
   Yes    Pipeline Co.
American Longshore
Mutual Association,

8JB9K7JCO

   $ 70,000.00       $ 70,000.00       USD      2-May-I1         2-May-12      
Yes    Ltd.

TOTAL:

   $ 606,400.00                     

 

Item 2.11(c) - 1

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

ITEM 5.6

No Material Adverse Change regarding Financial Statements

On April 25, 2011, we entered into a purchase and sale agreement with private
sellers to acquire approximately 21,900 gross leasehold acres (21,500 net acres)
in the West Texas Permian Basin for a purchase price of $366 million, subject to
adjustments and an effective date of January 1, 2011. At January 1, 2011, the
estimated proved reserves to be acquired were approximately 27 million barrel
equivalents (164 Bcfe) (using a 6 to 1 Mcf to barrel equivalency). The estimated
reserves are over 91% oil and natural gas liquids. The current wells produce
approximately 2,800 net barrel equivalents per day. Since January 1, 2011,
production has increased from approximately 1,900 net barrel equivalents.

Capital expenditures associated with planned development activities for these
properties for the balance of 2011 are currently estimated between $35 million
and $40 million. The closing, which is subject to customary closing conditions
and normal closing price adjustments, including effective date adjustments, is
anticipated in the second quarter and will be funded from cash on hand and
borrowings under our revolving loan facility.

 

Item 5.6 - 1

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

ITEM 5.7

Liabilities, Obligations and Restrictions

None.

 

Item 5.7 - 1

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

ITEM 5.9

Litigation Matters

Three lawsuits have been filed and two lawsuits threatened all alleging surface
damage to property in Cameron Parish, Louisiana arising out of alleged actions
of a predecessor by merger of the Borrower in the late 1980’s and early 1990’s.
These lawsuits are in the ordinary course of business and discovery has not
begun in any case, making valuation of any potential liability indeterminable at
the date hereof.

The three filed lawsuits are as follows:

 

  1.

Fred J. Gary and Peggy A. Gary vs. BP America Production Company, et al. 38th
JDC, Parish of Cameron, Case No. 10-17463

 

  2.

Betty Hebert Geer, et al. vs. BP America Production Co., et al. 38th JDC, Parish
of Cameron, No. 10-18439

 

  3.

Curtis Dwayne Nunez, et al. vs. BP America Production Company, et al. 38th JDC,
Parish of Cameron, Case No. 10-18755

 

Item 5.9 - 1

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

ITEM 5.10

Extraordinary Events, Labor Disputes and Acts of God

None.

 

Item 5.10 - 1

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

ITEM 5.11

ERISA Plans and Liabilities

None.

 

Item 5.11 - 1

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

ITEM 5.12

Environmental Matters

None.

 

Item 5.12 - 1

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

ITEM 5.13

Names and Places of Business and State of Incorporation or Formation

 

1.

Name of Restricted Party: W&T Offshore, Inc.

 

  a.

State of Formation: Texas

 

  b.

Other names used in preceding five years:

 

  i.

Successor by merger with Offshore Energy I LLC, a Delaware limited liability
company

 

  ii.

Successor by merger with Offshore Energy II LLC, a Delaware limited liability
company

 

  iii.

Successor by merger with Offshore Energy III LLC, a Delaware limited liability
company

 

  iv.

Successor by merger with Gulf of Mexico Oil and Gas Properties LLC, a Delaware
limited liability company

 

  v.

Successor by merger with Offshore Shelf LLC, a Delaware limited liability
company

 

  c.

Other Offices and Places of Business:

 

  i.

None.

 

2.

Name of Restricted Party: W&T Energy VI, LLC

 

  a.

State of Formation: Delaware

 

  b.

Other names used in preceding five years:

 

  i.

None.

 

  c.

Other Offices and Places of Business:

 

  i.

None.

 

3.

Name of Restricted Party: W&T Energy VII, LLC

 

  a.

State of Formation: Delaware

 

  b.

Other names used in preceding five years:

 

  i.

None.

 

Item 5.13 - 1

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

ITEM 5.21

Gas Imbalances, Prepayments

None.

 

Item 5.21 - 1

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

ITEM 5.22

Marketing of Production

None.

 

Item 5.22 - 1

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

ITEM 5.23

Hedging Transactions

 

Zero Cost Collars - Oil        Effective
Date      Termination
Date      Notional
Quantity
(Bbls)      Weighted Average
NYMEX  Contract Price      Fair Value
Liability1
(in thousands)      Counterparties2          Floor      Ceiling          
4/1/2011         6/30/2011         618,700       $ 75.00       $ 92.80       $
9,221       BNP Paribas Toronto Dominion   7/1/2011         9/30/2011        
231,900         75.00         93.02         4,589       BNP Paribas Toronto
Dominion   10/1/2011         12/31/2011         392,100         75.00        
95.58         5,552       BNP Paribas Toronto Dominion   1/1/2012        
3/31/2012         364,000         75.00         97.88         6,512      
Toronto Dominion   4/1/2012         6/30/2012         364,000         75.00   
     97.88         5,457       Toronto Dominion   7/1/2012         9/30/2012   
     124,000         75.00         97.88         1,810       Toronto Dominion  
10/1/2012         12/31/2012         251,000         75.00         98.99        
3,357       Toronto Dominion                                                  
2,345,700       $ 75.00       $ 95.79       $ 36,498                           
                    

 

1 

As of March 31, 2011.

2 

Where two counterparties are listed in the same category, the numbers given are
aggregated for quantity and liability and averaged for price.

 

Item 5.23 - 1

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

ITEM 6.19

Non-Guarantor Subsidiaries

 

1.

N.O. Properties, LLC, a Delaware limited liability company

 

2.

White Shoal Pipeline Corporation, a Delaware corporation (not a wholly- owned
subsidiary; W&T Offshore, Inc. is a shareholder holding a 73.38% interest).

 

Item 6.19 - 1

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

ITEM 7.1(c)

Permitted Existing Indebtedness

None.

 

Item7.1(c) - 1

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

ITEM 7.2(f)

Permitted Existing Liens

None.

 

Item 7.2(f) - 1

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

SCHEDULE 2

SECURITY SCHEDULE

1. Fourth Amended and Restated Security Agreement and Irrevocable Proxy dated as
of the Closing Date, from Borrower, in favor of Toronto Dominion (Texas) LLC
(“TD (Texas)”), as Agent (as amended, supplemented, restated or otherwise
modified from time to time, the “Security Agreement”), covering all personal
property of Borrower.

2. Various Uniform Commercial Code Financing Statements naming Borrower as
debtor and TD (Texas), as Agent, as secured party, covering the collateral
described in the Security Agreement.

3. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated February 2, 1998, from Borrower, in favor of TD
(Texas), as Agent, successor in interest to General Electric Capital
Corporation, covering oil and gas properties located in the States of Louisiana
and Texas, as supplemented and amended by that certain First Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated July 1, 1999, and by that certain Second
Supplement and Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement dated November 30, 1999, and
by that certain Third Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
February 24, 2000, and by that certain Fourth Supplement and Amendment to Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated February 20, 2001, and by that certain Fifth Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated May 31, 2002, and by that certain Sixth
Supplement and Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement dated December 2, 2002, and by
that certain Seventh Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
July 14, 2003, and by that certain Eighth Supplement and Amendment to Deed of
Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated December 12, 2003, and by that certain Ninth Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated as of March 15, 2005, and by that certain
Tenth Supplement and Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement dated as of May 26, 2006, and
by that certain Eleventh Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated as
of August 24, 2006, and by that certain Twelfth Supplement and Amendment to Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated as of March 29, 2007, any that certain Thirteenth Amendment to
Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated as of the Closing Date (as so amended and as amended,
supplemented, restated or otherwise modified from time to time, the “Borrower
Mortgage”).

 

Schedule 2 - Page 1

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

4. Various Uniform Commercial Code Financing Statements covering the collateral
described in the Borrower Mortgage, naming Borrower as debtor and TD (Texas), as
Agent, as secured party.

