Exhibit 10.1

 

Execution Version

 

AMENDED & RESTATED CREDIT AGREEMENT

 

 

DATED AS OF
June 22, 2011

 

AMONG

 

EAGLE ROCK ENERGY PARTNERS, L.P.,
AS BORROWER,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT AND SWINGLINE LENDER,

 

BANK OF AMERICA, N.A.,
AND
THE ROYAL BANK OF SCOTLAND plc,
AS CO-SYNDICATION AGENTS,

 

BNP PARIBAS,
AS DOCUMENTATION AGENT

 

AND

 

THE LENDERS PARTY HERETO

 

 

 

 

 

WELLS FARGO SECURITIES,
LLC

MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED

RBS SECURITIES INC.

 

 

AS JOINT LEAD ARRANGERS AND BOOKRUNNERS

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

5

 

 

 

Section 1.01

Defined Terms

5

Section 1.02

Types of Loans and Borrowings

34

Section 1.03

Terms Generally; Rules of Construction

34

Section 1.04

Accounting Terms and Determinations; GAAP

34

 

 

 

ARTICLE II

THE CREDITS

34

 

 

 

Section 2.01

Commitments

34

Section 2.02

Loans and Borrowings

35

Section 2.03

Requests for Borrowings

36

Section 2.04

Swingline Loans

36

Section 2.05

Interest Elections

38

Section 2.06

Funding of Borrowings

39

Section 2.07

Termination, Reduction and Increase of Commitments

40

Section 2.08

Borrowing Base

42

Section 2.09

Letters of Credit

47

 

 

 

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

52

 

 

 

Section 3.01

Repayment of Loans

52

Section 3.02

Interest

52

Section 3.03

Alternate Rate of Interest

53

Section 3.04

Prepayments

53

Section 3.05

Fees

55

 

 

 

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

56

 

 

 

Section 4.01

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

56

Section 4.02

Presumption of Payment by the Borrower

57

Section 4.03

Certain Deductions by the Administrative Agent

57

Section 4.04

Disposition of Proceeds

57

 

 

 

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

60

 

 

 

Section 5.01

Increased Costs

60

Section 5.02

Break Funding Payments

62

Section 5.03

Taxes

62

Section 5.04

Mitigation Obligations; Replacement of Lenders

65

Section 5.05

Illegality

66

 

 

 

ARTICLE VI

CONDITIONS PRECEDENT

66

 

 

 

Section 6.01

Effective Date

66

Section 6.02

Each Credit Event

69

 

 

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

69

 

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Section 7.01

Organization; Powers

69

Section 7.02

Authority; Enforceability

70

Section 7.03

Approvals; No Conflicts

70

Section 7.04

Financial Condition; No Material Adverse Change

70

Section 7.05

Litigation

71

Section 7.06

Environmental Matters

71

Section 7.07

Compliance with the Laws and Agreements; No Defaults

72

Section 7.08

Investment Company Act

73

Section 7.09

Taxes

73

Section 7.10

ERISA

73

Section 7.11

Disclosure; No Material Misstatements

74

Section 7.12

Insurance

74

Section 7.13

Restriction on Liens

75

Section 7.14

Subsidiaries

75

Section 7.15

Location of Business and Offices

75

Section 7.16

Properties; Titles, Etc.

75

Section 7.17

Maintenance of Properties

77

Section 7.18

Gas Imbalances, Prepayments

77

Section 7.19

Marketing of Production

77

Section 7.20

Security Instruments

77

Section 7.21

Hedging Agreements

78

Section 7.22

Use of Loans and Letters of Credit

78

Section 7.23

Solvency

79

Section 7.24

Anti-Terrorism Laws

79

 

 

 

ARTICLE VIII

AFFIRMATIVE COVENANTS

80

 

 

 

Section 8.01

Financial Statements; Ratings Change; Other Information

80

Section 8.02

Notices of Material Events

82

Section 8.03

Existence; Conduct of Business

83

Section 8.04

Payment of Obligations

83

Section 8.05

Performance of Obligations under Loan Documents

83

Section 8.06

Operation and Maintenance of Properties

83

Section 8.07

Insurance

84

Section 8.08

Books and Records; Inspection Rights

84

Section 8.09

Compliance with Laws

84

Section 8.10

Environmental Matters

84

Section 8.11

Further Assurances

85

Section 8.12

Reserve Reports

86

Section 8.13

Title Information

87

Section 8.14

Additional Collateral; Additional Guarantors

88

Section 8.15

ERISA Compliance

89

Section 8.16

Unrestricted Subsidiaries

90

 

 

 

ARTICLE IX

NEGATIVE COVENANTS

90

 

 

 

Section 9.01

Financial Covenants

91

Section 9.02

Indebtedness

93

Section 9.03

Liens

94

 

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Section 9.04

Restricted Payments

95

Section 9.05

Investments, Loans and Advances

96

Section 9.06

Designation and Conversion of Restricted and Unrestricted Subsidiaries;
Indebtedness of Unrestricted Subsidiaries

97

Section 9.07

Nature of Business

97

Section 9.08

Proceeds of Loans

98

Section 9.09

ERISA Compliance

98

Section 9.10

Sale or Discount of Receivables

99

Section 9.11

Mergers, Etc.

99

Section 9.12

Sale of Properties

100

Section 9.13

Environmental Matters

100

Section 9.14

Transactions with Shareholders and Affiliates

100

Section 9.15

Subsidiaries

100

Section 9.16

Negative Pledge Agreements; Dividend Restrictions

100

Section 9.17

Limitation on Issuance of Equity Interests

101

Section 9.18

Gas Imbalances, Take-or-Pay or Other Prepayments

101

Section 9.19

Hedging Agreements

101

Section 9.21

Amendments to Fiscal Year End; Prepayments of Other Indebtedness

102

Section 9.22

Marketing Activities

102

Section 9.23

Anti-Terrorism Law; Anti-Money Laundering

102

Section 9.24

Embargoed Person

103

 

 

 

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

103

 

 

 

Section 10.01

Events of Default

103

Section 10.02

Remedies

105

 

 

 

ARTICLE XI

THE AGENTS

106

 

 

 

Section 11.01

Appointment; Powers

106

Section 11.02

Duties and Obligations of Administrative Agent

107

Section 11.03

Action by Administrative Agent

107

Section 11.04

Reliance by Administrative Agent

108

Section 11.05

Sub-agents

108

Section 11.06

Resignation or Removal of Administrative Agent

109

Section 11.07

Agents as Lenders

109

Section 11.08

No Reliance

109

Section 11.09

Administrative Agent May File Proofs of Claim

110

Section 11.10

Authority of Administrative Agent to Release Collateral and Liens

110

Section 11.11

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

111

 

 

 

ARTICLE XII

MISCELLANEOUS

111

 

 

 

Section 12.01

Notices

111

Section 12.02

Waivers; Amendments

112

Section 12.03

Expenses, Indemnity; Damage Waiver

114

Section 12.04

Assignments and Participations

116

Section 12.05

Survival; Revival; Reinstatement

120

Section 12.06

Counterparts; Integration; Effectiveness

120

 

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Section 12.07

Severability

121

Section 12.08

Right of Setoff

121

Section 12.09

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

121

Section 12.10

Headings

122

Section 12.11

Confidentiality

122

Section 12.12

Interest Rate Limitation

123

Section 12.13

EXCULPATION PROVISIONS

124

Section 12.14

Collateral Matters; Hedging Agreements; Treasury Management Agreements

124

Section 12.15

No Third Party Beneficiaries

124

Section 12.16

USA Patriot Act Notice

125

 

EXHIBITS AND SCHEDULES

 

Exhibit A

Form of Note

Exhibit B

Form of Borrowing Request

Exhibit C

Form of Interest Election Request

Exhibit D-1

Form of Compliance Certificate (Effective Date)

Exhibit D-2

Form of Compliance Certificate (Ongoing)

Exhibit E

Form of Guaranty and Collateral Agreement

Exhibit F

Form of Assignment and Assumption

Exhibit G-1

Form of Commitment Increase Certificate

Exhibit G-2

Form of Additional Lender Certificate

 

 

Schedule 1.01(a)

Existing Letters of Credit

Schedule 1.01(b)

Security Instruments

Schedule 7.05

Litigation

Schedule 7.06

Environmental Matters

Schedule 7.14

Subsidiaries

Schedule 7.18

Gas Imbalances

Schedule 7.19

Marketing Contracts

Schedule 7.20

Jurisdictions for Security Instrument Filings

Schedule 7.21

Hedging Agreements

Schedule 9.02

Existing Indebtedness

Schedule 9.03

Existing Liens

Schedule 9.05

Existing Investments

Schedule 9.14

Certain Shareholder and Affiliate Transactions

 

 

Annex I

Commitments

 

4

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 22, 2011, is among: 
EAGLE ROCK ENERGY PARTNERS, L.P., a limited partnership duly formed and existing
under the laws of the State of Delaware (the “Borrower”); each of the Lenders
from time to time party hereto; and WELLS FARGO BANK, NATIONAL ASSOCIATION, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); Bank of America, N.A.
and The Royal Bank of Scotland plc as co-syndication agents for the Lenders (in
such capacity, together with their successors in such capacity, the
“Co-Syndication Agents”); and BNP Paribas, as documentation agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Documentation Agent”).

 

R E C I T A L S

 

A.            The Borrower wishes to refinance all outstanding Indebtedness
under the Existing Credit Agreement (as defined below).

 

B.            The Borrower has requested that the Lenders provide certain loans
to and extensions of credit on behalf of the Borrower.

 

C.            The Lenders have agreed to the Refinancing and to make such loans
and extensions of credit subject to the terms and conditions of this Agreement.

 

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

 

ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS

 

Section 1.01         Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:

 

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

 

“Additional Lender” has the meaning assigned to such term in Section 2.07(b)(i).

 

“Additional Lender Certificate” has the meaning assigned to such term in
Section 2.07(b)(ii)(F).

 

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

 

“Administrative Agent” has the meaning assigned to such term in the introductory
paragraph hereto.

 

5

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

 

“Affected Loans” has the meaning assigned to such term in Section 5.05.

 

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

 

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

 

“Agreement” means this Credit Agreement, as the same may from time to time be
amended, modified, supplemented or restated.

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1% and (c) the daily LIBO Rate for a one
month Interest Period plus 1%.  Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Federal Funds Effective Rate or the LIBO Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Federal Funds Effective Rate or the LIBO Rate, respectively.

 

“Anti-Terrorism Law” has the meaning assigned to such term in Section 7.24(a).

 

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

 

Borrowing Base
Utilization Percentage

 

ABR

 

LIBOR

 

Commitment
Fee

Less than 25.0%

 

75.0 bps

 

175.0 bps

 

37.5 bps

Greater than or equal to 25.0% but less than 50.0%

 

100.0 bps

 

200.0 bps

 

37.5 bps

Greater than or equal to 50.0% but less than 75.0%

 

125.0 bps

 

225.0 bps

 

45.0 bps

Greater than or equal to 75.0% but less than 90.0%

 

150.0 bps

 

250.0 bps

 

50.0 bps

Greater than or equal to 90.0%

 

175.0 bps

 

275.0 bps

 

50.0 bps

 

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.  If at any time the Borrower fails
to deliver a Reserve Report pursuant to Section 8.12(a), fails to deliver the
annual financial reports pursuant to Section 8.01(a), or fails to deliver the
quarterly financial reports pursuant to Section 8.01(b), then the “Applicable
Margin”

 

6

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shall mean the rate per annum set forth on the grid when the Borrowing Base
Utilization Percentage is at its highest level until such time as the Reserve
Report or financial statements are delivered, whereupon the Applicable Margin
shall be determined as if the Reserve Report or financial statements had been
timely delivered, and is to be effective as of the first Business Day
immediately following the date such Reserve Report or financial statements were
delivered. In the event that any financial statement or compliance certificate
delivered pursuant to Section 6.01(d) or Section 8.01(c) is shown to be
inaccurate (regardless of whether this Agreement or the Commitments are in
effect when such inaccuracy is discovered) (an “Applicable Period”), then the
Borrower shall immediately (a) deliver to the Administrative Agent a corrected
compliance certificate for such Applicable Period, (b) determine the Applicable
Margin for such Applicable Period based upon the corrected compliance
certificate, and (c) pay to the Administrative Agent an accrued additional
interest owing as a result of an increased Applicable Margin for such Applicable
Period, which payment shall be promptly applied by the Administrative Agent in
accordance with Section 4.01, or receive from the Lenders any excess interest
previously paid by the Borrower as a result of a decreased Applicable Margin for
such Applicable Period.  The preceding sentence is in addition to rights of the
Administrative Agent and Lenders with respect to Section 3.02(d) and
Section 10.01 and other of their respective rights under this Agreement.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment, as such percentage is
agreed between the Administrative Agent and such Lender and is set forth on
documentation on file with the Administrative Agent.

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender,
(b) any other Person whose long term senior unsecured debt rating is A-/A3 by
S&P or Moody’s (or their equivalent) or higher,
(c) IntercontinentalExchange, Inc., its Subsidiaries, and their respective
successors and (d) Chicago Mercantile Exchange (CME Group Inc.), its
Subsidiaries and their respective successors.

 

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

 

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P., (c) Cawley, Gillespie &
Associates and (d) any other independent petroleum engineers reasonably
acceptable to the Administrative Agent.

 

“Arranger” means Wells Fargo Securities, LLC, in its capacity as the left lead
arranger and left bookrunner hereunder.

 

“Asset Sale” means any Disposition by the Borrower or any Restricted Subsidiary
to any Person but excluding Dispositions resulting from Casualty Events.

 

7

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

 

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

 

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

 

“Borrower” has the meaning assigned to such term in the introductory paragraph
hereto.

