Exhibit 10.1

 

Third Amendment

to

Credit Agreement

Among

Legacy Reserves LP
as Borrower,

BNP Paribas,
as Administrative Agent,

and

The Lenders Signatory Hereto

Effective as of October 24, 2007

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Third Amendment to Credit Agreement

This Third Amendment to Credit Agreement (this “Third Amendment”) executed
effective as of October 24, 2007 (the “Third Amendment Effective Date”) is among
Legacy Reserves LP, a limited partnership formed under the laws of the State of
Delaware (the “Borrower”); each of the undersigned guarantors (the “Guarantors”,
and together with the Borrower, the “Obligors”); each of the Lenders that is a
signatory hereto; and BNP Paribas, as administrative agent for the Lenders (in
such capacity, together with its successors, the “Administrative Agent”).

Recitals

A.           The Borrower, the Administrative Agent and the Lenders are parties
to that certain Credit Agreement dated as of March 15, 2006 (as amended to date,
the “Credit Agreement”), pursuant to which the Lenders have made certain credit
available to and on behalf of the Borrower.

B.           The Borrower has requested and the Administrative Agent and the
Lenders have agreed to amend certain provisions of the Credit Agreement.

C.           NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

Section 1.                                Defined Terms.  Each capitalized term
which is defined in the Credit Agreement, but which is not defined in this Third
Amendment, shall have the meaning ascribed to such term in the Credit
Agreement.  Unless otherwise indicated, all section references in this Third
Amendment refer to the Credit Agreement.

Section 2.                      Amendments to Credit Agreement.

2.1           Definitions.  Section 1.02 is hereby amended by amending and
restating the following definitions as follows:

“ ‘Agreement’ means this Credit Agreement, as amended by that certain First
Amendment to Credit Agreement, dated as of July 7, 2006, the Second Amendment to
Credit Agreement, dated as of May 3, 2007, and the Third Amendment to Credit
Agreement, dated as of October 24, 2007, and as the same may from time to time
be further amended, modified, supplemented or restated.”

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

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Borrowing Base Utilization Percentage
Eurodollar Loans
ABR Loans
Level 1
less than 33%
1.000%
0.000%
Level 2
greater than or equal to 33%, but less than 66%
1.250%
0.000%
Level 3
greater than or equal to 66%, but less than 85%
1.500%
0.125%
Level 4
greater than or equal to 85%
1.750%
0.250%

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

Section 3.                      Assignment to New Lenders; Borrowing Base.

3.1           New Lender.  For an agreed consideration, each of the Lenders
party to the original Credit Agreement hereby irrevocably sells and assigns to
Fortis Capital Corp. and Compass Bank (the “New Lenders”), and each of the New
Lenders, by its signature hereto, hereby irrevocably purchases and assumes from
the existing Lenders, subject to and in accordance with the Credit Agreement, as
of the Third Amendment Effective Date (i) such Lenders’ rights and obligations
in their capacities as Lenders under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified on the attached Annex I, of such
outstanding rights and obligations of such Lenders under the Credit Agreement
and (ii) to the extent permitted to be assigned under applicable law, all
claims, suits, causes of action and any other right of the Administrative Agent
and the other Lenders against any Person, whether known or unknown, arising
under or in connection with the Credit Agreement, any other documents or
instruments delivered pursuant thereto or the loan transactions governed thereby
or in any way based on or related to any of the foregoing, including contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above.
 

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3.2           Borrowing Base.  For the period from and including the Third
Amendment Effective Date to but excluding the next Redetermination Date, the
amount of the Borrowing Base shall be equal to $225,000,000.  Notwithstanding
the foregoing, the Borrowing Base may be subject to further adjustments from
time to time pursuant to Section 8.13(c) or Section 9.12(d).

Section 4.                      Conditions Precedent.  The effectiveness of this
Third Amendment is subject to the receipt by the Administrative Agent of the
following documents and satisfaction of the other conditions provided in this
Section 4, each of which shall be reasonably satisfactory to the Administrative
Agent in form and substance:

4.1           Third Amendment.  The Administrative Agent shall have received
multiple counterparts as requested of this Third Amendment from each Lender and
the Borrower.

4.2           Secretary’s Certificates.  The Administrative Agent shall have
received a certificate of the Borrower and of each Guarantor (a) setting forth
resolutions of the board of directors or other managing body with respect to the
authorization of the Borrower or such Guarantor to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in those documents, and (b) certifying that there has been no change to either
(i) the individuals who are authorized to sign the Loan Documents to which the
Borrower or such Guarantor is a party and (ii) the articles or certificate of
incorporation or formation and bylaws, operating agreement or partnership
agreement, as applicable, of the Borrower and each Guarantor, in each case,
since the Effective Date.  The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent receives
notice in writing from the Borrower to the contrary.
 
4.3           Good Standing Certificates.  The Administrative Agent shall have
received certificates of the appropriate State agencies with respect to the
existence, qualification and good standing of the Borrower and each Guarantor,
if any.
 