5. Amended and Restated Guaranty of W&T Energy VI, LLC dated as of the Closing
Date, in favor of TD (Texas).

6. Guaranty of W&T Energy VII, LLC dated as of the Closing Date, in favor of TD
(Texas).

7. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated December 2, 2002, from W&T Offshore Inc. (as
successor-by-merger to Offshore Energy I, LLC), in favor of Martin Snyder, as
trustee, and TD (Texas), as Agent, as amended by that certain First Supplement
and Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement,
Fixture Filing and Financing Statement dated as of March 15, 2005, as amended by
that certain Second Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
effective as of August 24, 2006, as amended by that certain Third Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective as of the Closing Date.

8. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated December 2, 2002, from W&T Offshore Inc. (as
successor-by-merger to Offshore Energy II, LLC), in favor of Martin Snyder, as
trustee, and TD (Texas), as Agent, as amended by that certain First Supplement
and Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement,
Fixture Filing and Financing Statement dated as of March 15, 2005, as amended by
that certain Second Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
effective as of August 24, 2006, as amended by that certain Third Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective as of the Closing Date.

9. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated December 2, 2002, from W&T Offshore Inc. (as
successor-by-merger to Offshore Energy III, LLC), in favor of Martin Snyder, as
trustee, and TD (Texas), as Agent, as amended by that certain First Supplement
and Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement,
Fixture Filing and Financing Statement dated as of March 15, 2005, as amended by
that certain Second Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
effective as of August 24, 2006, as amended by that certain Third Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective as of the Closing Date.

10. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated December 12, 2003, from W&T Offshore Inc. (as
successor-by-merger to Gulf of Mexico Oil and Gas Properties LLC), in favor of
Martin Snyder, as trustee, and TD (Texas), as Agent (Properties other than
Mobile Bay Properties), as amended by that certain First Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement,

 

Schedule 2 - Page 2

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

Fixture Filing and Financing Statement dated as of March 15, 2005, as amended by
that certain Second Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
effective as of August 24, 2006, as amended by that certain Third Supplement and
Amendment to Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective as of the Closing Date.

11. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated effective as of April 30, 2010, from W&T Energy VI,
LLC, in favor of Martin Snyder, as trustee, and TD (Texas), as Agent, as amended
by that certain First Supplement and Amendment to Deed of Trust, Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated
effective as of the Closing Date.

12. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated effective as of the Closing Date, from W&T Energy VI,
LLC, in favor of Martin Snyder, as trustee, and TD (Texas), as Agent.

13. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement dated effective as of the Closing Date, from W&T Energy VI,
LLC, in favor of Martin Snyder, as trustee, and TD (Texas), as Agent.

14. Amended and Restated Security Agreement dated as of the Closing Date, from
W&T Energy VI and W&T Energy VII, in favor of TD (Texas), as Agent, covering all
personal property of W&T Energy VI and W&T Energy VII (the “Subsidiary Security
Agreement”).

15. Various Uniform Commercial Code Financing Statements naming Borrower, W&T
Energy VI and W&T Energy VII, as debtor and TD (Texas), as Agent, as secured
party.

 

Schedule 2 - Page 3

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

SCHEDULE 3

LENDERS SCHEDULE

 

     Revolving
Loan
Percentage
Share     Revolving Loan
Commitment
for
$900,000,000
Aggregate
Revolving Loan
Commitment      Revolving Loan
Commitment for
$525,000,000 Initial
Availability
Amount1      Revolving Loan
Commitment for
$575,000,000
Initial
Availability
Amount2  

Lending Office for ABR Loans:

          

Toronto Dominion (Texas) LLC

     11.826087 %    $ 106,434,782.61       $ 62,086,956.52       $ 68,000,000.00
  

31 West 52nd Street, 20th Floor

          

New York, New York 10019

          

Tel:         (212) 827-7600

          

Fax:         (212) 827-7227

          

Attn:       Rose Warren

          

(with a copy to:

          

909 Fannin, Suite 1950

          

Houston, Texas 77010

          

Tel:         (713)653-8211

          

Fax:         (713) 652-2647

          

Attn:       Martin Snyder)

          

BNP Paribas

     11.826087 %    $ 106,434,782.61       $ 62,086,956.52       $ 68,000,000.00
  

1200 Smith Street, Suite 3100

          

Houston, Texas 77002

          

Tel:         (713)982-1154

          

Fax:         (713)659-6915

          

Attn:       Doug Liftman

          

Morgan Stanley Bank, N.A.

     11.826087 %    $ 106,434,782.61       $ 62,086,956.52       $ 68,000,000.00
  

One Pierrepont Plaza

          

Brooklyn, New York 11201

          

Tel:         (718)754-4041

          

Fax:        (718)233-2132

          

Attn:       Michael Gavin

          

Bank of Scotland pic

     11.652174 %    $ 104,869,565.22         61,173,913.04       $ 67,000,000.00
  

1095 Avenue of the Americas,

          

35th Floor

          

New York, New York 10036

          

Tel:         (212)450-0877

          

Fax:         (212)479-2806

          

Attn:       Karen Weich

          

The Bank of Nova Scotia

     11.652174 %    $ 104,869,565.22         61,173,913.04       $ 67,000,000.00
  

720 King Street W, 2nd Floor

          

Toronto, ON M5V2T3

          

Tel:         (212) 225-5705

          

Fax:         (212)225-5709

          

 

1 

As of Closing Date of Agreement

2 

On Fairway Acquisition Effective Date

 

Schedule 3 - Page 1

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

SCHEDULE 3

 

     Revolving
Loan
Percentage
Share     Revolving Loan
Commitment
for
$900,000,000
Aggregate
Revolving Loan
Commitment      Revolving Loan
Commitment for
$525,000,000 Initial
Availability
Amount1      Revolving Loan
Commitment for
$575,000,000 Initial
Availability
Amount2  

Attn:       Ivica Anastasov

          

Natixis

     11.652174 %    $ 104,869,565.22         61,173,913.04       $ 67,000,000.00
  

333 Clay Street, Suite 4340

          

Houston, Texas 77002

          

Tel:         (713) 759-9495

          

Fax:         (713) 571-6167

          

Attn:       Liana Tchnernysheva

          

Amegy Bank National Association

     8.695652 %    $ 78,260,869.57       $ 45,652,173.91       $ 50,000,000.00
  

4400 Post Oak Parkway #404

          

Houston, Texas 77027

          

Tel:         (713)232-2026

          

Fax:         (713) 561-0345

          

Attn:       Charles W. Patterson

          

ING Capital LLC

     8.695652 %    $ 78,260,869.57       $ 45,652,173.91       $ 50,000,000.00
  

1325 Avenue of Americas

          

New York, New York 10019

          

Tel:         (646) 424-8244

          

Fax:         (646)424-8251

          

Attn:       Frenklin Christian

          

General Electric Capital Corporation

     6.086957 %    $ 54,782,608.70       $ 31,956,521.74       $ 35,000,000.00
  

Corporate Financial Services

          

333 Clay Street Suite 4450

          

Houston, Texas 77002

          

Tel:         (713)951-2324

          

Fax:         (713)583-3271

          

Attn:       Salman Patoli

          

Iberiabank

     6.086957 %    $ 54,782,608.70       $ 31,956,521.74       $ 35,000,000.00
  

11 E. Greenway Plaza, Suite 2900

          

Houston, Texas 77046

          

Tel:         (713) 624-7726

          

Fax:         (713) 965-0276

          

Attn:       Cameron Jones

          

TOTAL

     100 %    $ 900,000,000.00       $ 525,000,000.00       $ 575,000,000.00   

Lending Office for Eurodollar

          

Loans:

          

Same.