 

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

 

“Borrowing Base” means at any time an amount equal to the sum of the Upstream
Component and the Midstream Component.

 

“Borrowing Base Deficiency” occurs if at any time the total Credit Exposures
exceed the Loan Limit.

 

“Borrowing Base Properties” means all Upstream Component Properties and all
Midstream Properties.

 

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

 

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

 

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

 

“Capital Expenditures” means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
and purchase and construction expenditures and costs that are capital in nature
and any other expenditures that are capitalized on the balance sheet of such
Person in accordance with GAAP.

 

8

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

 

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

 

“Change in Control” means:

 

(a)           The Borrower shall cease to Control the General Partner;

 

(b)           (i) any Person (other than any Principal, the Borrower or any Loan
Party) has beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 50% of the Voting Securities of the General Partner
or (ii) any Person, entity or group (other than any Principal) has beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than
50% of the Voting Securities of the Borrower; or

 

(c)           the General Partner shall cease for any reason to be the sole
general partner of the Borrower.

 

Notwithstanding the preceding, a conversion of the Borrower or any of its
Restricted Subsidiaries from a limited partnership, corporation, limited
liability company or other form of entity to a limited liability company,
corporation, limited partnership or other form of entity or an exchange of all
of the outstanding Equity Interests in one form of entity for Equity Interests
in another form of entity shall not constitute a Change of Control, so long as
following such conversion or exchange the Persons who have beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of the Equity
Interests of the Borrower immediately prior to such transactions continue to
have beneficial ownership in the aggregate more than 50% of the Voting
Securities of such entity, or continue to have beneficial ownership of
sufficient Voting Securities in such entity to elect a majority of its
directors, managers, trustees or other persons serving in a similar capacity for
such entity or its general partner (or its general partner’s general partner),
as applicable, and, in either case, no Person, other than the Company, any
Restricted Subsidiary or any Principal, has beneficial ownership of more than
50% of the Voting Securities of such entity or its general partner (or its
general partner’s general partner), as applicable.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, rule, guideline or
directive (whether or not having the force of law) by any Governmental
Authority; provided that notwithstanding anything herein to the contrary, the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and all requests, rules, guidelines or directives promulgated by the
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

 

9

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pursuant to Basel III, shall, in each case, be deemed to be a “Change in Law”,
regardless of the date enacted, adopted or issued.

 

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

 

“Co-Syndication Agents” has the meaning assigned to such term in the
introductory paragraph hereto.

 

“Collateral” means all Property of the Loan Parties that is secured by a Lien
under one or more Security Instruments.

 

“Commercial Operation Date” means, with respect to a Material Project, the date
on which such Material Project achieves commercial operation.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder, as
such commitment may be (a) modified from time to time pursuant to Section 2.07
and (b) modified from time to time pursuant to assignments by or to such Lender
pursuant to Section 12.04(b).  The amount of each Lender’s Commitment shall be
the amount as agreed between the Administrative Agent and such Lender and set
forth on Annex I.  The total Commitments for all Lenders on the Effective Date
equal $675,000,000.

 

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

 

“Commitment Increase Certificate” has the meaning assigned to such term in
Section 2.07(b)(ii)(E).

 

“Conflicts Committee” has the meaning assigned to such term in the Partnership
Agreement, as in effect on the date hereof.

 

“Consolidated EBITDA” means, for any period, (a) the sum of (i) Consolidated Net
Income for such period (excluding, to the extent included in the calculation of
Consolidated Net Income in such period, gains or losses attributable to asset
Dispositions not in the ordinary course of business) plus (ii) the following
expenses or charges to the extent deducted from Consolidated Net Income in such
period (including, in respect of assets classified as discontinued operations
but still owned by the Borrower or a Consolidated Restricted Subsidiary as of
the end of such period): Consolidated Interest Expense, income taxes (including
any franchise taxes to the extent based upon net income), depreciation,
depletion, amortization, other similar non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual or reserve for
potential cash charges in any future period or amortization of a prepaid cash
charge that was paid in a prior period), and non-cash compensation expense
related to the Borrower’s equity-based compensation program, minus (b) all
non-cash income added to Consolidated Net Income (excluding any such non-cash
income to the extent it represents the reversal of an accrual or reserve for
potential cash charge in any prior period).

 

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“Consolidated Interest Expense” means, for any period, the sum (determined
without duplication) of the aggregate interest expense of the Borrower and the
Consolidated Restricted Subsidiaries for such period, including to the extent
included in interest expense under GAAP:  (a) amortization of debt discount,
(b) capitalized interest and (c) the portion of any payments or accruals under
Capital Leases allocable to interest expense, plus the portion of any payments
or accruals under Synthetic Leases allocable to interest expense whether or not
the same constitutes interest expense under GAAP, plus the net costs under the
Interest Rate Hedges and minus the net benefits under the Interest Rate Hedges.

 

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

 

“Consolidated Net Tangible Assets” means, at any date of determination, the
total amount of consolidated assets of the Borrower and its Consolidated
Restricted Subsidiaries after deducting therefrom: (a) all current liabilities
(excluding (i) any current liabilities that by their terms are extendable or
renewable at the option of the obligor thereon to a time more than twelve (12)
months after the time as of which the amount thereof is being computed, and
(ii) current maturities of long-term Indebtedness) and (b) the value (net of any
applicable reserves) of all goodwill, trade names, trademarks, patents and other
like intangible assets, all as set forth, or on a pro forma basis would be set
forth, on the consolidated balance sheet of the Borrower and its Consolidated
Restricted Subsidiaries for the most recently completed fiscal quarter, prepared
in accordance with GAAP.

 

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

 

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

 

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“Consolidated Tangible Net Worth” means, at any date of determination, all
amounts that would, in conformity with GAAP, be included on a consolidated
balance sheet of the Borrower and its Consolidated Restricted Subsidiaries under
stockholders’ equity at such date, minus the net book amount of all assets of
the Borrower and its Consolidated Restricted Subsidiaries (after deducting any
reserves applicable thereto) which would be shown as intangible assets on a
consolidated balance sheet of the Borrower and its Consolidated Restricted
Subsidiaries as of such time prepared in accordance with GAAP.

 

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

 

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

 

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

 

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

 

“Defaulting Lender” means any Lender that has (a) failed to fund any portion of
its Loans or participations in Letters of Credit within two Business Days of the
date required to be funded by it hereunder unless such Lender notifies the
Administrative 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) notified the Borrower, the Administrative Agent, the Issuing Bank or any
Lender in writing that it does not intend to comply with any of its funding
obligations under this Agreement or has made a public statement to the effect
that it does not intend to comply with its funding obligations under this
Agreement or under other agreements in which it commits to extend credit (unless
such writing or public statement indicates that such position is based on such
Lender’s good faith determination that a specifically identified condition
precedent to funding a Loan under this Agreement cannot be satisfied),
(c) failed, within two Business Days after request by the Administrative Agent
or the Borrower, to confirm that it will comply with the terms of this Agreement
relating to its obligations to fund prospective Loans and participations in then
outstanding Letters of Credit, (d) otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid by
it hereunder within three Business Days of the date when due, unless the subject
of a good faith dispute, or (e)(i) been adjudicated as, or determined by any
Governmental Authority having regulatory authority over such Person or its
assets to be, insolvent or has a parent company that has been adjudicated as, or
determined by any Governmental Authority having regulatory authority over such
Person or its assets to be, insolvent or (ii) become the subject of a bankruptcy
or insolvency proceeding, or has had a receiver, conservator, trustee or
custodian appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding or
appointment or has a parent company that has become the subject of a bankruptcy
or insolvency

 

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proceeding other than an Undisclosed Administration, or, other than via an
Undisclosed Administration, or has had a receiver, conservator, trustee or
custodian appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding or
appointment; provided, that a Lender shall not become a Defaulting Lender solely
as the result of the acquisition or maintenance of an ownership interest in such
Lender or a parent company thereof or the exercise of control over a Lender or a
parent company thereof by a Governmental Authority or an instrumentality
thereof..

 

“Deficiency Amount” means, at the time of determination, the amount by which the
total Credit Exposures exceeds the aggregate Loan Limit.

 

“Disposition” means any conveyance, sale, lease, sale and leaseback, assignment,
farm-out, transfer or other disposal (including by way of redemption) of any
Property or assets (including any capital stock or other securities of, or
Equity Interests in, another Person) of the Borrower and its Subsidiaries,
including such actions taken pursuant to a Recovery Event or Casualty Event. 
“Dispose” shall have a correlative meaning.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Indebtedness or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.

 

“Documentation Agent” has the meaning assigned to such term in the introductory
paragraph hereto.

 

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

 

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

 

“Earnout” means (a) any initially contingent payment obligation related to a
Permitted Acquisition, including, without limitation, in the form of earnout
payments, purchase price adjustments, deferred purchase price payments and
bonuses and other forms of compensation to directors, officers, employees or
consultants, in each case so long as (i) such payment obligations are contingent
at the time such obligation is incurred or entered into, and subject to
adjustment based on the performance of the Person and/or Property so acquired,
(ii) such payment obligations are not subject, at the time such obligation is
entered into, to any minimum payment, in whole or in part, by the Borrower or
any Subsidiary, and (iii) prior to becoming fixed or matured, such payment
obligations are not evidenced by a promissory note or secured by a pledge of
Property by the Borrower or any Subsidiary, or (b) the portion of a payment
obligation described in clause (a) which has become fixed and matured.

 

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

 

“Embargoed Person” has the meaning assigned to such term in Section 9.23.

 

“Engineering Reports” has the meaning assigned to such term in
Section 2.08(a)(iii)(A).

 

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

 

“Environmental Permit” means any permit, registration, license, approval,
consent, exemption, variance, or other authorization required under or issued
pursuant to applicable Environmental Laws.

 

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

 

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

 

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

 

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“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower, a
Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was
a “substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to section 4202 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 Plan.

 

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

 

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

 

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

 

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promulgated by the Board and no such deposit account is intended by Borrower or
any of its Restricted Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Restricted Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, 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 Restricted Subsidiary or materially impair the value of such
Property subject thereto without, as to Midstream Properties only, compensation
therefore; (g) Liens on cash or securities pledged to secure performance of
tenders, surety and appeal bonds, government contracts, performance and return
of money bonds, plugging and abandonment bonds, bids, trade contracts, leases,
statutory obligations, regulatory obligations and other obligations of a like
nature incurred in the ordinary course of business not to exceed $10,000,000 in
the aggregate at any time; (h) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (i) any zoning or similar law or right reserved
to or vested in any governmental office or agency to control or regulate the use
of any real property; and (j) 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;
provided, further, that Liens described in clauses (a) through (e) shall remain
“Excepted Liens” only for so long as no action to enforce such Lien has been
commenced and no intention to subordinate the first priority Lien granted in
favor of the Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise taxes (including the Texas
Margin Tax) imposed on (or measured by) its net income in each case (i) by the
United States of America or such other jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, or
(ii) as the result of any other present or former connection between such
recipient and the jurisdiction imposing such Tax (other than any connection
arising from such recipient having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected
a security interest under, engaged in any other transaction pursuant to or
enforced any Loan Document, or sold or assigned an interest in any Loan or Loan
Document), (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction described in (a) above,
(c) any backup withholding tax that is required by the Code to be withheld from
amounts payable to a Lender that has failed to comply with Section 5.03(e)(ii),
(d) in the case of a Foreign Lender (other than an assignee pursuant to a
request by the Borrower under Section 5.04(b)), any withholding tax that (i) is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender pursuant to any law in effect becomes a party to this Agreement (or
designates a new lending office) except to the extent that such Foreign Lender
(or its assignor, if any) was entitled, at the time of designation of a new
lending

 

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office (or assignment), to receive additional amounts with respect to such
withholding tax pursuant to Section 5.03(a) or Section 5.03(c) or (ii) is
attributable to such Foreign Lender’s failure to comply with Section 5.03(e),
and (e) any United States withholding tax that is imposed as a result of such
recipient’s failure or inability to comply with the requirements of FATCA to
establish an exemption from such withholding tax pursuant to FATCA.

 

“Executive Order” has the meaning assigned to such term in Section 7.24(a).

 

“Existing Credit Agreement” means that certain Credit Agreement, dated as of
December 13, 2007, by and among the Borrower, Wells Fargo Bank, National
Association as administrative agent and the lenders party thereto, as heretofore
amended.

 

“Existing Letters of Credit” means the Letters of Credit described on
Schedule 1.01(a) that were issued by Wells Fargo Bank, National Association
under the Existing Credit Agreement and that shall be transferred to and deemed
issued under this Agreement, as such Letters of Credit may be renewed or amended
from time to time.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any regulations or official
interpretations thereof.

 

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

 

“Fee Letter” means that certain letter agreement from the Administrative Agent,
the Arranger, and the Syndication Agent to the Borrower dated May 17, 2011
concerning certain fees in connection with this Agreement.

 

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

 

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

 

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

 

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

 

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“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with
respect to any Issuing Bank, such Defaulting Lender’s Applicable Percentage of
the outstanding Letters of Credit with respect to Letters of Credit issued by
such Issuing Bank other than the Letters of Credit as to which such Defaulting
Lender’s participation obligation has been reallocated to other Lenders or cash
collateralized in accordance with the terms hereof, and (b) with respect to any
Swingline Lender, such Defaulting Lender’s Applicable Percentage of outstanding
Swingline Loans made by such Swingline Lender other than Swingline Loans as to
which such Defaulting Lender’s participation obligation has been reallocated to
other Lenders.

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.04.

 

“General Partner” means Eagle Rock Energy GP, L.P., a Delaware limited
partnership.