4.4           Compliance Certificate.  The Administrative Agent shall have
received a compliance certificate, which shall be substantially in the form of
Exhibit B to the Credit Agreement, duly and properly executed by a Responsible
Officer and dated as of the Third Amendment Effective Date.
 
4.5           Notes.  The Administrative Agent shall have received a Note
payable to the order of each Lender in the amount of such Lender’s Commitment
after giving effect to the assignment and increase in commitments pursuant to
this Third Amendment, duly executed and delivered by Borrower, to be dated as of
the Third Amendment Effective Date.
 
4.6           Amendments to Security Documents.  The Administrative Agent shall
have received from each party thereto duly executed counterparts (in such number
as may be requested by the Administrative Agent) of amendments to the Deed of
Trust, Mortgage, Line of Credit Mortgage, Fixture Filing, Assignment of
As-Extracted Collateral, Security Agreement and Financing Statement from Legacy
Reserves Operating LP.
 

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4.7           Legal Opinion.  The Administrative Agent shall have received an
opinion of Andrews & Kurth, L.L.P., special counsel to the Borrower, in form and
substance satisfactory to the Administrative Agent, as to such matters incident
to this Third Amendment as the Administrative Agent may reasonably request.
 
4.8           No Default.  No Default or Event of Default shall have occurred
and be continuing as of the Third Amendment Effective Date.

Section 5.                      Representations and Warranties; Etc.  Each
Obligor hereby affirms:  (a) that as of the date of execution and delivery of
this Third Amendment, all of the representations and warranties contained in
each Loan Document to which such Obligor is a party are true and correct in all
material respects as though made on and as of the Third Amendment Effective Date
(unless made as of a specific earlier date, in which case, was true as of such
date); and (b) that after giving effect to this Third Amendment and to the
transactions contemplated hereby, no Defaults exist under the Loan Documents or
will exist under the Loan Documents.

Section 6.                      Miscellaneous.

6.1           Confirmation.  The provisions of the Credit Agreement (as amended
by this Third Amendment) shall remain in full force and effect in accordance
with its terms following the effectiveness of this Third Amendment.

6.2           Ratification and Affirmation of Obligors.  Each of the Obligors
hereby expressly (i) acknowledges the terms of this Third Amendment, (ii)
ratifies and affirms its obligations under the Guaranty Agreement and the other
Security Instruments to which it is a party, (iii) acknowledges, renews and
extends its continued liability under the Guaranty Agreement and the other
Security Instruments to which it is a party and (iv) agrees that its guarantee
under the Guaranty Agreement and the other Security Instruments to which it is a
party remains in full force and effect with respect to the Indebtedness as
amended hereby.

6.3           Counterparts.  This Third Amendment may be executed by one or more
of the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.

6.4           No Oral Agreement.  This written Third Amendment, the Credit
Agreement and the other Loan Documents executed in connection herewith and
therewith represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or unwritten oral agreements
of the parties.  There are no subsequent oral agreements between the parties.

6.5           Governing Law.  This Third Amendment (including, but not limited
to, the validity and enforceability hereof) shall be governed by, and construed
in accordance with, the laws of the State of Texas.
 

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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be
duly executed effective as of the date first written above.

 BORROWER:
LEGACY RESERVES LP
 
By:  Legacy Reserves GP, LLC, its general partner
         
 
By:
/s/ Steven H. Pruett       Steven H. Pruett       President, Chief Financial
Officer and Secretary          

 

 GUARANTORS:
LEGACY RESERVES OPERATING LP
 
By:  Legacy Reserves Operating GP, LLC, its general partner
         
 
By:
/s/ Steven H. Pruett       Steven H. Pruett       President, Chief Financial
Officer and Secretary          

  LEGACY RESERVES OPERATING GP, LLC          
 
By:
/s/ Steven H. Pruett       Steven H. Pruett        President, Chief Financial
Officer and Secretary          

  LEGACY RESERVES SERVICES, INC.          
 
By:
/s/ Steven H. Pruett       Steven H. Pruett        President, Chief Financial
Officer and Secretary          

 

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 ADMINISTRATIVE AGENT:
BNP PARIBAS
as Administrative Agent and Lender
         
 
By:
/s/ Russell Otts       Russell Otts       Vice President          

 
By:
/s/ Robert Long       Robert Long       Vice President          

 

 LENDERS: BANK OF AMERICA N.A.          
 
By:
/s/ Scott A. Mackey       Scott A. Mackey       Vice President          

  COMERICA BANK          
 
By:
/s/ Mark Fuqua       Mark Fuqua       Senior Vice President          

  KEYBANK N.A.          
 
By:
/s/ Thomas Rajan       Thomas Rajan       Director          

  WACHOVIA BANK, NATIONAL ASSOCIATION          
 
By:
/s/ Leanne S. Phillips       Leanne S. Phillips       Director          

 

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 NEW LENDER: FORTIS CAPITAL CORP.          
 
By:
/s/ David Montgomery       David Montgomery       Director          

 
By:
/s/ Darrell Holley       Darrell Holley       Managing Director          

 

 NEW LENDER: COMPASS BANK          
 
By:
/s/ Kathleen J. Bowen       Kathleen J. Bowen       Senior Vice President