          

 

Schedule 3 - Page 2

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

EXHIBIT A-1

REVOLVING LOAN NOTE

 

        $                

   Houston, Texas                    , 20    

FOR VALUE RECEIVED, the undersigned, W&T Offshore, Inc. a Texas corporation
(herein called “Borrower”), hereby promises to pay to                     
(herein called “Lender”), the principal sum of                  Dollars
($            ), or, if greater or less, the aggregate unpaid principal amount
of the Revolving Loans made under this Revolving Loan Note by Lender to Borrower
pursuant to the terms of the Credit Agreement (as hereinafter defined), together
with interest on the unpaid principal balance thereof as hereinafter set forth,
both principal and interest payable as herein provided in lawful money of the
United States of America to Agent’s account at a bank located in New York, New
York as designated in writing to Borrower by Agent, as from time to time may be
designated by the holder of this Revolving Loan Note.

This Revolving Loan Note (a) is issued and delivered under that certain Fourth
Amended and Restated Credit Agreement of May 5, 2011, by and among Borrower,
Toronto Dominion (Texas) LLC, as Agent, and the lenders (including Lender) and
letter-of-credit issuing banks referred to therein as Issuers (herein, as from
time to time supplemented, amended or restated, called the “Credit Agreement”),
and is a “Revolving Note” as defined therein, (b) is subject to the terms and
provisions of the Credit Agreement, which contains provisions for payments and
prepayments hereunder and acceleration of the maturity hereof upon the happening
of certain stated events, (c) is secured by and entitled to the benefits of
certain Security Documents (as identified and defined in the Credit Agreement),
and (d) is executed in partial replacement, substitution, renewal, extension,
and increase of, but not in extinguishment or novation of, those certain Tranche
A Loan Notes, Tranche B Loan Notes and Revolving Loan Notes dated as of May 26,
2006, executed by Borrower and payable to certain lenders in the aggregate
principal amount of $1,300,000,000. Payments on this Revolving Loan Note shall
be made and applied as provided herein and in the Credit Agreement. Reference is
hereby made to the Credit Agreement for a description of certain rights,
limitations of rights, obligations and duties of the parties hereto and for the
meanings assigned to terms used and not defined herein and to the Security
Documents for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto.

The principal amount of this Revolving Loan Note, together with all interest
accrued hereon, shall be due and payable in full on the Maturity Date.

So long as no Event of Default has occurred and is continuing, all ABR Loans
(exclusive of any past due principal or interest) from time to time outstanding
shall bear interest on each day outstanding at the Alternate Base Rate in effect
on such day. If an Event of Default has occurred and is continuing, all ABR
Loans (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Default Rate in
effect on such day. On each ABR Payment Date Borrower shall pay to the holder
hereof all unpaid interest which has accrued on the ABR Loans to but not
including such ABR Payment Date. So long as no Event of Default has occurred and
is continuing, each Eurodollar Loan (exclusive of any past due principal or
interest) shall bear interest on each day during the related Interest

 

Exhibit A - 1

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

Period at the related Eurodollar Rate in effect on such day. If an Event of
Default has occurred and is continuing, each Eurodollar Loan (exclusive of any
past due principal or interest) from time to time outstanding shall bear
interest on each day outstanding at the Default Rate in effect on such day. On
each Eurodollar Rate Payment Date relating to such Eurodollar Loan, Borrower
shall pay to the holder hereof all unpaid interest which has accrued on such
Eurodollar Loan to but not including such Eurodollar Rate Payment Date. All past
due principal of and past due interest on the Loans shall bear interest on each
day outstanding at the Default Rate in effect on such day, and such interest
shall be due and payable daily as it accrues. Notwithstanding the foregoing
provisions of this paragraph: (A) this Revolving Loan Note shall never bear
interest in excess of the Highest Lawful Rate, and (B) if at any time the rate
at which interest is payable on this Revolving Loan Note is limited by the
Highest Lawful Rate (by the foregoing subsection (a) or by reference to the
Highest Lawful Rate in the definitions of Alternate Base Rate, Eurodollar Rate,
and Default Rate), this Revolving Loan Note shall bear interest at the Highest
Lawful Rate and shall continue to bear interest at the Highest Lawful Rate until
such time as the total amount of interest accrued hereon equals (but does not
exceed) the total amount of interest which would have accrued hereon had there
been no Highest Lawful Rate applicable hereto.

Notwithstanding the foregoing paragraph and all other provisions of this
Revolving Loan Note, in no event shall the interest payable hereon, whether
before or after maturity, exceed the maximum amount of interest which, under
applicable Law, may be contracted for, charged, or received on this Revolving
Loan Note, and this Revolving Loan Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations on
how interest accrues hereon.

If this Revolving Loan Note is placed in the hands of an attorney for collection
after default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Revolving Loan Note jointly and
severally agree to pay reasonable attorneys’ fees and collection costs to the
holder hereof in addition to the principal and interest payable hereunder.

Borrower and all endorsers, sureties and guarantors of this Revolving Loan Note
hereby severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Revolving Loan Note, protest, notice of protest, notice of
intention to accelerate the maturity of this Revolving Loan Note, declaration or
notice of acceleration of the maturity of this Revolving Loan Note, diligence in
collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Revolving Loan Note or in any of its terms, provisions
and covenants, or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether before or
after maturity.

THIS REVOLVING LOAN NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSES
SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.

 

Exhibit A - 2

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

W&T OFFSHORE, INC. By:     Name:   Title:  

 

Exhibit A - 3

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

EXHIBIT B

BORROWING NOTICE

Reference is made to that certain Fourth Amended and Restated Credit Agreement
dated as of May 5, 2011 (as from time to time amended, supplemented, restated or
otherwise modified, the “Agreement”), by and among W&T Offshore, Inc.
(“Borrower”), Toronto Dominion (Texas) LLC, as Agent, and certain lenders
(“Lenders”) and letter-of-credit issuing banks from time to time parties thereto
as Issuers. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.

Borrower hereby requests a Borrowing of new Loans to be advanced pursuant to
Section 2.2 of the Agreement as follows:

 

Aggregate amount of Borrowing:

   $ ___________   

Type of Loans in Borrowing:

     ___________   

Date on which Loans are to be advanced:

     ___________   

Length of Interest Period for Eurodollar Loans (1, 2 or 3 months):

     _____ months   

To induce Lenders to make such Loans, Borrower hereby represents, warrants,
acknowledges, and agrees to and with Agent and each Lender that:

(a) The officer of Borrower signing this instrument is the duly elected,
qualified and acting officer of Borrower as indicated below such officer’s
signature hereto having all necessary authority to act for Borrower in making
the request herein contained.

(b) The representations and warranties of Borrower set forth in the Agreement
and the other Loan Documents are true and correct on and as of the date hereof
(except to the extent that the facts on which such representations and
warranties are based have been changed by the extension of credit under the
Agreement), with the same effect as though such representations and warranties
had been made on and as of the date hereof.

(c) There does not exist on the date hereof any condition or event which
constitutes a Default or Borrowing Base Deficiency which has not been waived in
writing as provided in Section 10.1(a) of the Agreement; nor will any such
Default or Borrowing Base Deficiency exist upon Borrower’s receipt and
application of the Loans requested hereby. Borrower will use the Loans hereby
requested in compliance with Section 2.4 of the Agreement.

(d) Except to the extent waived in writing as provided in Section 10.1(a) of the
Agreement, Borrower has performed and complied with all agreements and
conditions in the Agreement required to be performed or complied with by
Borrower on or prior to the date hereof, and each of the conditions precedent to
Loans contained in the Agreement remains satisfied.

 

Exhibit B - 1

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

(e) The Facility Usage, after the making of the Loans requested hereby, will not
be in excess of the Borrowing Base on the date requested for the making of such
Loans.

(f) The Loan Documents have not been modified, amended or supplemented by any
unwritten representations or promises, by any course of dealing, or by any other
means not provided for in Section 10.1(a) of the Agreement. The Agreement and
the other Loan Documents are hereby ratified, approved, and confirmed in all
respects.

The officer of Borrower signing this instrument hereby certifies that, to the
best of his knowledge after due inquiry, the above representations, warranties,
acknowledgments, and agreements of Borrower are true, correct and complete.