 

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

 

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

 

“Guarantors” means:

 

(a)                                  each Person listed on Schedule 7.14,

 

(b)                                 each other Material Domestic Subsidiary or
other Domestic Subsidiary that guarantees the Secured Obligations pursuant to
Section 8.14(b); and

 

(c)                                  each Affiliate of the Borrower that is a
signatory to a Mortgage.

 

“Guaranty and Collateral Agreement” means an agreement executed by the Loan
Parties (including the Borrower) in substantially the form of Exhibit E granting
security interests in certain Collateral and unconditionally guarantying on a
joint and several basis, payment of the Secured Obligations, as the same may be
amended, modified or supplemented from time to time.

 

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law and including, without
limitation:  (a) any chemical, compound, material, product, byproduct, substance
or waste defined as or included in the definition or meaning of “hazardous
substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,”
“pollutant,” or words of similar meaning or import found in any applicable
Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum
substances, natural gas, oil, oil and

 

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gas waste, crude oil, and any components, fractions, or derivatives thereof; and
(c) radioactive materials, asbestos containing materials, polychlorinated
biphenyls, or radon.

 

“Hedge Termination Value” means, in respect of any one or more Hedging
Agreements, after taking into account the effect of any legally enforceable
netting agreement relating to such Hedging Agreements, (a) for any date on or
after the date such Hedging Agreements have been closed out and termination
value(s) determined in accordance therewith, such termination value(s) and
(b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such Hedging Agreements,
as determined by the counterparties to such Hedging Agreements.

 

“Hedge Unwind” has the meaning assigned to such term in Section 2.08(a)(viii).

 

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

 

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

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature. 
Unless otherwise indicated herein, each reference to “Hydrocarbon Interests”
means Hydrocarbon Interests owned by the Borrower or a Restricted Subsidiary.

 

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

 

“Indebtedness” means, for any Person, the sum of the following (without
duplication):  (a) all obligations of such Person for borrowed money or
evidenced by bonds, bankers’ acceptances, debentures, notes or other similar
instruments; (b) all obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, surety or other bonds and similar
instruments; (c) all accounts payable and all accrued expenses, liabilities or
other obligations of such Person to pay the deferred purchase price of Property
or services; (d) the portion of any payments or accruals under Capital Leases
allocable to principal; (e) the portion of any payments

 

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or accruals under Synthetic Leases allocable to principal; (f) all Indebtedness
(as defined in the other clauses of this definition) of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) a Lien on any Property of such Person, whether or
not such Indebtedness is assumed by such Person; (g) all Indebtedness (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Indebtedness (howsoever such assurance shall be made) to the extent of the
lesser of the amount of such Indebtedness and the maximum stated amount of such
guarantee or assurance against loss; (h) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Indebtedness or Property of others; (i) obligations
to deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas
balancing arrangements in the ordinary course of business; (j) obligations to
pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Indebtedness of a partnership for
which such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability;
(l) Disqualified Capital Stock; and (m) the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment.  The Indebtedness of any Person
shall include all obligations of such Person of the character described above to
the extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Initial Quarter” has the meaning assigned to such term in
Section 9.01(e)(ii)(A).

 

“Initial Reserve Report” means the report of Cawley, Gillespie & Associates with
respect to certain Upstream Properties of the Borrower and its Restricted
Subsidiaries as of December 31, 2010.

 

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.05.

 

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

 

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, with the consent of each Lender, nine or twelve months) thereafter, as the
Borrower may elect; provided, that (a) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to

 

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the next succeeding Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day and (b) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period.  For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.  On a one-time basis only, the Borrower may
request one Interest Period to begin on the Effective Date and end on a day that
is two weeks after the Effective Date.

 

“Interest Rate Hedges” means all Hedging Agreements entered into by the Borrower
and its Restricted Subsidiaries for the purpose of hedging the interest rate
exposure associated with the operations of the Borrower and its Restricted
Subsidiaries.

 

“Interim Upstream Component Redetermination” has the meaning assigned to such
term in Section 2.08(a)(ii).

 

“Interim Upstream Component Redetermination Date” means the date on which a
Upstream Component that has been redetermined pursuant to an Interim Upstream
Component Redetermination becomes effective as provided in Section 2.08(a)(iv).

 

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

 

“Issuing Bank” means (a) Wells Fargo Bank, National Association, and (b) any
other Lender agreed to by the Borrower, the Administrative Agent and such
Lender, as applicable, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.09(i). 
Any Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of such Issuing Bank, in which case the term
“Issuing Bank” shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.

 

“LC Commitment” means, at any time, $150,000,000.

 

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

 

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

 

“Lenders” means the lenders party hereto and any Person that shall have become a
party hereto pursuant to an Assignment and Assumption or as an Additional Lender
pursuant to Section 2.07(b), other than any such Person that ceases to be a
party hereto pursuant to an Assignment and Assumption.

 

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

 

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

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate reported by Bloomberg L.P. (the “Service”) in its index of
rates (or on any successor or substitute page of such Service, or any successor
to or substitute for such Service, providing rate quotations comparable to those
currently provided on such screen of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period.  In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate (rounded
upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two (2) Business Days prior to the commencement of such Interest Period.

 

“LIBOR Reference Rate” means a rate of interest for Swingline Loans determined
by reference to the Adjusted LIBO Rate for a one (1) month interest period, as
that rate may fluctuate in accordance with changes in the Adjusted LIBO Rate as
determined on a day-to-day basis.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of
Upstream Properties.

 

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The term “Lien” shall include easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations.  For the purposes of this
Agreement, the Borrower and its Restricted Subsidiaries shall be deemed to be
the owner of any Property which they have acquired or hold subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

 

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

 

“Loan Limit” means for all Lenders the lesser of (i) the total Commitments and
(ii) the Borrowing Base, and for any Lender the lesser of (x) its Commitment and
(y) its Applicable Percentage of the Borrowing Base.

 

“Loan Parties” means, collectively, the Borrower and the Guarantors.

 

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

 

“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having greater than fifty percent (50%) of the total
Commitments, and at any time while any Loans or LC Exposure is outstanding,
Lenders having greater than fifty (50%) of the outstanding aggregate principal
amount of the Loans and participation interests in Letters of Credit (without
regard to any sale by a Lender of a participation in any Loan under
Section 12.04(c)); provided, that if any Lender is a Defaulting Lender at the
time of determination, the total Credit Exposures and Commitments of such Lender
shall be excluded from the determination of Majority Lenders.

 

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

 

“Material Domestic Subsidiary” means, as of any date, each Domestic Subsidiary
that owns Property, excluding the value of the Equity Interests of all of its
Subsidiaries, exceeding $10,000,000.  If the gross value of the Property of the
Domestic Subsidiaries that are not Guarantors exceeds $25,000,000 in the
aggregate, those Domestic Subsidiaries holding a majority of such Property shall
each be a Material Domestic Subsidiary; provided that any Domestic Subsidiary
that guarantees any Indebtedness shall be deemed a Material Domestic Subsidiary.

 

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Hedging Agreements, of any one
or more of the Borrower and its Restricted Subsidiaries in an aggregate
principal amount exceeding $25,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the

 

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obligations of the Borrower or any Restricted Subsidiary in respect of any
Hedging Agreement at any time shall be the Hedge Termination Value.

 

“Material Project” means any capital expansion project undertaken by the
Borrower or any Restricted Subsidiary relating to any Midstream Properties, the
capital expenditures (determined in accordance with GAAP) attributable to which
exceed $15,000,000.

 

“Material Project EBITDA Adjustments” has the meaning assigned to such term in
Section 9.01(e)(i).

 

“Maturity Date” means June 22, 2016.

 

“Maximum Credit Amount” means the amount set forth under the heading Maximum
Credit Amount on Annex I.  As of the Effective Date, the Maximum Credit Amount
is $1,200,000,000.00.

 

“Midstream Attributed Value” means for any Midstream Properties, the Midstream
EBITDA for such Midstream Properties multiplied by 3.75.

 

“Midstream Component” means an amount equal to the lesser of (a) Midstream
EBITDA multiplied by 3.75 and (b) fifty-five percent (55%) of the Borrowing Base
(or sixty percent (60%) of the Borrowing Base for the first two full fiscal
quarters following an acquisition of Midstream Properties in an aggregate amount
in excess of $25,000,000).

 

“Midstream EBITDA” means Consolidated EBITDA attributable to the Midstream
Properties and the Midstream Hedges related thereto.

 

“Midstream Hedges” means all commodity Hedging Agreements entered into by the
Borrower and its Restricted Subsidiaries, other than the Upstream Hedges.

 

“Midstream Properties” means all Property used by the Borrower in (i) gathering,
compressing, treating, processing and transporting natural gas;
(ii) fractionating and transporting natural gas liquids; and (iii) marketing
natural gas, crude, condensate and natural gas liquids, including, without
limitation, gathering lines, pipelines, storage facilities, surface leases,
rights-of-way, easements and servitudes related to each of the foregoing and
classified by the Borrower, in its financial reporting, as a part of its
Midstream Business, as defined in such financial reporting.

 

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

 

“Mortgage” means each mortgage, deed of trust or any other document creating and
evidencing a Lien on real or immovable Property and other Property in favor of
the Secured Parties, which shall be in a form reasonably satisfactory to the
Administrative Agent and shall include each such instrument securing the
obligations under the Existing Credit Agreement not released by the Secured
Parties, as the same may be amended, modified, supplemented or restated from
time to time in accordance with the Loan Documents.

 

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“Mortgaged Building” has the meaning assigned to such term in Section 8.14(e).

 

“Mortgaged Property” means any real Property owned by the Borrower or any
Subsidiary that is subject to a Mortgage.

 

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

 

“New Midstream Component Notice” has the meaning assigned to such term in
Section 2.08(b)(ii).

 

“New Upstream Component Notice” has the meaning assigned to such term in
Section 2.08(a)(iv).

 

“Non-Consenting Lender” means (a) any Lender that has not approved the Upstream
Component proposed by the Administrative Agent pursuant to Section 2.08, or
(b) any Lender that has not approved a proposed waiver or amendment that has
been approved by Lenders holding 80% or more of the then outstanding total
Commitments.

 

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

 

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

 

“OFAC” has the meaning assigned to such term in Section 7.24(b)(v).

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non US jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

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

 

“Partnership Agreement” means the Agreement of Limited Partnership of the
Borrower dated as of May 25, 2006.

 

“Participant” has the meaning assigned to such term in Section 12.04(c)(i).

 

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“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Permitted Acquisition” means any acquisition after the Effective Date (whether
by purchase, merger, amalgamation, consolidation or otherwise), by any Loan
Party in the form of acquisitions of all or substantially all of the business or
a line of business (whether by the acquisition of all of the Equity Interests,
Property or any combination thereof) of any other Person if each such
acquisition meets all of the following requirements:

 

(a)                              no later than the closing date of any
acquisition for which the Permitted Acquisition Consideration exceeds
$25,000,000, the Borrower shall have delivered to the Administrative Agent and
the Lenders a compliance certificate in the form of Exhibit D-2 for the most
recent fiscal quarter end preceding such acquisition demonstrating, in form and
substance reasonably satisfactory to the Administrative Agent and the Lenders,
pro forma compliance (after giving effect to the acquisition and any Loans made
or to be made in connection therewith, as if such acquisition had occurred on
the first day of the applicable four (4) quarter period) with each covenant
contained in Section 9.01 as of the date of the acquisition; and

 

(b)                                 the Borrower shall provide such documents
and information as may be reasonably requested by the Administrative Agent or
the Majority Lenders (through the Administrative Agent) in connection with the
acquisition.

 

“Permitted Acquisition Consideration” means the aggregate amount of the purchase
price (including, but not limited to, any assumed debt, Earnouts (valued at the
maximum amount reasonably expected to be payable thereunder as determined in
good faith by the Borrower) or deferred payments, but excluding any Qualified
Capital Stock of the Borrower issued to the seller in any such Permitted
Acquisition, net of the applicable acquired company’s cash and cash equivalents
balance (including investments of the type described in Section 9.05(c)-(f)) as
shown on its most recent financial statements delivered in connection with the
applicable Permitted Acquisition) to be paid in connection with any applicable
Permitted Acquisition as set forth in the applicable Permitted Acquisition
Documents executed by the applicable Loan Party in order to consummate the
applicable Permitted Acquisition.

 

“Permitted Refinancing Indebtedness” means Indebtedness (for purposes of this
definition, “new Indebtedness”) incurred in exchange for, or proceeds of which
are used to refinance, all of any other Indebtedness (the “Refinanced
Indebtedness”); provided that (a) such new Indebtedness is in an aggregate
principal amount not in excess of the sum of (i) the aggregate principal amount
then outstanding of the Refinanced Indebtedness (or, if the Refinanced
Indebtedness is exchanged or acquired for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration thereof,
such lesser amount) and (ii) an amount necessary to pay any fees and expenses,
including premiums, related to such exchange or refinancing; (b) such new
Indebtedness has a stated maturity no earlier than the stated maturity of the
Refinanced Indebtedness and an average life no shorter than the average life of
the Refinanced Indebtedness; (c) such new Indebtedness does not have a stated
interest rate in excess of the stated interest rate of the Refinanced
Indebtedness; (d) such new Indebtedness does not contain any covenants which are
more onerous to the Borrower and its Restricted Subsidiaries than those imposed
by the Refinanced Indebtedness and (e) such new Indebtedness (and any guarantees
thereof) is subordinated in right of payment to the Secured

 

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Obligations (or, if applicable, the Guaranty and Collateral Agreement) to at
least the same extent as the Refinanced Indebtedness and is otherwise
subordinated on terms substantially reasonably satisfactory to the
Administrative Agent.