IN WITNESS WHEREOF, this instrument is executed as of                 , 20    .

 

W&T OFFSHORE, INC. By:     Name:   Title:  

 

Exhibit B - 2

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

EXHIBIT C

CONTINUATION/CONVERSION NOTICE

Reference is made to that certain Fourth Amended and Restated Credit Agreement
dated as of May 5, 2011 (as from time to time amended, supplemented, restated or
otherwise modified, the “Agreement”), by and among W&T Offshore, Inc.
(“Borrower”), Toronto Dominion (Texas) LLC, as Agent, and certain lenders
(“Lenders”) and letter-of-credit issuing banks from time to time parties thereto
as Issuers. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.

Borrower hereby requests a conversion or continuation of existing Loans into a
new Borrowing pursuant to Section 2.3 of the Agreement as follows:

Existing Borrowing(s) to be continued or converted:

$             of Revolving Loans which are Eurodollar Loans with Interest Period
ending                                     3

$             of Revolving Loans which are ABR Loans4

 

    

If being combined with new

       

Loans,

        $__________   

of new Loans to be advanced on                             

     

Aggregate amount of new Borrowing:

        $__________   

Type of Loans in new Borrowing:

        __________   

Date of continuation or conversion:

        __________   

Length of Interest Period for Eurodollar Loans 1, 2 or 3 months):

        ____  months   

To meet the conditions set out in the Agreement for such
conversion/continuation, Borrower hereby represents, warrants, acknowledges, and
agrees to and with Agent and each Lender that:

(a) The officer of Borrower signing this instrument is the duly elected,
qualified and acting officer of Borrower as indicated below such officer’s
signature hereto having all necessary authority to act for Borrower in making
the request herein contained.

 

3 

  Repeat as appropriate for different tranches of Loans.

4 

  Repeat as appropriate for different tranches of Loans.

 

Exhibit C - 1

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

(b) There does not exist on the date hereof any condition or event which
constitutes a Default or Borrowing Base Deficiency which has not been waived in
writing as provided in Section 10.1(a) of the Agreement.

(c) The Loan Documents have not been modified, amended or supplemented by any
unwritten representations or promises, by any course of dealing, or by any other
means not provided for in Section 10.1(a) of the Agreement. The Agreement and
the other Loan Documents are hereby ratified, approved, and confirmed in all
respects.

The officer of Borrower signing this instrument hereby certifies that, to the
best of his knowledge after due inquiry, the above representations, warranties,
acknowledgments, and agreements of Borrower are true, correct and complete.

IN WITNESS WHEREOF this instrument is executed as of                 ,
20        .

 

W&T OFFSHORE, INC.

By:

   

Name:

 

Title:

 

 

Exhibit C - 2

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

EXHIBIT D

CERTIFICATE ACCOMPANYING

FINANCIAL STATEMENTS

Reference is made to that certain Fourth Amended and Restated Credit Agreement
dated as of May 5, 2011 (as from time to time amended, supplemented, restated or
otherwise modified, the “Agreement”), by and among W&T Offshore, Inc.
(“Borrower”), Toronto Dominion (Texas) LLC, as Agent, and certain lenders
(“Lenders”) and letter-of-credit issuing banks from time to time parties thereto
as Issuers. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.

This Certificate is furnished pursuant to Section 6.2(b) of the Agreement.
Together herewith Borrower is furnishing to Agent and each Lender, Borrower’s
*[audited/unaudited] financial statements (the “Financial Statements”) as at
(the “Reporting Date”). Borrower hereby represents, warrants, and acknowledges
to Agent and each Lender that:

(a) the officer of Borrower signing this instrument is the duly elected,
qualified and acting              of Borrower and as such is Borrower’s chief
financial officer;

(b) the Financial Statements are accurate and complete and satisfy the
requirements of the Agreement;

(c) on the Reporting Date Borrower was, and on the date hereof Borrower is, in
full compliance with the financial covenants set forth in Sections 7.11 and 7.12
of the Agreement *[except for any non-compliance under Section(s)             of
the Agreement, which non-compliance * [is/are] more fully described on a
schedule attached hereto];

(d) on the Reporting Date Borrower was, and on the date hereof Borrower is, in
full compliance with the disclosure requirements of Section 6.4 of the
Agreement, and no Default otherwise existed on the Reporting Date or otherwise
exists on the date of this instrument *[except for Default(s) under Section(s)
                 of the Agreement, which *[is/are] more fully described on a
schedule attached hereto]

(e) *[Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower set forth in the Agreement and the
other Loan Documents are true and correct on and as of the date hereof (except
to the extent that the facts on which such representations and warranties are
based have been changed by the extension of credit under the Agreement), with
the same effect as though such representations and warranties had been made on
and as of the date hereof.

The officer of Borrower signing this instrument hereby certifies that he has
reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above representations, warranties and
acknowledgments of Borrower and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.

 

Exhibit D - 1

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

IN WITNESS WHEREOF, this instrument is executed as of             , 20    .

 

W&T OFFSHORE, INC.

By:

   

Name:

 

Title:

 

 

Exhibit D - 2

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

EXHIBIT E

ASSIGNMENT AND ACCEPTANCE

Reference is made to that certain Fourth Amended and Restated Credit Agreement
dated as of May 5, 2011 (as from time to time amended, supplemented, restated or
otherwise modified, the “Agreement”), by and among W&T Offshore, Inc.
(“Borrower”), Toronto Dominion (Texas) LLC, as Agent, and certain lenders
(“Lenders”) and letter-of-credit issuing banks from time to time parties thereto
as Issuers. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.

The “Assignor” and the “Assignee” referred to on Schedule 1 agree as follows:

1. The Assignor hereby sells and assigns to the Assignee, without recourse and
without representation or warranty except as expressly set forth herein, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor’s rights and obligations under the Agreement and the other Loan
Documents as of the date hereof equal to the percentage interest specified on
Schedule 1 of all outstanding rights and obligations under the Agreement and the
other Loan Documents. After giving effect to such sale and assignment, the
Assignee’s Commitments and the amount of the Loans owing to the Assignee will be
as set forth on Schedule 1.

2. The Assignor (i) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Documents or any other instrument or document furnished pursuant
thereto; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Restricted Person or the
performance or observance by any Restricted Person of any of its obligations
under the Loan Documents or any other instrument or document furnished pursuant
thereto; and (iv) attaches the applicable Notes held by the Assignor and
requests that Agent exchange such Notes for new Notes payable to the Assignee in
an amount equal to the Commitments assumed by the Assignee pursuant hereto and
to the Assignor in an amount equal to the Commitments retained by the Assignor,
if any, as specified on Schedule 1.

3. The Assignee (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements referred to in Section 6.2
thereof 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
Acceptance; (ii) agrees that it will, independently and without reliance upon
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 Agreement;
(iii) confirms that it is an Eligible Transferee; (iv) appoints and authorizes
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under the Agreement as are delegated to Agent by the terms thereof,
together with such powers and discretion as are reasonably incidental thereto;
(v) agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Agreement are required to be performed by
it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other
forms required under Section 3.6(e).

 

Exhibit E - 1

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

4. Following the execution of this Assignment and Acceptance, it will be
delivered to Agent for acceptance and recording by Agent. The effective date for
this Assignment and Acceptance (the “Effective Date”) shall be the date of
acceptance hereof by Agent, unless otherwise specified on Schedule 1.

5. Upon such acceptance and recording by Agent, as of the Effective Date,
(i) the Assignee shall be a party to the Agreement and, to the extent provided
in this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Agreement.

6. Upon such acceptance and recording by Agent, from and after the Effective
Date, Agent shall make all payments under the Agreement and the Notes in respect
of the interest assigned hereby (including, without limitation, all payments of
principal, interest and commitment fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Agreement and the Notes for periods prior to the Effective Date
directly between themselves.

7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.

8. This Assignment and Acceptance may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as
delivery of a manually executed counterpart of this Assignment and Acceptance.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.

 

Exhibit E - 2

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

SCHEDULE 1

to

ASSIGNMENT AND ACCEPTANCE

 

Percentage Share assigned:

  

            % (Revolving Loan Percentage Share)

  

            % (Aggregate Percentage Share)

Assignee’s Commitments:

  

$             (Revolving Loan Commitment)

  

$             (Letter of Credit Commitment)

Aggregate outstanding principal amount of Loans assigned:

  

$             (Revolving Loans)

Principal amount of Note(s) payable to Assignee:

  

$             (Revolving Loans)

Principal amount of Note payable to Assignor:

  

$             (Revolving Loans)

Effective Date (if other than date of acceptance by Agent):

  

*            , 20    

 

Exhibit E - 3

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

[NAME OF ASSIGNOR], as Assignor By:     ______________________________________
Title Dated:                     , 20     [NAME OF ASSIGNEE], as Assignee By:  
  ______________________________________ Title: Domestic Lending Office:
Eurodollar Lending Office:

 

*

This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to Agent.

 

Accepted [and Approved] ** this          day of                 , 20     TORONTO
DOMINION (TEXAS) LLC, as Agent By:       Title: [Approved this          day of
                , 20     W&T OFFSHORE, INC. By:       Name:   Title:

 

**

Required if the Assignee is an Transferee solely by reason of clause (b) of the
definition of “Eligible Transferee”.

 

Exhibit E - 4

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

EXHIBIT F

FORM OF

[AMENDED AND RESTATED] GUARANTY

THIS [AMENDED AND RESTATED] GUARANTY (this “Guaranty”) is made as of
            , 20    , by [NAME OF SUBSIDIARY], a Delaware limited liability
company (“Guarantor”), in favor of Toronto Dominion (Texas) LLC, individually
and as agent (in such capacity, together with any successor or assign thereto,
“Agent”) and each of the other Lender Parties (as defined in the Credit
Agreement).

RECITALS:

1. W&T Offshore, Inc., a Nevada corporation and predecessor to W&T Offshore,
Inc., a Texas corporation (the “Borrower”), the Lenders (or their
predecessors-in-interest), the Issuers (or their predecessors-in-interest) and
Toronto Dominion (Texas) LLC have heretofore entered into that certain Amended
and Restated Credit Agreement, dated as of February 24, 2000 (as so amended), as
amended and restated by that certain Second Amended and Restated Credit
Agreement dated as of March 15, 2005, among the Borrower, the Lenders, the
Issuers and the Agent, as further amended and restated by that certain Third
Amended and Restated Credit Agreement, dated as of May 26, 2006 (as amended and
modified from time to time, the “Existing Credit Agreement”), pursuant to which
the Lenders and Issuers agreed to make Loans to the Borrower or issue or
participate in Letters of Credit on behalf of the Borrower.

2. [Pursuant to the Existing Credit Agreement, the Guarantor has heretofore
executed and delivered that certain Guaranty dated as of April 30, 2010, in
favor of Toronto Dominion (Texas) LLC, and each of the lender parties described
therein (the “Existing Guaranty”).]

3. The Existing Credit Agreement is being amended and restated contemporaneously
herewith pursuant to that certain Fourth Amended and Restated Credit Agreement
dated as of April     , 2011 (as from time to time amended, supplemented,
restated or otherwise modified, the “Credit Agreement”), by and among the
Borrower, the Agent, the Issuers and the Lender Parties.

4. It is a condition precedent to each Lender Party’s obligation to advance
funds pursuant to the Credit Agreement and to the Issuers’ obligations to issue
Letters of Credit pursuant to the Credit Agreement, that Guarantor shall execute
and deliver this Guaranty to Agent.

5. [The Guarantor intends that the Existing Guaranty be amended and restated,
and superseded, by this Guaranty.]

6. Borrower owns directly, or indirectly through one or more subsidiaries, one
hundred percent (100%) of the membership interests of Guarantor.

 

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7. Borrower, Guarantor, and the other direct and indirect subsidiaries of
Borrower are mutually dependent on each other in the conduct of their respective
businesses under a holding company structure, with the credit needed from time
to time by each often being provided by another or by means of financing
obtained by one such affiliate with the support of the others for their mutual
benefit and the ability of each to obtain such financing being dependent on the
successful operations of the others.

8. The members of Guarantor have determined that Guarantor’s execution, delivery
and performance of this Guaranty may reasonably be expected to benefit
Guarantor, directly or indirectly, and is in the best interests of Guarantor.

NOW, THEREFORE, in consideration of the premises, of the benefits which will
inure to Guarantor from Lender Parties’ advances of funds and Issuers’ issuances
of Letters of Credit, and of Ten Dollars and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, and in order (i) to induce Lender Parties to extend such credit
under the Credit Agreement, (ii) to induce Issuers to issue such Letters of
Credit pursuant to the Credit Agreement, and (iii) to induce the Lender Parties
to enter into the above-referenced Credit Agreement, Guarantor hereby agrees
with Agent, for the benefit of Agent and each Lender Party, as follows:

AGREEMENTS

Section 1. Definitions. Reference is hereby made to the Credit Agreement for all
purposes. All terms used in this Guaranty which are defined in the Credit
Agreement and not otherwise defined herein shall have the same meanings when
used herein. All references herein to any Loan Document or other document or
instrument refer to the same as from time to time amended, supplemented or
restated. As used herein the following terms shall have the following meanings:

“Agent” means the Person who, at the time in question, is the “Agent” under the
Credit Agreement. Whenever there is only one Lender under the Credit Agreement,
“Agent” shall also refer to such Lender in such capacity as the only Lender.

“Hedging Obligations” means (i) any and all present or future obligations of
Borrower according to the terms of any present or future interest or currency
rate swap, rate cap, rate floor, rate collar, exchange transaction, forward rate
agreement, or other exchange or rate protection agreements or any option with
respect to any such transaction now existing or hereafter entered into between
Borrower or any of its Subsidiaries and any then current Lender (or any
Affiliate of any then current Lender); and (ii) any and all present or future
obligations of Borrower according to the terms of any present or future swap
agreements, cap, floor, collar, exchange transaction, forward agreement or other
exchange or protection agreements relating to crude oil, natural gas or other
hydrocarbons, or any option with respect to any such transaction now existing or
hereafter entered into between Borrower or any of its Subsidiaries and any then
current Lender (or any Affiliate of any then current Lender).

“Obligations” means collectively all of the indebtedness, obligations, and
undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.

 

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“Obligors” means Borrower, Guarantor and any other endorsers, guarantors or
obligors, primary or secondary, of any or all of the Obligations.

“Security” means any rights, properties, or interests of Agent or any Lender
Party, under the Loan Documents or otherwise, which provide recourse or other
benefits to Agent or any Lender Party in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or any Lender Party have rights
under or pursuant to any Loan Documents, guaranties of the payment or
performance of any Obligation, bonds, surety agreements, keep-well agreements,
letters of credit, rights of subrogation, rights of offset, and rights pursuant
to which other claims are subordinated to the Obligations.

Section 2. Guaranty.

(a) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to
Agent and each other Lender Party the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:

(i) the Loans (whether or not evidenced by Notes), including all principal, all
interest thereon and all other sums payable thereunder;

(ii) all other “Obligations” (as defined in the Credit Agreement), including
without limitation, all other sums payable under the other Loan Documents,
whether for principal, interest, fees or otherwise; and

(iii) all Hedging Obligations.

Without limiting the generality of the foregoing, Guarantor’s liability
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection (a),
or below in the following subsection (b), which would be owed by Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving Borrower.

(b) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to
Agent and each other Lender Party the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender Party under, by reason of, or
pursuant to any of the Loan Documents.