 

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

 

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which is subject to Title IV of ERISA or Section 412 of the Code and is
currently or hereafter sponsored, maintained or contributed to by the Borrower,
a Subsidiary or an ERISA Affiliate.

 

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

 

“Principal” means each of Eagle Rock Holdings, L.P., Natural Gas Partners VII,
L.P., Natural Gas Partners VIII, L.P., Montierra Minerals & Production, L.P.,
Montierra Management LLC, Eagle Rock GP, L.L.C., NGP Income Management L.L.C.,
Eagle Rock Holdings NGP 7, LLC, Eagle Rock Holdings NGP 8, LLC, any Affiliated
funds and investment vehicles managed by NGP Energy Capital Management, L.L.C.,
or any general partner, managing member, principal or managing director of any
of the foregoing.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible (including, without limitation,
cash, securities, accounts, contract rights and Equity Interests or other
ownership interests of any Person), whether now in existence or owned or
hereafter acquired.

 

“Proposed Upstream Component” has the meaning assigned to such term in
Section 2.08(a)(iii)(A).

 

“Proposed Upstream Component Notice” has the meaning assigned to such term in
Section 2.08(a)(iii)(B).

 

“Purchase Money Indebtedness” means Indebtedness, the proceeds of which are used
to finance the acquisition, construction or improvement of inventory, equipment
or other property in the ordinary course of business.

 

“Qualified Capital Stock” means, with respect to any Person, the Equity
Interests of such Person that are not Disqualified Capital Stock.

 

“Recovery Event” means the receipt by the Borrower or any Guarantor of any cash
insurance proceeds or condemnation awards payable by reason of a Casualty Event.

 

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“Redemption” means, with respect to any Indebtedness, the repurchase,
redemption, prepayment, repayment, or defeasance or any other acquisition or
retirement for value (or the segregation of funds with respect to any of the
foregoing) of such Indebtedness.  “Redeem” has the correlative meaning thereto.

 

“Redetermination Date” means, with respect to any Scheduled Upstream Component
Redetermination or any Interim Upstream Component Redetermination, the date that
the redetermined Upstream Component related thereto becomes effective pursuant
to Section 2.08(a)(iv).

 

“Refinancing” means the payment in full of all obligations owing and outstanding
and termination of all commitments of lenders under the Existing Credit
Agreement and the amendment of all Security Instruments granted in connection
therewith.

 

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

 

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

 

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

 

“Release” means any depositing, spilling, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.

 

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

 

“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two-thirds percent (662/3%)
of the total Commitments; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding at least sixty-six and two-thirds percent (662/3%)
of the outstanding aggregate principal amount of the Loans or participation
interests in Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)); provided, that if any Lender
is a Defaulting Lender at the time of determination, the total Credit Exposures
and Commitments of such Lender shall be excluded from the determination of
Required Lenders.

 

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

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Senior Vice President of such Person (or
such Person’s

 

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general partner or manager).  Unless otherwise specified, all references to a
Responsible Officer herein shall mean a Responsible Officer of the Ultimate
General Partner.

 

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

 

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

 

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

 

“Scheduled Midstream Component Recalculation” has the meaning assigned to such
term in Section 2.08(b)(ii).

 

“Scheduled Upstream Component Redetermination” has the meaning assigned to such
term in Section 2.08(a)(ii).

 

“Scheduled Upstream Component Redetermination Date” means the date on which an
Upstream Component that has been redetermined pursuant to a Scheduled Upstream
Component Redetermination becomes effective as provided in Section 2.08(a)(iv).

 

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

 

“Secured Hedging Agreement” means any Hedging Agreement of the Borrower or any
Restricted Subsidiary with a Person while such Person is or before such Person
becomes a Lender or an Affiliate of a Lender; provided that if such Person
ceases to be a Lender or an Affiliate of a Lender, the Hedging Agreement with
such Person shall only be a Secured Hedging Agreement to the extent transactions
under such Hedging Agreement were entered into while such Person was a Lender or
an Affiliate of a Lender.

 

“Secured Obligations” means any and all amounts owing or to be owing (including
interest accruing at any post-default rate and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, any of its
Restricted Subsidiaries or any Guarantor, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) by the Borrower, any of
its Restricted Subsidiaries or any Guarantor (whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising):  (a) to the Administrative
Agent, any Issuing Bank or any Lender under any Loan Document; (b) to any
counterparty under any Secured Hedging Agreement; (c) to any counterparty under
any Secured Treasury Management Agreement; and (d) all renewals, extensions
and/or rearrangements of any of the above.

 

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“Secured Parties” means, collectively, the Administrative Agent, each Issuing
Bank, each Lender, each counterparty to a Secured Hedging Agreement and each
counterparty to a Secured Treasury Management Agreement.

 

“Secured Treasury Management Agreement” means any Treasury Management Agreement
of the Borrower or a Restricted Subsidiary with a Person while such Person is or
before such Person becomes a Lender or an Affiliate of a Lender; provided that
if such Person ceases to be a Lender or an Affiliate of a Lender, the Treasury
Management Agreement with such Person shall only be a Secured Treasury
Management Agreement to the extent transactions under such Treasury Management
Agreement were entered into while such Person was a Lender or an Affiliate of a
Lender.

 

“Security Instruments” means the Guaranty and Collateral Agreement, the
Mortgages, the other agreements, instruments or certificates described or
referred to in Schedule 1.01(b), and any and all other agreements, instruments,
consents or certificates now or hereafter executed and delivered by the Borrower
or any other Person (other than Secured Hedging Agreements, Secured Treasury
Management Agreements or participation or similar agreements between any Lender
and any other lender or creditor with respect to any Secured Obligations
pursuant to this Agreement) in connection with, or as security for the payment
or performance of the Secured Obligations, the Notes, this Agreement, the
Existing Credit Agreement or reimbursement obligations under the Letters of
Credit, as such agreements may be amended, modified, supplemented or restated
from time to time.

 

“Solvent” means, with respect to any Person as of any date, that (a) the value
of the assets of such Person (both at fair value and present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date, (b) as of such date, such Person is able to pay all liabilities
of such Person as such liabilities mature, and (c) as of such date, such Person
does not have unreasonably small capital given the nature of its business.  In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities shall be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

 

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

 

“Subject Transaction” has the meaning assigned to such term in Section 9.01(e).

 

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

 

“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender
at any time shall be its Applicable Percentage of the total Swingline Exposure
at such time.

 

“Swingline Lender” means Wells Fargo Bank, National Association, in its capacity
as lender of Swingline Loans hereunder.

 

“Swingline Loan” means a Loan made pursuant to Section 2.04.

 

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

 

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

 

“Termination Date” means the earlier of (a) the Maturity Date and (b) the date
of termination of the Commitments.

 

“Total Funded Indebtedness” means, at any date and without duplication, all
Indebtedness of the Borrower and the Consolidated Restricted Subsidiaries on a
consolidated basis as described in clauses (a), (d), (e), (f), (g), (h) and
(k) of the definition of Indebtedness (but (i) with respect to clauses (g),
(h) and (k), only to the extent such liabilities relate to Indebtedness
described in clauses (a), (d), (e) and (f), and (ii) with respect to clause (k),
only to the extent such liability is not fully covered by partnership assets).

 

“Total Leverage Ratio” means the ratio of Total Funded Indebtedness to
Consolidated EBITDA for the four (4) fiscal quarters ending on the last day of
the fiscal quarter immediately preceding the date of determination for which
financial statements are available.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement and each other Loan Document
to which it is a

 

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party, the Refinancing, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, the guaranteeing of the Secured
Obligations and the other obligations of its Restricted Subsidiaries under the
Guaranty and Collateral Agreement, and the grant of Liens by the Borrower on
Collateral pursuant to the Security Instruments, and (b) each Guarantor, the
execution, delivery and performance by such Guarantor of each Loan Document to
which it is a party, the guaranteeing of the Secured Obligations and the other
obligations under the Guaranty and Collateral Agreement by such Guarantor and
such Guarantor’s grant of the security interests and provision of Collateral
under the Security Instruments, and the grant of Liens by such Guarantor on
Collateral pursuant to the Security Instruments.

 

“Treasury Management Agreement” means any agreement governing the provision of
treasury or cash management services, including deposit accounts, funds
transfer, automated clearinghouse, auto-borrow, zero balance accounts, returned
check concentration, controlled disbursement, lockbox, account reconciliation
and reporting and trade finance services.

 

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

 

“Ultimate General Partner” means Eagle Rock Energy G&P, LLC, a Delaware limited
liability company.

 

“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.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as
such on Schedule 7.14 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06.

 

“Upstream Component” means at any time an amount equal to the amount determined
in accordance with Section 2.08(a)(iii), as the same may be adjusted from time
to time pursuant to Section 2.08(a)(v), Section 2.08(a)(vi),
Section 2.08(a)(vii), or Section 2.08(a)(viii).

 

“Upstream Component Properties” means the Upstream Properties evaluated in the
most recently delivered Reserve Report.

 

“Upstream Component Redetermination” means a Scheduled Upstream Component
Redetermination or an Interim Upstream Component Redetermination.

 

“Upstream Hedges” means all commodity Hedging Agreements entered into by the
Borrower and its Restricted Subsidiaries related to the Upstream Component
Properties.

 

“Upstream Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby

 

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

 

“Upstream Weighting” means the percentage obtained by dividing the Upstream
Component by the Borrowing Base then in effect (prior to giving effect to any
adjustment thereto pursuant to Section 2.08(a)(vi)).

 

“Voting Securities” means, with respect to any Person, Equity Interests of any
class or kind having the power to vote for the election of the members of the
governing body of such Person.

 

“Wells Fargo” means Wells Fargo Bank, National Association.

 

“Wholly-Owned Subsidiary” means (a) any Restricted Subsidiary of which all of
the outstanding Equity Interests (other than any directors’ qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and
one or more of the Wholly-Owned Subsidiaries or (b) any Subsidiary that is
organized in a foreign jurisdiction and is required by the applicable laws and
regulations of such foreign jurisdiction to be partially owned by the government
of such foreign jurisdiction or individual or corporate citizens of such foreign
jurisdiction, provided that the Borrower, directly or indirectly, owns the
remaining Equity Interests in such Subsidiary and, by contract or otherwise,
controls the management and business of such Subsidiary and derives economic
benefits of ownership of such Subsidiary to substantially the same extent as if
such Subsidiary were a Wholly-Owned Subsidiary.

 

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Section 1.02                            Types of Loans and Borrowings.  For
purposes of this Agreement, Loans and Borrowings, respectively, may be
classified and referred to by Type (e.g., a “Eurodollar Loan” or a “Eurodollar
Borrowing”).

 

Section 1.03                            Terms Generally; Rules of Construction. 
The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word “will” shall be construed to have the
same meaning and effect as the word “shall”.  Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth in the Loan Documents), (b) any reference herein to
any law shall be construed as referring to such law as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to time,
(c) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to the restrictions contained in the
Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word “from” means “from and including” and
the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Exhibits, Annexes and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits, Annexes and Schedules to, this
Agreement.  No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

 

Section 1.04                            Accounting Terms and Determinations;
GAAP.  Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial Statements except for changes in which Borrower’s
independent certified public accountants concur and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants contained herein is computed such that all such computations shall be
conducted utilizing financial information presented consistently with prior
periods.

 

ARTICLE II
THE CREDITS

 

Section 2.01                            Commitments.  Subject to the terms and
conditions set forth herein, each Lender agrees to make revolving loans to the
Borrower during the Availability Period in an aggregate principal amount that
will not result in (a) such Lender’s Credit Exposure exceeding such Lender’s
Loan Limit or (b) the total Credit Exposures exceeding the total Loan Limit.

 

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Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, repay and reborrow the Loans.

 

Section 2.02                            Loans and Borrowings.

 

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

 

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

 

(c)                                  Minimum Amounts; Limitation on Number of
Borrowings.  At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $1,000,000.  At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $1,000,000; provided that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.09(e). 
Borrowings of more than one Type may be outstanding at the same time, provided
that there shall not at any time be more than a total of ten (10) Eurodollar
Borrowings outstanding.  Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.

 

(d)                                 Notes.  The Loans made by each Lender, if
requested by such Lender, shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A, dated, in the case of (i) any
Lender party hereto as of the date of this Agreement, as of the date of this
Agreement, (ii) any Lender that becomes a party hereto pursuant to an Assignment
and Assumption, as of the effective date of the Assignment and Assumption, or
(iii) any Lender that becomes a party hereto in connection with an increase in
the total Commitments pursuant to Section 2.07(b), as of the effective date of
such increase, in each case, payable to the order of such Lender in a principal
amount equal to its Commitment as in effect on such date, and otherwise duly
completed.  In the event that any Lender’s Commitment increases or decreases for
any reason (whether pursuant to Section 2.07, Section 12.04(b) or otherwise), if
requested by such Lender, the Borrower shall deliver or cause to be delivered on
the effective date of such increase or decrease, a new Note payable to the order
of such Lender in a principal amount equal to its Commitment after giving effect
to such increase or decrease, and otherwise duly completed.  The date, amount,
Type, interest rate and, if applicable, Interest Period of each Loan made by
each Lender, and all payments made on account of the principal thereof, shall be
recorded by such Lender on its books for its Note, and, prior to any transfer,

 

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may be endorsed by such Lender on a schedule attached to such Note or any
continuation thereof or on any separate record maintained by such Lender. 
Failure to make any such notation or to attach a schedule shall not affect any
Lender’s or the Borrower’s rights or obligations in respect of such Loans or
affect the validity of such transfer by any Lender of its Note.