(c) If Borrower shall for any reason fail to pay any Obligation, as and when
such Obligation shall become due and payable, whether at its stated maturity, as
a result of the exercise of any power to accelerate, or otherwise, Guarantor
will, forthwith upon demand by Agent, pay such Obligation in full to Agent for
the benefit of Agent or the Lender Party to whom such Obligation is owed. If
Borrower shall for any reason fail to perform promptly any Obligation, Guarantor
will, forthwith upon demand by Agent, cause such Obligation to be performed or,
if specified by Agent, provide sufficient funds, in such amount and manner as
Agent shall in good faith determine, for the prompt, full and faithful
performance of such Obligation by Agent or such other Person as Agent shall
designate.

 

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(d) If either Borrower or Guarantor fails to pay or perform any Obligation as
described in the immediately preceding subsections (a), (b), or (c), Guarantor
will incur the additional obligation to pay to Agent, and Guarantor will
forthwith upon demand by Agent pay to Agent, the amount of any and all expenses,
including fees and disbursements of Agent’s counsel and of any experts or agents
retained by Agent, which Agent may incur as a result of such failure.

(e) The liability of Guarantor hereunder shall be limited to the maximum amount
of liability that can be incurred by Guarantor without rendering this Guaranty
voidable under applicable law relating to fraudulent conveyances or fraudulent
transfers, and not for any greater amount.

Section 3. Unconditional Guaranty.

(a) No action which Agent or any Lender Party may take or omit to take in
connection with any of the Loan Documents, any of the Obligations (or any other
indebtedness owing by Borrower to Agent or any Lender Party), or any Security,
and no course of dealing of Agent or any Lender Party with any Obligor or any
other Person, shall release or diminish Guarantor’s obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender Party, regardless of whether
any such action or inaction may increase any risks to or liabilities of Agent or
any Lender Party or any Obligor or increase any risk to or diminish any
safeguard of any Security. Without limiting the foregoing, Guarantor hereby
expressly agrees that Agent and any Lender Party may, from time to time, without
notice to or the consent of Guarantor, do any or all of the following:

(i) Amend, change or modify, in whole or in part, any one or more of the Loan
Documents and give or refuse to give any waivers or other indulgences with
respect thereto.

(ii) Neglect, delay, fail, or refuse to take or prosecute any action for the
collection or enforcement of any of the Obligations, to foreclose or take or
prosecute any action in connection with any Security Document or other Loan
Document, to bring suit against any Obligor or any other Person, or to take any
other action concerning the Obligations or the Loan Documents.

(iii) Accelerate, change, rearrange, extend, or renew the time, rate, terms, or
manner for payment or performance of any one or more of the Obligations (whether
for principal, interest, fees, expenses, indemnifications, affirmative or
negative covenants, or otherwise).

(iv) Compromise or settle any unpaid or unperformed Obligation or any other
obligation or amount due or owing, or claimed to be due or owing, under any one
or more of the Loan Documents.

(v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or
all Security for any or all of the Obligations, accept additional or substituted
Security therefor, and perfect or fail to perfect Agent’s or any Lender Party’s
rights in any or all Security.

 

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(vi) Discharge, release, substitute or add Obligors.

(vii) Apply all monies received from Obligors or others, or from any Security
for any of the Obligations, as Agent or any Lender Party may determine to be in
their best interest, without in any way being required to marshall Security or
assets or to apply all or any part of such monies upon any particular
Obligations.

(b) No action or inaction of any Obligor or any other Person, and no change of
law or circumstances, shall release or diminish Guarantor’s obligations,
liabilities, agreements, or duties hereunder, affect this Guaranty in any way,
or afford Guarantor any recourse against Agent or any Lender Party. Without
limiting the foregoing, the obligations, liabilities, agreements, and duties of
Guarantor under this Guaranty shall not be released, diminished, impaired,
reduced, or affected by the occurrence of any or all of the following from time
to time, even if occurring without notice to or without the consent of
Guarantor:

(i) Any voluntary or involuntary liquidation, dissolution, sale of all or
substantially all assets, marshalling of assets or liabilities, receivership,
conservatorship, assignment for the benefit of creditors, insolvency,
bankruptcy, reorganization, arrangement, or composition of any Obligor or any
other proceedings involving any Obligor or any of the assets of any Obligor
under laws for the protection of debtors, or any discharge, impairment,
modification, release, or limitation of the liability of, or stay of actions or
lien enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.

(ii) The failure by Agent or any Lender Party to file or enforce a claim in any
proceeding described in the immediately preceding subsection (i) or to take any
other action in any proceeding to which any Obligor is a party.

(iii) The release by operation of law of any Obligor from any of the Obligations
or any other obligations to Agent or any Lender Party, or any reduction,
limitation, impairment or termination of any Obligations of the Borrower or any
other Obligor for any reason, including any claim of waiver, release, surrender,
alteration or compromise.

(iv) The invalidity, deficiency, illegality, or unenforceability of any of the
Obligations or the Loan Documents, in whole or in part, any bar by any statute
of limitations or other law of recovery on any of the Obligations, or any
defense or excuse for failure to perform on account of force majeure, act of
God, casualty, impossibility, impracticability, or other defense or excuse
whatsoever.

(v) The failure of any Obligor or any other Person to sign any guaranty or other
instrument or agreement within the contemplation of any Obligor, Agent or any
Lender Party.

 

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(vi) The fact that Guarantor may have incurred directly part of the Obligations
or is otherwise primarily liable therefor.

(vii) Without limiting any of the foregoing, any fact or event (whether or not
similar to any of the foregoing) which in the absence of this provision would or
might constitute or afford a legal or equitable discharge or release of or
defense to a guarantor or surety other than the actual payment and performance
by Guarantor under this Guaranty.

(c) Agent and any Lender Party may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and any Lender Party may maintain
an action against Guarantor on this Guaranty without joining any other Obligor
therein and without bringing a separate action against any other Obligor.

(d) If any payment to Agent or any Lender Party by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender Party is required to refund
such payment to the pay or thereof or to pay the amount thereof to any other
Person, such payment to Agent or such Lender Party shall not constitute a
release of Guarantor from any liability hereunder, and Guarantor agrees to pay
such amount to Agent or such Lender Party on demand and agrees and acknowledges
that this Guaranty shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments. Any transfer by
subrogation which is made as contemplated in Section 6 prior to any such payment
or payments shall (regardless of the terms of such transfer) be automatically
voided upon the making of any such payment or payments, and all rights so
transferred shall thereupon revert to and be vested in Agent and such Lender
Party.

(e) This is a continuing guaranty and shall apply to and cover all Obligations
and renewals and extensions thereof and substitutions therefor from time to
time.

Section 4. Waiver. Guarantor hereby waives, with respect to the Obligations,
this Guaranty, and the other Loan Documents:

(a) notice of the incurrence of any Obligation by Borrower, and notice of any
kind concerning the assets, liabilities, financial condition, creditworthiness,
businesses, prospects, or other affairs of Borrower (it being understood and
agreed that: (i) Guarantor shall take full responsibility for informing itself
of such matters, (ii) neither Agent nor any Lender Party shall have any
responsibility of any kind to inform Guarantor of such matters, and (iii) Agent
and each Lender Party are hereby authorized to assume that Guarantor, by virtue
of its relationships with Borrower which are independent of this Guaranty, has
full and complete knowledge of such matters whenever any Lender Party extends
credit to Borrower or take any other action which may change or increase
Guarantor’s liabilities or losses hereunder).

(b) notice that Agent, any Lender Party, any Obligor, or any other Person has
taken or omitted to take any action under any Loan Document or any other
agreement or instrument relating thereto or relating to any Obligation,
including, without limitation, in connection with any Lien or security interest
granted by Guarantor in favor of Agent or any Lender Party.

 

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(c) notice of acceptance of this Guaranty.

(d) demand, presentment for payment, and notice of demand, dishonor, nonpayment,
or nonperformance.

(e) notice of intention to accelerate, notice of acceleration, protest, notice
of protest, notice of any exercise of remedies (as described in the following
Section 5 or otherwise), and all other notices of any kind whatsoever.