 

Section 2.03                            Requests for Borrowings.  To request a
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon,
Eastern time, three (3) Business Days before the date of the proposed Borrowing,
or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Eastern time,
on the date of the proposed Borrowing; provided that no such notice shall be
required for any deemed request of an ABR Borrowing to finance the reimbursement
of an LC Disbursement as provided in Section 2.09(e).  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery, facsimile or other electronic transmission to the Administrative Agent
of a written Borrowing Request in substantially the form of Exhibit B and signed
by the Borrower.  Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.02:

 

(i)                                     the aggregate amount of the requested
Borrowing;

 

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

 

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

 

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

 

(v)                                 the current total Credit Exposures (without
regard to the requested Borrowing) and the pro forma total Credit Exposures
(giving effect to the requested Borrowing).

 

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one (1) month’s duration.  Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Credit Exposures to exceed the total
Commitments.

 

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

 

Section 2.04                            Swingline Loans.

 

(a)                                  Subject to the terms and conditions set
forth herein, the Swingline Lender agrees to make Swingline Loans to the
Borrower from time to time during the Availability Period, in an aggregate
principal amount at any time outstanding that will not result in (i) the

 

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aggregate principal amount of outstanding Swingline Loans exceeding $30,000,000
or (ii) the sum of the total Credit Exposures exceeding the total Commitments;
provided that the Swingline Lender shall not be required to make a Swingline
Loan to refinance an outstanding Swingline Loan.  Within the foregoing limits
and subject to the terms and conditions set forth herein, the Borrower may
borrow, prepay and reborrow Swingline Loans.

 

(b)                                 To request a Swingline Loan, the Borrower
shall notify the Administrative Agent of such request by telephone (confirmed by
hand delivery, facsimile or other electronic transmission), not later than
2:00 p.m., Eastern time, on the day of a proposed Swingline Loan.  Each such
notice shall be irrevocable and shall specify the requested date (which shall be
a Business Day) and amount of the requested Swingline Loan.  The Administrative
Agent will promptly advise the Swingline Lender of any such notice received from
the Borrower.  The Swingline Lender shall make each Swingline Loan available to
the Borrower by means of a credit to the general deposit account of the Borrower
with the Swingline Lender (or, in the case of a Swingline Loan made to finance
the reimbursement of an LC Disbursement as provided in Section 2.09(e), by
remittance to the applicable Issuing Bank) by 4:00 p.m., Eastern time, on the
requested date of such Swingline Loan.

 

(c)                                  The Swingline Lender may by written notice,
given to the Administrative Agent not later than 10:00 a.m., Eastern time, on
any Business Day, require the Lenders to acquire participations on such Business
Day in all or a portion of the Swingline Loans outstanding.  Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate.  Promptly upon receipt of such notice, the Administrative Agent
will give notice thereof to each Lender, specifying in such notice such Lender’s
Applicable Percentage of such Swingline Loan or Loans.  Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each
Lender acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.  Each Lender shall comply with its obligation under
this paragraph by wire transfer of immediately available funds, in the same
manner as provided in Section 2.06 with respect to Loans made by such Lender
(and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders.  The Administrative Agent
shall notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the Swingline Lender. 
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear; provided that any such
payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Borrower for any

 

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reason.  The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrower of any default in the payment thereof.

 

Section 2.05                            Interest Elections.

 

(a)                                  Conversion and Continuance.  Each Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request.  Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section 2.05.  The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.

 

(b)                                 Interest Election Requests.  To make an
election pursuant to this Section 2.05, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election.  Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or facsimile or
other electronic transmission to the Administrative Agent of a written Interest
Election Request in substantially the form of Exhibit C and signed by the
Borrower.

 

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

 

(i)                                     the Borrowing to which such Interest
Election Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified pursuant
to Section 2.05(c)(iii) and (iv) shall be specified for each resulting
Borrowing);

 

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

 

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

 

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

 

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one (1) month’s duration.

 

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

 

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

 

Section 2.06                            Funding of Borrowings.

 

(a)                                  Funding by Lenders.  Each Lender shall make
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 2:00 p.m., Eastern time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
provided in Section 2.04.  The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to the account of the Borrower designated in the Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.09(e) shall be remitted by the Administrative Agent to
the relevant Issuing Bank.  Nothing herein shall be deemed to obligate any
Lender to obtain the funds for its Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

 

(b)                                 Presumption of Funding by the Lenders. 
Unless the Administrative Agent shall have received notice from a Lender prior
to the proposed time of any Borrowing (or prior to the proposed time of any same
day ABR Borrowing) that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.06(a) and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount.  In such event, if a Lender
has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender agrees to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative Agent
at the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.  If such Lender does not pay such corresponding amount to the
Administrative Agent within three (3) Business Days after demand, the Borrower
agrees to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent at the interest rate

 

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applicable to ABR Loans.  If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing. Any payment by the Borrower shall be without prejudice to any claim
the Borrower may have against a Lender that shall have failed to make such
payment to the Administrative Agent.

 

Section 2.07                            Termination, Reduction and Increase of
Commitments.

 

(a)                                  Optional Termination and Reduction of
Commitments.

 

(i)                                     The Borrower may at any time terminate,
or from time to time reduce, the total Commitments; provided that (A) each
reduction of the total Commitments shall be in an amount that is an integral
multiple of $1,000,000 and not less than $10,000,000 and (B) the Borrower shall
not terminate or reduce the total Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 3.04(c), the total
Credit Exposures would exceed the total Commitments.

 

(ii)                                  The Borrower shall notify the
Administrative Agent of any election to terminate or reduce the total
Commitments under Section 2.07(a)(i) at least three (3) 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 2.07(a)(ii) shall be
irrevocable; provided that a notice of termination of the Commitments delivered
by the Borrower may state that such notice is conditioned upon (i) the
effectiveness of other credit facilities or (ii) the issuance or incurrence of
other indebtedness permitted under Section 9.02, and in each such 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.

 

(iii)                               Other than as provided in
Section 2.07(a)(iv) below, any termination or reduction of the Commitments shall
be permanent and may not be reinstated except pursuant to Section 2.07(b).  Each
reduction of the Commitments shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.

 

(iv)                              If any Lender shall be a Defaulting Lender,
the Borrower, at the Borrower’s election may elect to terminate such Defaulting
Lender’s Commitment hereunder; provided that (i) such termination must be of the
Defaulting Lender’s entire Commitment, (ii) the Borrower shall pay all amounts
owed by the Borrower to such Defaulting Lender under this Agreement and under
the other Loan Documents (including principal of and interest on the Loans owed
to such Defaulting Lender, commitment fees accrued prior to the time such
Defaulting Lender became a Defaulting Lender, and letter of credit fees accrued
prior to the time such Defaulting Lender became a Defaulting Lender but
specifically excluding any amounts owing under Section 5.02 as result of such
payment of Loans) and shall deposit with the Administrative Agent cash
collateral in the amount equal to such Defaulting Lender’s ratable share of the
LC Exposure, including

 

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any such LC Exposure that has been reallocated pursuant to Section 4.05(a)(iv);
and (iii) a Defaulting Lender’s Commitment may be terminated by the Borrower
under this Section 2.07(a)(iv) if and only if at such time, the Borrower has
elected, or is then electing, to terminate the Commitments of all then existing
Defaulting Lenders.  Upon written notice to the Defaulting Lender and
Administrative Agent of the Borrower’s election to terminate a Defaulting
Lender’s Commitment pursuant to this clause (c) and the payment and deposit of
amounts required to be made by the Borrower under clause (ii) above, (A) such
Defaulting Lender shall cease to be a “Lender” hereunder for all purposes except
that such Lender’s rights under Section 5.01, Section 5.03, Section 12.02, and
Section 12.03 shall continue with respect to events and occurrences occurring
before or concurrently with its ceasing to be a “Lender” hereunder, (B) such
Defaulting Lender’s Commitment shall be terminated, and (C) such Defaulting
Lender shall be relieved of its obligations hereunder, provided that, any such
termination will not be deemed to be a waiver or release of any claim by
Borrower, the Administrative Agent or any Lender may have against such
Defaulting Lender.

 

(b)                                 Optional Increase in Commitments.

 

(i)                                     Subject to the conditions set forth in
Section 2.07(b)(ii), the Borrower may increase the total Commitments then in
effect by increasing the Commitment of a Lender or by causing a Person that at
such time is not a Lender to become a Lender (an “Additional Lender”).

 

(ii)                                  Any increase in the Commitments shall be
subject to the following additional conditions:

 

(A)                              at no time shall the total Commitments exceed
the Maximum Credit Amount;

 

(B)                                no Default shall have occurred and be
continuing at the effective date of such increase;

 

(C)                                the Borrower shall have paid all compensation
required by Section 5.02 (if any);

 

(D)                               no Lender’s Commitment may be increased
without the consent of such Lender;

 

(E)                                 if the Borrower elects to increase the total
Commitments by increasing the Commitment of a Lender, the Borrower and such
Lender shall execute and deliver to the Administrative Agent a certificate
substantially in the form of Exhibit G-1 (a “Commitment Increase Certificate”),
and if requested by such Lender, the Borrower shall deliver a new Note payable
to the order of such Lender in a principal amount equal to its Commitment after
giving effect to such increase, and otherwise duly completed;

 

(F)                                 if the Borrower elects to increase the total
Commitments by causing an Additional Lender to become a party to this Agreement,
then, upon the

 

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prior written consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed), the Borrower and such Additional Lender shall
execute and deliver to the Administrative Agent a certificate substantially in
the form of Exhibit G-2 (an “Additional Lender Certificate”), together with an
Administrative Questionnaire, and if requested by such Additional Lender, the
Borrower shall deliver a Note payable to the order of such Additional Lender in
a principal amount equal to its Commitment, and otherwise duly completed; and

 

(G)                                the Borrower and its Restricted Subsidiaries
shall have delivered to the Administrative Agent such legal opinions,
resolutions, amendment to Security Instruments and other documents as the
Administrative Agent may reasonably request.

 

(iii)                               Subject to acceptance and recording thereof
pursuant to Section 2.07(b)(iv), from and after the effective date specified in
the Commitment Increase Certificate or the Additional Lender Certificate: 
(A) the amount of the total Commitments shall be increased as set forth therein,
and (B) in the case of an Additional Lender Certificate, any Additional Lender
party thereto shall be a party to this Agreement and the other Loan Documents
and have the rights and obligations of a Lender under this Agreement and the
other Loan Documents.  In addition, the Lender or the Additional Lender, as
applicable, shall purchase a pro rata portion of the outstanding Loans (and
participation interests in Letters of Credit) of each of the other Lenders (and
such Lenders hereby agree to sell and to take all such further action to
effectuate such sale) such that each Lender (including any Additional Lender, if
applicable) shall hold its Applicable Percentage of the outstanding Loans (and
participation interests) after giving effect to the increase in the total
Commitments.

 

(iv)                              Upon its receipt of a duly completed
Commitment Increase Certificate or an Additional Lender Certificate, executed by
the Borrower and the Lender or the Borrower and the Additional Lender party
thereto, as applicable, the Administrative Questionnaire referred to in
Section 2.07(b)(ii), if applicable, the written consent of the Administrative
Agent to such increase required by Section 2.07(b)(i)(F), and all other
documents and payments required by this Section 2.07(b), the Administrative
Agent shall accept such Commitment Increase Certificate or Additional Lender
Certificate and record the information contained therein in the Register
required to be maintained by the Administrative Agent pursuant to
Section 12.04(b)(iv).

 

Section 2.08                            Borrowing Base.

 

(a)                                  Upstream Component.

 

(i)                                     Initial Upstream Component.  For the
period from and including the Effective Date to but excluding the first
Redetermination Date, the amount of the Upstream Component shall be
$353,000,000; provided, that if the Borrower issues any unsecured Indebtedness
in excess of $350,000,000 prior to the Effective Date, such $353,000,000 shall
be reduced in accordance with Section 2.08(a)(vi).  Notwithstanding the
foregoing, the Upstream Component may be subject to further adjustments from
time

 

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to time before the first Redetermination Date pursuant to Section 2.08(a)(v),
Section 2.08(a)(vii) or  Section 2.08(a)(viii).

 

(ii)                                  Upstream Component Redeterminations.  The
Upstream Component shall be redetermined semi-annually in accordance with this
Section 2.08(a)(ii) (a “Scheduled Upstream Component Redetermination”), and
subject to Section 2.08(a)(iv), such redetermined Upstream Component (and
resulting new Borrowing Base) shall become effective and applicable to the
Borrower, the Agents, any Issuing Bank and the Lenders on April 1st and
October 1st of each year, commencing October 1, 2011.  In addition, the Borrower
may, by notifying the Administrative Agent thereof, and the Administrative Agent
may, at the direction of the Majority Lenders, by notifying the Borrower
thereof, elect to cause the Upstream Component to be redetermined one time each
between Scheduled Upstream Component Redeterminations in accordance with this
Section 2.08(a)(ii) (each such redetermination, an “Interim Upstream Component
Redetermination”).

 

(iii)                               Upstream Component Redetermination
Procedure.

 

(A)                              Each Upstream Component Redetermination shall
be effectuated as follows:  Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Upstream Component
Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an
Interim Upstream Component Redetermination, pursuant to Section 8.12(b) and (c),
and (B) such other reports, data and supplemental information, including,
without limitation, the information provided pursuant to Section 8.12(c), as
may, from time to time, be reasonably requested by the Majority Lenders (the
Reserve Report, such certificate and such other reports, data and supplemental
information being the “Engineering Reports”), the Administrative Agent shall
evaluate the information contained in the Engineering Reports and shall, in good
faith, propose a new Upstream Component (the “Proposed Upstream Component”)
based upon such Engineering Report and such other information (consistent with
the Administrative Agent’s normal oil and gas lending criteria and the price
assumptions used by the Administrative Agent in evaluating oil and gas loans
generally, in each case as they exist at the particular time).