Section 5. Exercise of Remedies. Agent and each Lender Party shall have the
right to enforce, from time to time, in any order and at Agent’s or such Lender
Party’s sole discretion, any rights, powers and remedies which Agent or such
Lender Party may have under the Loan Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent and each Lender Party hereunder for any
deficiency resulting from the exercise by Agent or any Lender Party of any such
right or remedy even though any rights which Guarantor may have against Lender
Party or others may be destroyed or diminished by exercise of any such right or
remedy. No failure on the part of Agent or any Lender Party to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right. If, in the exercise of any of its rights and remedies, any Lender
Party shall forfeit any of its rights or remedies, including its right to enter
a deficiency judgment against any Obligor or any other Person, whether because
of any applicable laws pertaining to “election of remedies” or the like,
Guarantor hereby consents to such action by such Lender Party and waives any
claim based upon such action, even if such action by such Lender Party shall
result in a full or partial loss of any rights of subrogation that Guarantor
might otherwise have had but for such action by such Lender Party. Any election
of remedies that results in the denial or impairment of the right of any Lender
Party to seek a deficiency judgment against the Borrower shall not impair
Guarantor’s obligation to pay the full amount of the Obligations. The rights,
powers and remedies of Agent and each Lender Party provided herein and in the
other Loan Documents are cumulative and are in addition to, and not exclusive
of, any other rights, powers or remedies provided by law or in equity. The
rights of Agent and each Lender Party hereunder are not conditional or
contingent on any attempt by Agent or any Lender Party to exercise any of its
rights under any other Loan Document against any Obligor or any other Person.

Section 6. Limited Subrogation. Until one year and one day after the
indefeasible payment in full in cash of all Obligations, the expiration or
termination of all Letters of Credit and the termination of all Commitments,
Guarantor shall have no right to exercise any right of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against or to any Obligor or any Security in
connection with this

 

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Guaranty, and Guarantor hereby waives any rights to enforce any remedy which
Guarantor may have against Borrower and any right to participate in any Security
until such time. If any amount shall be paid to Guarantor on account of any such
subrogation or other rights, any such other remedy, or any Security at any time
when all of the Obligations and all other expenses guaranteed pursuant hereto
shall not have been indefeasibly paid in full in cash, all Letters of Credit
have not expired or terminated or all Commitments have not terminated, such
amount shall be held in trust for the benefit of Agent, shall be segregated from
the other funds of Guarantor and shall forthwith be paid over to Agent to be
held by Agent as collateral for, or then or at any time thereafter applied in
whole or in part by Agent against, all or any portion of the Obligations,
whether matured or unmatured, in such order as Agent shall elect. If Guarantor
shall make payment to Agent of all or any portion of the Obligations and if all
of the Obligations shall be indefeasibly paid in full in cash, all Letters of
Credit have expired or terminated and all Commitments have terminated, Agent
will, at Guarantor’s request and expense, execute and deliver to Guarantor
(without recourse, representation or warranty) appropriate documents necessary
to evidence the transfer by subrogation to Guarantor of an interest in the
Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section 3(d) above and that without the consent of
Agent (which Agent may withhold in its discretion) Guarantor shall not have the
right to be subrogated to any claim or right against any Obligor which has
become owned by Agent or any Lender Party, whose ownership has otherwise changed
in the course of enforcement of the Loan Documents, or which Agent otherwise has
released or wishes to release from its Obligations.

Section 7. Successors and Assigns. Guarantor’s rights or obligations hereunder
may not be assigned or delegated, but this Guaranty and such obligations shall
pass to and be fully binding upon the successors of Guarantor, as well as
Guarantor. This Guaranty shall apply to and inure to the benefit of Agent and
each Lender Party and their successors or assigns, including, without
limitation, any such Person permitted under the Credit Agreement.

Section 8. Subordination. Guarantor hereby subordinates and makes inferior to
the Obligations any and all indebtedness now or at any time hereafter owed by
Borrower to Guarantor. Guarantor agrees that after the occurrence of any Default
or Event of Default it will neither permit Borrower to repay such indebtedness
or any part thereof nor accept payment from Borrower of such indebtedness or any
part thereof without the prior written consent of Agent. If Guarantor receives
any such payment without the prior written consent of Agent, the amount so paid
shall be held in trust for the benefit of each Lender Party, shall be segregated
from the other funds of Guarantor, and shall forthwith be paid over to Agent to
be held by Agent as collateral for, or then or at any time thereafter applied in
whole or in part by Agent against, all or any portions of the Obligations,
whether matured or unmatured, in such order as Agent shall elect. At the Agent’s
request, Guarantor will promptly mark its books and records, and cause any
Subsidiary of Guarantor to mark its books and records, so as to indicate that
any and all indebtedness now or at any time hereafter owed by Borrower to
Guarantor is subordinated in accordance with the terms of this Guaranty, and
will cause to be clearly inserted in any promissory note or other instrument
which at any time evidences any such indebtedness a statement to the effect that
the payment thereof is subordinated in accordance with the terms of this
Guaranty. Guarantor shall execute such further documents or instruments and take
such further action as the Agent may reasonably from time to time request to
carry out the intent of

 

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this Guaranty. Guarantor hereby grants to each Lender Party a right of offset to
secure the payment of the Obligations and Guarantor’s obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender Party from or
for the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender Party. Upon the occurrence of any Default or Event
of Default, Agent and each Lender Party is hereby authorized at any time and
from time to time, without notice to Guarantor, to offset, appropriate and apply
any and all items hereinabove referred to against the Obligations and
Guarantor’s obligations and liabilities hereunder irrespective of whether or not
Agent or such Lender Party shall have made any demand under this Guaranty and
although such obligations and liabilities may be contingent or unmatured. Agent
and each Lender Party agrees promptly to notify Guarantor after any such offset
and application made by Agent or such Lender Party, provided that the failure to
give such notice shall not affect the validity of such offset and application.
The rights of Agent and each Lender Party under this Section 8 are in addition
to, and shall not be limited by, any other rights and remedies (including other
rights of offset) which Agent and any Lender Party may have.

Section 9. Representations and Warranties. Guarantor hereby represents and
warrants to Agent and each Lender Party as follows:

(a) [Reserved].

(b) Guarantor is a limited liability company duly organized, validly existing
and in good standing under the laws of the state of its organization as set
forth in the Preamble and Recitals to this Guaranty and is duly qualified to do
business and is in good standing as a limited liability company in each
jurisdiction where the nature of its business requires such qualification,
except for such jurisdiction where the failure to so qualify could not
reasonably be expected to have a Material Adverse Change, and has all requisite
power and authority and holds all requisite governmental licenses, permits and
other approvals (a) to execute, deliver and perform this Guaranty and each other
Loan Document to which it is a party and (b) to own and hold under lease its
respective property and to conduct its business substantially as currently
conducted by it, except for those licenses, permits or other approvals, the
absence of which could not reasonably be expected to have a Material Adverse
Change.

(c) The execution, delivery and performance by Guarantor of this Guaranty have
been duly authorized by all necessary organization action and do not and will
not contravene its certificate or articles of organization or bylaws.

(d) The execution, delivery and performance by Guarantor of this Guaranty do not
and will not contravene any law or governmental regulation or any contractual
restriction binding on or affecting Guarantor or any of its Affiliates or
properties, and do not and will not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of its properties.

 

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(e) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or other regulatory body or third party is
required for the due execution, delivery and performance by Guarantor of this
Guaranty.

(f) This Guaranty is a legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms except as limited by
bankruptcy, insolvency or similar laws of general application relating to the
enforcement of creditors’ rights.

(g) There is no action, suit or proceeding pending or, to the knowledge of
Guarantor, threatened against or otherwise affecting Guarantor before any court,
arbitrator or governmental department, commission, board, bureau, agency or
instrumentality which may materially and adversely affect Guarantor’s financial
condition or its ability to perform its obligations hereunder.

(h) Immediately after entering into this Guaranty, Guarantor will be solvent (as
such term is used in applicable bankruptcy, liquidation, receivership,
insolvency or similar laws).

(i) Guarantor has knowledge of the Borrower’s and each other Obligor’s financial
condition and affairs and has adequate means to obtain from the Borrower and
each other Obligor on an ongoing basis information relating thereto and to the
Borrower’s and such Obligor’s ability to pay and perform the Obligations, and
agrees to assume the responsibility for keeping, and to keep, so informed for so
long as this Guaranty is in effect. Guarantor acknowledges and agrees that the
Agent and the Lender Parties shall have no obligation to investigate the
financial condition or affairs of any Obligor for the benefit of Guarantor nor
to advise Guarantor of any fact respecting, or any change in, the financial
condition or affairs of the Borrower or any other Obligor that might become
known to Agent or any Lender Party at any time, whether or not such Person knows
or believes or has reason to know or believe that any such fact or change is
unknown to Guarantor, or might (or does) materially increase the risk of
Guarantor as guarantor, or might (or would) affect the willingness of Guarantor
to continue as a guarantor of the Obligations.

(j) All of the representations and warranties made by the Borrower or any other
Obligor regarding Guarantor in the Credit Agreement or in any other Loan
Document are true and correct in all respects as of the date hereof as if such
representations and warranties were incorporated herein in their entirety and
made by Guarantor; provided that each reference in each such representation and
warranty to the Borrower’s knowledge shall, for the purposes of this
Section 9(j), be deemed to be a reference to such Guarantor’s knowledge.

Section 10. Covenants

(a) Affirmative Covenants. Guarantor covenants and agrees that, until the
indefeasible payment in full in cash of all Obligations, the expiration or
termination of all Letters of Credit and the termination of all Commitments,
Guarantor shall and shall cause any Subsidiaries to, unless the Lenders or the
Required Lenders, as applicable, shall otherwise consent in writing in
accordance with the Credit Agreement, perform each of the obligations set forth
in Article VI of the Credit Agreement, to the extent such obligations pertain to
Guarantor or its assets, as if such obligations were set forth in full in this
Guaranty.

 

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(b) Negative Covenants. Guarantor covenants and agrees that, until the
indefeasible payment in full in cash of all Obligations, the expiration or
termination of all Letters of Credit and the termination of all Commitments,
Guarantor shall not and shall cause any Subsidiaries not to, without the prior
written consent of the Lenders or the Required Lenders, as applicable, in
accordance with the Credit Agreement, do anything prohibited by Article VII of
the Credit Agreement, to the extent such obligations pertain to Guarantor or its
assets, as if each such prohibition was set forth in full in this Guaranty.

(c) Non-Petition Covenant. Prior to the date that is one year and one day after
the indefeasible payment in full in cash of all Obligations, the expiration or
termination of all Letters of Credit and the termination of all Commitments,
Guarantor will not, and will not allow any Subsidiary to, directly or
indirectly, commence, join any other person in commencing, or authorize a
trustee or other person acting on its behalf or on behalf of others to commence,
any bankruptcy, reorganization, arrangement, insolvency, liquidation, or
receivership proceeding under the laws of the United States or any state of the
United States against Guarantor or the Borrower, or any other their respective
Subsidiaries.

Section 11. No Oral Change. No amendment of any provision of this Guaranty shall
be effective unless it is in writing and signed by Guarantor and Agent, and no
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall be effective unless it is in writing and signed by
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

Section 12. Unenforceability. Any provision of this Guaranty which is prohibited
or unenforceable in any jurisdiction or against any party shall, as to such
jurisdiction or such party, be ineffective to the extent of such prohibition or
invalidity without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction or against any other party.

Section 13. Headings and References. The headings used herein are for purposes
of convenience only and shall not be used in construing the provisions hereof.
The words “this Guaranty,” “this instrument,” “herein,” “hereof,” “hereby” and
words of similar import refer to this Guaranty as a whole and not to any
particular subdivision unless expressly so limited. The phrases “this section”
and “this subsection” and similar phrases refer only to the subdivisions hereof
in which such phrases occur. The word “or” is not exclusive, and the word
“including” (in its various forms) means “including without limitation”.
Pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to include
the plural and vice versa, unless the context otherwise requires.

Section 14. Term. This Guaranty shall be irrevocable until the indefeasible
payment in full in cash of all Obligations, the expiration or termination of all
Letters of Credit and the termination of all Commitments, and all obligations
and undertakings of Borrower under, by reason of, or pursuant to the Loan
Documents have been completely performed, and this Guaranty is thereafter
subject to reinstatement as provided in Section 3(d). All extensions of credit
and financial accommodations heretofore or hereafter made by Agent or any Lender
Party to Borrower shall be conclusively presumed to have been made in acceptance
hereof and in reliance hereon.

 

11

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Section 15. Notices. Any notice or communication required or permitted hereunder
shall be given as provided in the Credit Agreement to each Lender Party at its
address specified on its signature page to the Credit Agreement and to Guarantor
at its address specified on the signature page hereto, or to another address
designated in writing by such party to the other relevant parties.

Section 16. Limitation on Interest. Agent, Lender Parties and Guarantor intend
to contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein by reference.

Section 17. Loan Document. This Guaranty is a Loan Document, as defined in the
Credit Agreement, and is subject to the provisions of the Credit Agreement
governing Loan Documents. Guarantor hereby ratifies, confirms and approves the
Credit Agreement and the other Loan Documents and, in particular, any provisions
thereof which relate to Guarantor.

Section 18. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which when so executed shall be deemed to constitute one
and the same Guaranty.

Section 19. GOVERNING LAW. THIS GUARANTY SHALL BE DEEMED A CONTRACT AND
INSTRUMENT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSES SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK). IN ANY LEGAL PROCEEDING RELATING TO
THIS GUARANTY, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS ITSELF TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN HARRIS
COUNTY, TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE OBLIGATIONS BY
ANY MEANS ALLOWED UNDER APPLICABLE LAW.

Section 20. FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES HERETO.

Section 21. [Restatement. This Guaranty renews, amends and restates, but does
not terminate or novate, the Existing Guaranty in its entirety, effective as of
the date first written above, and all of the terms and provisions hereof shall
supersede the terms and provisions thereof.]

 

12

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the
date first written above.

 

[SUBSIDIARY NAME] By:       Name:     Title:   Address:

 

   S-1    Form of Guaranty

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EXHIBIT G

FORM OF ISSUANCE REQUEST

Issuance Request

Toronto Dominion (Texas) LLC

31 West 52nd Street

New York, New York 10019

Attention: ____________________________

Re: W&T Offshore, Inc.

Ladies and Gentlemen:

This Issuance Request is delivered to you pursuant to Section 2.11(b) of that
certain Fourth Amended and Restated Credit Agreement dated as of May 5, 2011 (as
from time to time amended, supplemented, restated or otherwise modified, the
“Agreement”), by and among W&T Offshore, Inc. (“Borrower”), Toronto Dominion
(Texas) LLC, as Agent, and certain lenders (“Lenders”) and letter-of-credit
issuing banks from time to time parties thereto as Issuers. Terms used herein
have the meanings provided in the Credit Agreement unless otherwise defined
herein or the context otherwise requires.

The Borrower hereby requests that the Issuer issue a Letter of Credit on [Date]
in the aggregate Stated Amount of _______ [and in the form attached hereto].5

The beneficiary of the requested Letter of Credit will be ____________________,
and such Letter of Credit will be in support of the [Provide Description] and
will have a Stated Expiry Date of [Date]. The following documents will be
required upon presentation: [Provide Description]

Attached hereto is an executed copy of an [Application for Letter of Credit]

 

5 

Include where the Borrower is providing the form of Letter of Credit requested
to be issued.

 

Exhibit G - 1

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IN WITNESS WHEREOF, the Borrower has caused this Issuance Request to be executed
and delivered by its duly authorized officer this      day of
                    , 20    .

 

BORROWER: W&T OFFSHORE, INC. By:     Name:     Title:    

 

Address:  

Nine Greenway Plaza

Suite 300

Houston, TX 70046

Telephone:   (713) 626-8525 Fax:   (713) 626-8527

 

Exhibit G - 2