 

(B)                                The Administrative Agent shall notify the
Borrower and the Lenders of the Proposed Upstream Component (the “Proposed
Upstream Component Notice”):

 

(1)                                  in the case of a Scheduled Upstream
Component Redetermination (1) if the Administrative Agent shall have received
the Engineering Reports required to be delivered by the Borrower pursuant to
Section 8.12(a) and (c) in a timely and complete manner, then on or before the
March 15th and September 15th of such year following the date of delivery, or
(2) if the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to

 

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Section 8.12(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Upstream
Component in accordance with Section 2.08(a)(iii)(A); and

 

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

 

(C)                                Any Proposed Upstream Component that would
increase the Upstream Component then in effect must be approved or deemed to
have been approved by all of the Lenders (except for any Defaulting Lender) as
provided in this Section 2.08(a)(iii)(C); and any Proposed Upstream Component
that would decrease or maintain the Upstream Component then in effect must be
approved or be deemed to have been approved by the Required Lenders as provided
in this Section 2.08(a)(iii)(C).  Upon receipt of the Proposed Upstream
Component Notice, each Lender shall have fifteen (15) days to, in its sole
discretion and consistent with such Lender’s normal and customary oil and gas
lending criteria, agree with the Proposed Upstream Component or disagree with
the Proposed Upstream Component by proposing an alternate Upstream Component. 
If at the end of such fifteen (15) days, any Lender has not communicated its
approval or disapproval in writing to the Administrative Agent, such silence
shall be deemed to be an approval of the Proposed Upstream Component.  If, at
the end of such 15-day period, all of the Lenders, in the case of a Proposed
Upstream Component that would increase the Upstream Component then in effect, or
the Required Lenders, in the case of a Proposed Upstream Component that would
decrease or maintain the Upstream Component then in effect, have approved or
deemed to have approved, as aforesaid, then the Proposed Upstream Component
shall become the new Upstream Component and the Borrowing Base, giving effect to
the new Upstream Component, shall become the new Borrowing Base, effective on
the date specified in Section 2.08(a)(iv).  If, however, at the end of such
15-day period, all of the Lenders or the Required Lenders, as applicable, have
not approved or deemed to have approved, as aforesaid, then (1) the
Administrative Agent shall poll the Lenders to ascertain the highest Upstream
Component then acceptable to all Lenders or the number of Lenders sufficient to
constitute the Required Lenders, as applicable, and such amount shall become the
new Upstream Component and the Borrowing Base, giving effect to the new Upstream
Component, shall become the new Borrowing Base, effective on the date specified
in Section 2.08(a)(iv) and (2) Borrower may replace any Non-Consenting Lender
with respect to such Proposed Upstream Component as provided in Section 5.04(b).

 

(iv)                              Effectiveness of a Redetermined Upstream
Component.  After a Proposed Upstream Component is approved or is deemed to have
been approved by all of the Lenders or the Required Lenders, as applicable,
pursuant to Section 2.08(a)(iii)(C), the Administrative Agent shall notify the
Borrower and the Lenders of the amount of the

 

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redetermined Upstream Component (the “New Upstream Component Notice”) and the
resulting new Borrowing Base, and such amounts shall become the new Upstream
Component and the new Borrowing Base, respectively, effective and applicable to
the Borrower, the Agents, any Issuing Bank and the Lenders:

 

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

 

(B)                                in the case of an Interim Upstream Component
Redetermination or an adjustment to the Upstream Component under
Section 2.08(a)(v), Section 2.08(a)(vi), Section 2.08(a)(vii), or
Section 2.08(a)(viii), on the Business Day next succeeding delivery of such
notice.

 

Such amount shall then become the Upstream Component until the next Scheduled
Upstream Component Redetermination Date, the next Interim Upstream Component
Redetermination Date or the next adjustment to the Upstream Component under
Section 2.08(a)(v), Section 2.08(a)(vi), Section 2.08(a)(vii), or
Section 2.08(a)(viii), whichever occurs first.  Notwithstanding the foregoing,
no Upstream Component Redetermination shall become effective until the New
Upstream Component Notice related thereto is received by the Borrower.

 

(v)                                 Reduction of Upstream Component Upon Asset
Dispositions.  Upon the Disposition of any Upstream Component Properties, if the
sum of (A) the attributed Upstream Component value of all Upstream Component
Properties Disposed of since the last redetermination of the Upstream Component
and (B) the aggregate Midstream Attributed Value of Midstream Properties
Disposed of since the last calculation of the Midstream Component exceeds five
percent (5%) of the Borrowing Base then in effect, the Administrative Agent
shall adjust the Upstream Component in an amount equal to the Upstream Component
value attributable to the Upstream Component Properties being Disposed of.  The
Administrative Agent shall promptly notify the Borrower and the Lenders in
writing of the Upstream Component value attributable to the Upstream Component
Properties being Disposed of in the calculation of the then-effective Upstream
Component and upon receipt of such notice, the Upstream Component shall be
reduced by such amount.

 

(vi)                              Reduction of Upstream Component Upon Issuance
of Unsecured Indebtedness.  Upon the issuance or incurrence of any unsecured
indebtedness after the date hereof pursuant to Section 9.02(h), the Upstream
Component then in effect shall be reduced by an amount equal to the product of
(i) 0.25 multiplied by the principal amount of such newly issued indebtedness
(without regard to any original issue discount) and (ii)

 

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the Upstream Weighting.  The Administrative Agent shall promptly notify the
Borrower and the Lenders of the new Upstream Component.

 

(vii)                           Reduction of Upstream Component Associated with
Title Defects or Exceptions.  The Upstream Component may be reduced from time to
time as provided in Section 8.13(c).

 

(viii)                        Reduction of Upstream Component Upon Termination
of Hedge Positions.  If the Borrower or a Restricted Subsidiary shall terminate
prior to the contracted term therefore or create any off-setting positions in
respect of any Upstream Hedges (whether evidenced by a floor, put or Hedging
Agreement) (a “Hedge Unwind”) and the aggregate net value of all such Hedge
Unwinds since the last determination of the Upstream Component exceeds 2.5% of
the effective Upstream Component, then the Administrative Agent shall have the
right to adjust the Upstream Component in an amount equal to the Upstream
Component value attributable to such terminated or off-setting hedge positions
in the calculation of the then-effective Upstream Component.  The Administrative
Agent shall promptly notify the Borrower and the Lenders in writing of any such
adjustment to the Upstream Component and the resulting new Upstream Component
and resulting new Borrowing Base giving effect to such new Upstream Component,
shall become effective as of the date of such notice.

 

(b)                                 Midstream Component.

 

(i)                                     Initial Midstream Component.  For the
period from and including the Effective Date to but excluding the first
Scheduled Midstream Component Recalculation, the amount of the Midstream
Component shall be $322,000,000

 

(ii)                                  Scheduled Recalculations of the Midstream
Component.  Midstream EBITDA (and hence the Midstream Component of the Borrowing
Base) will be recalculated quarterly (each such recalculation, a “Scheduled
Midstream Component Recalculation”) in connection with the delivery of the
consolidated financial statements of the Borrower and its Consolidated
Restricted Subsidiaries pursuant to Section 8.01(a), Section 8.01(b) and the
compliance certificate pursuant to Section 8.01(c).  The Administrative Agent
shall notify the Borrower and the Lenders of the amount of the recalculated
Midstream Component (the “New Midstream Component Notice”) and the resulting new
Borrowing Base, and such amount shall become the new Midstream Component and the
Borrowing Base, giving effect to the new Midstream Component, shall become the
new Borrowing Base, effective and applicable to the Borrower, the Agents, any
Issuing Bank and the Lenders as of the day such financial statements are
delivered.

 

(iii)                               Pro Forma Adjustments to Midstream
Component.  Pro forma adjustments, as reasonably determined by the Borrower and
approved by the Administrative Agent, shall be made to Midstream EBITDA (and
hence the Midstream Component of the Borrowing Base) between Scheduled Midstream
Component Recalculations for (A) acquisitions of Midstream Properties (either
through a direct acquisition of such Midstream Properties or through a Permitted
Acquisition),

 

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individually or in the aggregate, with Midstream Attributed Value in excess of
5% of then effective Midstream Component since the last recalculation pursuant
to Section 2.08(b)(ii), (B) Dispositions of Midstream Properties if the sum of
(1) the attributed Upstream Component value of all Upstream Component Properties
Disposed of since the last redetermination of the Upstream Component and (2) the
aggregate Midstream Attributed Value of Midstream Properties sold since the last
recalculation of the Midstream Component exceeds five percent (5%) of the
Borrowing Base then in effect and (C) Material Projects as provided in
Section 9.01(e).  The Administrative Agent shall notify the Borrower and the
Lenders of the amount of the adjusted Midstream Component  and the resulting new
Borrowing Base, and such amount shall become the new Midstream Component and the
Borrowing Base, giving effect to the adjusted Midstream Component, shall become
the new Borrowing Base, shall be effective and applicable to the Borrower, the
Agents, any Issuing Bank and the Lenders as of the day of such notice.

 

Section 2.09                            Letters of Credit.

 

(a)                                  General.  The Borrower, the Administrative
Agent, the Issuing Bank, and Lenders hereby agree that all Existing Letters of
Credit shall be deemed to be issued under this Agreement as of the Effective
Date and shall constitute Letters of Credit hereunder for all purposes (except
that no Issuing Bank’s standard issuance fee shall be payable on such deemed
issuance).  Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of dollar denominated Letters of Credit for its own
account or for the account of any of its Restricted Subsidiaries, in a form
reasonably acceptable to the Administrative Agent and the applicable Issuing
Bank, at any time and from time to time during the Availability Period.  In the
event of any inconsistency between the terms and conditions of this Agreement
and the terms and conditions of any Letter of Credit Agreement, the terms and
conditions of this Agreement shall control.

 

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

 

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

 

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

 

(iii)                               specifying the date on which such Letter of
Credit is to expire (which shall comply with Section 2.09(c));

 

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

 

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

 

(vi)                              specifying the current total Credit Exposures
(without regard to the requested Letter of Credit or the requested amendment,
renewal or extension of an outstanding Letter of Credit) and the pro forma total
Credit Exposures (giving effect to the requested Letter of Credit or the
requested amendment, renewal or extension of an outstanding Letter of Credit).

 

Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (A) the LC
Exposure shall not exceed the LC Commitment and (B) the total Credit Exposures
shall not exceed the total Commitments.

 

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

 

(c)                                  Expiration Date.  Each Letter of Credit
shall expire at or prior to the close of business on the earlier of (i) the date
one (1) year after the date of the issuance of such Letter of Credit, provided
that such Letter of Credit may provide for automatic extensions of such
expiration date (such Letter of Credit, an “Auto-Extension Letter of Credit”)
for additional periods of 365 days thereafter, and (ii) the date that is five
(5) Business Days prior to the Maturity Date.  The Borrower shall be required to
make a specific request to the applicable Issuing Bank for any extension of an
Auto-Extension Letter of Credit.  Once an Auto-Extension Letter of Credit has
been issued, the Lenders shall be deemed to have authorized (but may not
require) the applicable Issuing Bank to permit the extension of such Letter of
Credit at any time to an expiry date not later than five (5) Business Days prior
to the Maturity Date; provided, however, that such Issuing Bank shall not permit
any such extension if (A) such Issuing Bank has determined that it would not be
permitted at such time to issue such Letter of Credit in its revised form (as
extended) under the terms hereof, or (B) it has received notice (which may be by
telephone or in writing) from the Administrative Agent, on or before the day
that is five (5) Business Days before the last day in which notice of
non-extension for such Letter of Credit may be given, that one or more of the
applicable conditions specified in Section 6.02 is not then satisfied, and
directing such Issuing Bank not to permit such extension.

 

(d)                                 Participations.  By the issuance of a Letter
of Credit (or an amendment to a Letter of Credit increasing the amount thereof)
and without any further action on the part of any Issuing Bank or the Lenders,
the applicable Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from such Issuing Bank, a participation in such Letter of Credit equal
to such Lender’s Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit.  In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the applicable Issuing Bank, such
Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank
and not reimbursed by the Borrower on the date due as provided in
Section 2.09(e), or of any reimbursement payment required to be refunded to the
Borrower for any reason.  Each Lender acknowledges and agrees that its
obligation to acquire participations

 

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pursuant to this Section 2.09(d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default, the existence of a Borrowing Base
Deficiency or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

(e)                                  Reimbursement.  If any Issuing Bank shall
make any LC Disbursement in respect of a Letter of Credit, the Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent an amount
equal to such LC Disbursement not later than 12:00 noon, Eastern time, on the
date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., Eastern time, on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 12:00 noon, Eastern time, on (i) the Business Day
that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., Eastern time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
the Borrower shall, subject to the conditions to Borrowing set forth herein, be
deemed to have requested, and the Borrower does hereby request under such
circumstances, that such payment be financed with an ABR Borrowing (or, if such
LC Disbursement is less than $1,000,000, a Swingline Loan) in an equivalent
amount and, to the extent so financed, the Borrower’s obligation to make such
payment shall be discharged and replaced by the resulting ABR Borrowing (or
Swingline Loan).  If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Lender of the applicable LC Disbursement,
the payment then due from the Borrower in respect thereof and such Lender’s
Applicable Percentage thereof.  Promptly following receipt of such notice, each
Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in
Section 2.05(a) with respect to Loans made by such Lender (and
Section 2.05(a) shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to such Issuing Bank
the amounts so received by it from the Lenders.  Promptly following receipt by
the Administrative Agent of any payment from the Borrower pursuant to this
Section 2.09(e), the Administrative Agent shall distribute such payment to such
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
Section 2.09(e) to reimburse such Issuing Bank, then to such Lenders and such
Issuing Bank as their interests may appear.  Any payment made by a Lender
pursuant to this Section 2.09(e) to reimburse such Issuing Bank for any LC
Disbursement (other than the funding of ABR Loans or a Swingline Loan as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.

 

(f)                                    Obligations Absolute.  The Borrower’s
obligation to reimburse LC Disbursements as provided in Section 2.09(e) shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term
or provision therein, (ii) any draft or other document presented under a Letter
of Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
any Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not substantially comply with the terms of such Letter
of Credit or

 

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any Letter of Credit Agreement, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section 2.09(f), constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder, absent such Issuing Bank’s gross negligence or willful misconduct. 
Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of
their Related Parties shall have any liability or responsibility by reason of or
in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of any
Issuing Bank; provided that the foregoing shall not be construed to excuse such
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by such Issuing Bank’s failure to exercise care
when determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of any
Issuing Bank (as finally determined by a court of competent jurisdiction), such
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination.  In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, such Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.

 

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

 

(h)                                 Interim Interest.  If any Issuing Bank shall
make any LC Disbursement, then, until the Borrower shall have reimbursed such
Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing
under Section 2.09(e)), the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date that the Borrower reimburses such LC Disbursement, at the rate per
annum then applicable to ABR Loans.  Interest accrued pursuant to this
Section 2.09(h) shall be for the account of the applicable Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to
Section 2.09(e) to reimburse such Issuing Bank shall be for the account of such
Lender to the extent of such payment.

 

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

 

(j)                                     Cash Collateralization.  If (i) any
Event of Default shall occur and be continuing and the Borrower receives notice
from the Administrative Agent or the Majority Lenders demanding the deposit of
cash collateral pursuant to this Section 2.09(j), or (ii) the Borrower is
required to pay to the Administrative Agent the excess attributable to an LC
Exposure in connection with any prepayment pursuant to Section 3.04(c), then the
Borrower shall deposit, in an account with the Administrative Agent, in the name
of the Administrative Agent and for the benefit of the Lenders, an amount in
cash equal to, in the case of an Event of Default, the LC Exposure, and in the
case of a payment required by Section 3.04(c), the amount of such excess as
provided in Section 3.04(c), as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the occurrence
of any Event of Default with respect to the Borrower or any Restricted
Subsidiary described in Section 10.01(i) or Section 10.01(j).  The Borrower
hereby grants to the Administrative Agent, for the benefit of the Issuing Banks
and the Lenders, an exclusive first priority and continuing perfected security
interest in and Lien on such account and all cash, checks, drafts, certificates
and instruments, if any, from time to time deposited or held in such account,
all deposits or wire transfers made thereto, any and all investments purchased
with funds deposited in such account, all interest, dividends, cash,
instruments, financial assets and other Property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all of
the foregoing, and all proceeds, products, accessions, rents, profits, income
and benefits therefrom, and any substitutions and replacements therefor.  The
Borrower’s obligation to deposit amounts pursuant to this Section 2.09(j) shall
be absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any of its
Subsidiaries may now or hereafter have against any such beneficiary, any Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s and the Guarantor’s obligations under this
Agreement and the other Loan Documents.  The Administrative Agent shall have
exclusive dominion and control, including the

 

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exclusive right of withdrawal, over such account.  Other than any interest
earned on the investment of such deposits, which investments shall be made at
the option and sole discretion of the Administrative Agent and at the Borrower’s
risk and expense, such deposits shall not bear interest.  Interest or profits,
if any, on such investments shall accumulate in such account.  Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Banks for LC Disbursements for which they have not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time, and if such moneys
shall exceed the LC Exposure at any time, such excess shall be reimbursed to the
Borrower.  If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, and the Borrower
is not otherwise required to pay to the Administrative Agent the excess
attributable to an LC Exposure in connection with any prepayment pursuant to
Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three (3) Business Days after all Events of
Default have been cured or waived.

 

ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

Section 3.01                            Repayment of Loans.  The Borrower hereby
unconditionally promises to pay (a) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Loan (other than the
Swingline Loans) on the Termination Date and (b) to the Swingline Lender or the
Administrative Agent for the account of each Lender, as applicable, the
outstanding aggregate principal and accrued and unpaid interest under each
Swingline Loan no later than the earlier to occur of (i) the tenth (10th) day
following such Swingline Loan Borrowing and (ii) the Termination Date; provided,
that on each date that a Borrowing (other than a Swingline Loan) is made, the
Borrower shall repay all Swingline Loans then outstanding.

 

Section 3.02                            Interest.

 

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

 

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

 

(c)                                  Swingline Loans.  Each Swingline Loan shall
bear interest at the LIBOR Reference Rate plus the Applicable Margin for a
Eurodollar Borrowing, but in no event to exceed the Highest Lawful Rate.

 

(d)                                 Post-Default Rate.  Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing, then, upon
request of Majority Lenders, all Loans outstanding and any fees or amounts
payable by the Borrower or any Restricted Subsidiary hereunder or under any
other Loan Document,  shall bear interest from the date of such Event of Default
at the rate then applicable to such Loans or such fees or amounts, plus the
Applicable Margin, if any, plus an additional two percent (2%), but in no event
to exceed the Highest Lawful Rate.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 3.04                            Prepayments.

 

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

 

(b)                                 Notice and Terms of Optional Prepayment. 
The Borrower shall notify the Administrative Agent (and, in the case of
prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by
facsimile or other electronic transmission) of any

 

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prepayment hereunder not later than 12:00 noon, Eastern time, on the date of
prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitments as contemplated by
Section 2.07(a), then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.07(a).  Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each partial prepayment of
any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02.  Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02.

 

(c)                                  Mandatory Prepayments.

 

(i)                                     If, after giving effect to any
termination or reduction of the total Commitments pursuant to Section 2.07(a),
the total Credit Exposures exceeds the total Commitments, then the Borrower
shall make a prepayment in accordance with Section 3.04(c)(v) on the date of
such termination or reduction in an aggregate principal amount equal to such
excess.

 

(ii)                                  If a Borrowing Base Deficiency results
from or exists immediately after any adjustment of the Borrowing Base due to a
Scheduled Upstream Component Redetermination or Interim Upstream Component
Redetermination of the Upstream Component or Scheduled Midstream Component
Recalculation of the Midstream Component, then within thirty (30)  days of the
effective date of such new Borrowing Base, the Borrower shall elect (A) to
prepay the Loans in an aggregate principal amount equal to such Deficiency
Amount or (B) to pay such Deficiency Amount in six (6) equal installments, the
first such installment being due and payable by the first Business Day after
such election has been made and the remaining installments due monthly
thereafter until such Deficiency Amount is paid in full; provided, that all
payments under this Section 3.04(c)(ii) must be made prior to the Maturity Date.

 

(iii)                               If a Borrowing Base Deficiency results from
or exists immediately after any adjustment to the Borrowing Base other than
pursuant to any Scheduled Upstream Component Redetermination or Interim Upstream
Component Redetermination of the Upstream Component or Scheduled Midstream
Component Recalculation of the Midstream Component, then the Borrower shall make
a prepayment on the date of such adjustment in an aggregate amount equal to such
Deficiency Amount.

 

(iv)                              Each payment made pursuant to this
Section 3.04(c) shall be used to prepay the Borrowings, and if any Borrowing
Base Deficiency remains after prepaying all of the Borrowings as a result of an
LC Exposure, such excess shall be paid to the Administrative Agent on behalf of
the Lenders to be held as cash collateral as provided in Section 2.09(j).  Each
prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied,
first, to any Swingline Loans then outstanding, second, ratably to any ABR
Borrowings then outstanding, and, third, to any Eurodollar Borrowings then
outstanding,

 

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and if more than one Eurodollar Borrowing is then outstanding, to each such
Eurodollar Borrowing in order of priority beginning with the Eurodollar
Borrowing with the least number of days remaining in the Interest Period
applicable thereto and ending with the Eurodollar Borrowing with the most number
of days remaining in the Interest Period applicable thereto.

 

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

 

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

 

Section 3.05                            Fees.

 

(a)                                  Commitment Fees.  The Borrower agrees to
pay to the Administrative Agent for the account of each Lender (other than a
Defaulting Lender) a commitment fee, which shall accrue at the applicable
Commitment Fee Rate on the average daily amount of the unused amount of the
Commitment of such Lender (notwithstanding such Lender’s Applicable Percentage
of the Borrowing Base) during the period from and including the date of this
Agreement to but excluding the Termination Date; provided that for purposes of
calculating commitment fees pursuant to this Section 3.05(a), Swingline Loans
shall not be deemed to be a utilization of Commitments.  Accrued commitment fees
shall be payable in arrears on the last day of March, June, September and
December of each year and on the Termination Date, commencing on the first such
date to occur after the date hereof.  All commitment fees shall be computed on
the basis of a year of 360 days, unless such computation would exceed the
Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

 

(b)                                 Letter of Credit Fees.  The Borrower agrees
to pay (i) to the Administrative Agent for the account of each Lender (other
than a Defaulting Lender except as provided in Section 4.05(a)(iii)(B)) a
participation fee with respect to its participations in Letters of Credit, which
shall accrue at the same Applicable Margin used to determine the interest rate
applicable to Eurodollar Loans on the average daily amount of such Lender’s LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement
to but excluding the later of the date on which such Lender’s Commitment
terminates and the date on which such Lender ceases to have any LC Exposure,
(ii) to the applicable Issuing Bank a fronting fee, which shall accrue at the
rate of 0.125% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but excluding
the later of the date of termination of the Commitments and the date on which
there ceases to be any LC Exposure, and (iii) to the applicable Issuing Bank,
for its own account, its standard fees with respect to the amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder. 
Participation fees and fronting fees accrued through and including the last day
of March, June, September and December of each

 

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year shall be payable on the third (3rd) Business Day following such last day,
commencing on the first such date to occur after the date of this Agreement;
provided that all such fees shall be payable on the Termination Date and any
such fees accruing after the Termination Date shall be payable on demand.  Any
other fees payable to any Issuing Bank pursuant to this Section 3.05(b) shall be
payable within ten (10) days after demand.  All participation fees and fronting
fees shall be computed on the basis of a year of 360 days, unless such
computation would exceed the Highest Lawful Rate, in which case interest shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).

 

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

 

ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.

 

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

 

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

 

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

 

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(c)                                  Sharing of Payments by Lenders.  If any
Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans or
participations in LC Disbursements or Swingline Loans resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and participations in LC Disbursements or Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans and participations in LC Disbursements of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans and participations
in LC Disbursements and Swingline Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements and Swingline Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 4.01(c) shall apply).  The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

 

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

 

Section 4.03                            Certain Deductions by the Administrative
Agent.  If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.06(b), Section 2.09(d), Section 2.09(e) or Section 4.02
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid.

 

Section 4.04                            Disposition of Proceeds.  The Security
Instruments contain an assignment by the Borrower and/or the Guarantors unto and
in favor of the Administrative Agent for the

 

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

 

Section 4.05                            Defaulting Lenders.

 

(a)                                  Notwithstanding anything to the contrary
contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as such Lender is no longer a Defaulting Lender, to the extent
permitted by applicable law:

 

(i)                                     Waivers and Amendments.  Such Defaulting
Lender’s right to approve or disapprove any amendment, waiver or consent with
respect to this Agreement shall be restricted as set forth in the definitions of
Majority Lenders and Required Lenders.

 

(ii)                                  Defaulting Lender Waterfall. Any payment
of principal, interest, fees or other amounts received by the Administrative
Agent for the account of such Defaulting Lender (whether voluntary or mandatory,
at maturity, pursuant to Article X or otherwise) or received by the
Administrative Agent from a Defaulting Lender pursuant to Section 12.08 shall be
applied at such time or times as may be determined by the Administrative Agent
as follows: first, to the payment of any amounts owing by such Defaulting Lender
to the Administrative Agent hereunder; second, to the payment on a pro rata
basis of any amounts owing by such Defaulting Lender to any Issuing Bank or
Swingline Lender hereunder; third, to cash collateralize the Fronting Exposure
of any Issuing Bank and Swingline Lender with respect to such Defaulting Lender;
fourth, as the Borrower may request (so long as no Default or Event of Default
exists), to the funding of any Loan in respect of which such Defaulting Lender
has failed to fund its portion thereof as required by this Agreement, as
determined by the Administrative Agent; fifth, if so determined by the
Administrative Agent and the Borrower, to be held in a deposit account and
released pro rata in order to (x) satisfy such Defaulting Lender’s potential
future funding obligations with respect to Loans under this Agreement and
(y) cash collateralize the Issuing Banks’ future Fronting Exposure with respect
to such Defaulting Lender with respect to future Letters of Credit issued and
Swingline Loans made under this Agreement; sixth, to the payment of any amounts
owing to the Lenders, the Issuing Banks or Swingline Lenders as a result of any
judgment of a court of competent jurisdiction obtained by any Lender, the
Issuing Banks or Swingline Lenders against such Defaulting Lender as a result of
such Defaulting Lender’s breach of its obligations under this Agreement;
seventh, so long as no Default or Event of Default exists, to the payment

 

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of any amounts owing to the Borrower as a result of any judgment of a court of
competent jurisdiction obtained by the Borrower against such Defaulting Lender
as a result of such Defaulting Lender’s breach of its obligations under this
Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a
court of competent jurisdiction; provided that if (x) such payment is a payment
of the principal amount of any Loans or LC Disbursements in respect of which
such Defaulting Lender has not fully funded its appropriate share, and (y) such
Loans were made or the related Letters of Credit were issued at a time when the
conditions set forth in Section 6.02 were satisfied or waived, such payment
shall be applied solely to pay the Loans of, and LC Disbursements owed to, all
Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment
of any Loans of, or LC Disbursements owed to, such Defaulting Lender until such
time as all Loans and funded and unfunded participations in Letters of Credit
and Swingline Loans are held by the Lenders pro rata in accordance with the
Commitments under the applicable Facility without giving effect to
Section 4.05(a)(iv). Any payments, prepayments or other amounts paid or payable
to a Defaulting Lender that are applied (or held) to pay amounts owed by a
Defaulting Lender or to post Cash Collateral pursuant to this
Section 4.05(a)(ii) shall be deemed paid to and redirected by such Defaulting
Lender, and each Lender irrevocably consents hereto.

 

(iii)                               Certain Fees.

 

(A)                              No Defaulting Lender shall be entitled to
receive any Commitment Fee for any period during which that Lender is a
Defaulting Lender (and the Borrower shall not be required to pay any such fee
that otherwise would have been required to have been paid to that Defaulting
Lender)

 

(B)                                Each Defaulting Lender shall be entitled to
receive fees with respect to its participations in Letters of Credit for any
period during which that Lender is a Defaulting Lender only to the extent
allocable to its Applicable Percentage of the stated amount of Letters of Credit
for which such Defaulting Lender has provided cash collateral pursuant to
Section 2.09(j).

 

(C)                                With respect to any fee not required to be
paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower
shall (x) pay to each Non-Defaulting Lender that portion of any such fee
otherwise payable to such Defaulting Lender with respect to such Defaulting
Lender’s participation in any outstanding Letters of Credit or Swingline Loans
that has been reallocated to such Non-Defaulting Lender pursuant to clause
(iv) below, (y) pay to each Issuing Bank and Swingline Lender, as applicable,
the amount of any such fee otherwise payable to such Defaulting Lender to the
extent allocable to such Issuing Bank’s or Swingline Lender’s Fronting Exposure
to such Defaulting Lender, and (z) not be required to pay the remaining amount
of any such fee.

 

(iv)                              Reallocation of Participations to Reduce
Fronting Exposure.  All or any part of such Defaulting Lender’s participation in
any outstanding Letters of Credit and Swingline Loans shall be reallocated among
the Non-Defaulting Lenders in accordance with their respective Applicable
Percentages (calculated without regard to

 

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such Defaulting Lender’s Commitment) but only to the extent that (x) the
conditions set forth in Section 6.02 are satisfied at the time of such
reallocation (and, unless the Borrower shall have otherwise notified the
Administrative Agent at such time, the Borrower shall be deemed to have
represented and warranted that such conditions are satisfied at such time), and
(y) such reallocation does not cause the Credit Exposure of any Non-Defaulting
Lender to exceed such Non-Defaulting Lender’s Loan Limit.  No reallocation
hereunder shall constitute a waiver or release of any claim of any party
hereunder against a Defaulting Lender arising from that Lender having become a
Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of
such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)                                 Cash Collateral, Repayment of Swingline
Loans.  If the reallocation described in clause (iv) above cannot, or can only
partially, be effected, the Borrower shall, without prejudice to any right or
remedy available to it hereunder or under law, (x) first, prepay Swingline Loans
in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second,
cash collateralize the Issuing Banks’ Fronting Exposure in accordance with the
procedures set forth in Section 2.09(j).

 

(b)                                 Defaulting Lender Cure.  If the Borrower,
the Administrative Agent and each Swingline Lender and Issuing Bank agree in
writing that a Lender is no longer a Defaulting Lender, the Administrative Agent
will so notify the parties hereto, whereupon as of the effective date specified
in such notice and subject to any conditions set forth therein (which may
include arrangements with respect to any cash collateral), that Lender will, to
the extent applicable, purchase at par that portion of outstanding Loans of the
other Lenders or take such other actions as the Administrative Agent may
determine to be necessary to cause the Loans and funded and unfunded
participations in Letters of Credit and Swingline Loans to be held pro rata by
the Lenders in accordance with the Commitments under the applicable Facility
(without giving effect to Section 4.05(a)(iv), whereupon such Lender will cease
to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
the Borrower while that Lender was a Defaulting Lender; and provided, further,
that except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute
a waiver or release of any claim of any party hereunder arising from that
Lender’s having been a Defaulting Lender.

 

(c)                                  New Swingline Loans/Letters of Credit.  So
long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be
required to fund any Swingline Loans unless it is satisfied that it will have no
Fronting Exposure after giving effect to such Swingline Loan and (ii) no Issuing
Bank shall be required to issue, extend, renew or increase any Letter of Credit
unless it is satisfied that it will have no Fronting Exposure after giving
effect thereto.

 

ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

 

Section 5.01                            Increased Costs.

 

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

 

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

 

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

 

(iii)                               subject any Lender to any Taxes with respect
to this Agreement, any Letter of Credit, any participation in a Letter of Credit
or any Eurodollar Rate Loan made by it (other than (A) Indemnified Taxes covered
by Section 5.03 and (B) Excluded Taxes);

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered;
provided that the Borrower shall have no obligation to pay any such costs
incurred or suffered more than six (6) months prior to the demand therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the six-month period referred to above shall
be extended to include the period of retroactive effect thereof.

 

(b)                                 Capital Requirements.  If any Lender or any
Issuing Bank determines that any Change in Law regarding capital requirements
has or would have the effect of reducing the rate of return on such Lender’s or
such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing
Bank’s holding company, if any, as a consequence of this Agreement or the Loans
made by, or participations in Letters of Credit held by, such Lender, or the
Letters of Credit issued by such Issuing Bank, to a level below that which such
Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or such Issuing Bank’s policies and the policies of
such Lender’s or such Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or such
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered; provided that the
Borrower shall have no obligation to pay any such costs incurred or suffered
more than six (6) months prior to the demand therefor; provided further that, if
the Change in Law giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof.

 

(c)                                  Certificates.  A certificate of a Lender or
an Issuing Bank setting forth the amount or amounts necessary to compensate such
Lender or such Issuing Bank or its holding company, as the case may be, as
specified in Section 5.01(a) or (b) shall be delivered to the Borrower and shall
be conclusive absent manifest error.  The Borrower shall pay such Lender or such
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

 

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(d)                                 Effect of Failure or Delay in Requesting
Compensation.  Except as provided above, failure or delay on the part of any
Lender or any Issuing Bank to demand compensation pursuant to this Section 5.01
shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to
demand such compensation.

 

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

 

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

 

Section 5.03                            Taxes.

 

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

 

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

 

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(c)                                  Indemnification by the Borrower.  The
Borrower shall indemnify the Administrative Agent, each Lender and each Issuing
Bank, within ten (10) days after written demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such
Lender or such Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section 5.03) and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate of the
Administrative Agent, a Lender or an Issuing Bank as to the amount of such
payment or liability under this Section 5.03 shall be delivered to the Borrower
and shall be conclusive absent manifest error. The Borrower shall also indemnify
the Administrative Agent, within ten (10) days after demand therefor, for any
amount which a Lender or the Issuing Bank for any reason fails to pay
indefeasibly to the Administrative Agent as required by paragraph (g) below;
provided that (i) the Borrower shall not be required to indemnify the
Administrative Agent pursuant to this sentence to the extent that any such
amount paid or payable as required by such paragraph (g) is a direct result of
the Administrative Agent’s gross negligence or willful misconduct, and (ii) such
Lender or Issuing Bank, as the case may be, shall indemnify the Borrower to the
extent of any such payment the Borrower makes to the Administrative Agent
pursuant to this sentence.

 

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

 

(e)                                  Status of Lenders; Tax Documentation.  (i) 
Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement or any other Loan Document shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative 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 Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting requirements. Without
limiting the generality of the foregoing, in the event that the Borrower is a
resident for tax purposes in the United States, any Foreign Lender shall deliver
to the Borrower and the Administrative 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 Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is
applicable:

 

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(A)      duly completed copies of IRS Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party;

 

(B)        duly completed copies of IRS Form W-8ECI;

 

(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 such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of IRS Form W-8BEN; or

 

(D)       any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower to determine the withholding or deduction
required to be made.

 

(ii)                                  Any Lender that is a “United States
person” within the meaning of Section 7701(a)(30) of the Code shall deliver to
the Borrower and the Administrative Agent executed originals of Internal Revenue
Service Form W-9 or such other documentation or information prescribed by
applicable Laws or reasonably requested by the Borrower or the Administrative
Agent certifying, to the extent such Lender is legally entitled to do so, that
such Lender is not subject to backup withholding tax requirements.

 

(iii)                               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 Administrative
Agent at the time or times prescribed by law and at such time or times
reasonably requested by the Borrower or the Administrative 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 Administrative Agent as may be
necessary for the Borrower and the Administrative 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.  Solely for purposes of this clause (iii), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.

 

(f)                                    Tax Refunds.  If the Administrative Agent
or a Lender determines, in its sole discretion, that it has received a refund of
any Taxes or Other Taxes as to which it has been indemnified by the Borrower or
with respect to which the Borrower has paid additional amounts pursuant to this
Section 5.03, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 5.03 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or
such Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Administrative Agent or such Lender, agrees to
repay

 

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the amount paid over to the Borrower (plus any penalties, interest or other
charges imposed by the relevant Governmental Authority) to the Administrative
Agent or such Lender in the event the Administrative Agent or such Lender is
required to repay such refund to such Governmental Authority.  Notwithstanding
anything to the contrary in this paragraph (f), in no event will the
Administrative Agent or any Lender be required to pay any amount to an
indemnifying party pursuant to this paragraph (f) the payment of which would
place the Administrative Agent or Lender in a less favorable net after-Tax
position than the Administrative Agent or Lender would have been in if the
indemnification payments or additional amounts giving rise to such refund had
never been paid. This Section 5.03 shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.

 

(g)                                 Indemnification of the Administrative
Agent.  Each Lender shall indemnify the Administrative Agent within ten
(10) days after demand therefor, for the full amount of any Excluded Taxes
attributable to such Lender that are payable or paid by the Administrative
Agent, and reasonable expenses arising therefrom or with respect thereto,
whether or not such Excluded 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 any Lender by the Administrative Agent shall
be conclusive absent manifest error.  Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender, as the case may be, under any Loan Document against any amount
due to the Administrative Agent under this paragraph (g). The agreements of this
paragraph (g) shall survive the resignation and/or replacement of the
Administrative Agent.

 

(h)                                 Survival.  Without prejudice to the survival
of any other agreement of the Borrower hereunder, the agreements and obligations
of the Borrower, each Lender and the Issuing Bank contained in this
Section shall survive the payment in full of the Obligations and the termination
of the Commitments until the expiration of the applicable statute of
limitations.

 

Section 5.04                            Mitigation Obligations; Replacement of
Lenders.

 

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

 

(b)                                 Replacement of Lenders.  If (i) any Lender
requests compensation under Section 5.01, (ii) the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, (iii) any Lender becomes a
Defaulting Lender, (iv) any Lender declines to make a Eurodollar Loan under

 

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Section 5.05, or (v) any Lender becomes a Non-Consenting Lender, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, and (ii) such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans and participations in LC Disbursements, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts).

 

Section 5.05                            Illegality.  Notwithstanding any other
provision of this Agreement, in the event that it becomes unlawful for any
Lender or its applicable lending office to honor its obligation to make or
maintain Eurodollar Loans either generally or having a particular Interest
Period hereunder, then (a) such Lender shall promptly notify the Borrower and
the Administrative Agent thereof and such Lender’s obligation to make such
Eurodollar Loans shall be suspended (the “Affected Loans”) until such time as
such Lender may again make and maintain such Eurodollar Loans and (b) all
Affected Loans which would otherwise be made by such Lender shall be made
instead as ABR Loans (and, if such Lender so requests by notice to the Borrower
and the Administrative Agent, all Affected Loans of such Lender then outstanding
shall be automatically converted into ABR Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as (or
converted into) ABR Loans, all payments of principal which would otherwise be
applied to such Lender’s Affected Loans shall be applied instead to its ABR
Loans.

 

ARTICLE VI
CONDITIONS PRECEDENT

 

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

 

(a)                                  The Administrative Agent, the Arranger and
the Lenders shall have received all commitment, facility and agency fees and all
other fees and amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder (including,
without limitation, the costs and expenses for recordation of certain Security
Instruments and the fees and expenses of legal counsel pursuant to
Section 12.03(a)).

 

(b)                                 The Administrative Agent shall have received
a certificate of the Secretary or an Assistant Secretary of each Loan Party
setting forth (i) resolutions of its board of directors (or its equivalent) with
respect to the authorization of such Loan Party to execute and deliver the Loan
Documents to which it is a party and to enter into the Transactions contemplated
in those documents, (ii) the officers of such Loan Party (A) who are authorized
to sign the Loan

 

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Documents to which such Loan Party is a party and (B) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the Transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the Organization Documents of such Loan Party, certified as being true and
complete.  The Administrative Agent and the Lenders may conclusively rely on
such certificate until the Administrative Agent receives notice in writing from
such Loan Party to the contrary.

 

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

 

(d)                                 The Administrative Agent shall have received
a compliance certificate substantially in the form of Exhibit D-1, duly and
properly executed by a Financial Officer and dated as of the Effective Date.

 

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

 

(f)                                    The Administrative Agent shall have
received duly executed Notes payable to the order of each Lender that has
requested a Note in a principal amount equal to its Commitment dated as of the
date hereof.

 

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

 

(i)                                     be reasonably satisfied that the
Security Instruments including amendments to the Security Instruments securing
the Existing Credit Agreement create first priority, perfected Liens (subject
only to Excepted Liens identified in clauses (a) to (d) and (f) of the
definition thereof, but subject to the provisos at the end of such definition)
on (A) at least 80% of the total value of the Upstream Component Properties as
reflected in the Initial Reserve Report, and (B) all of the other material
tangible and intangible Property of the Loan Parties (other than any Property
for which the Administrative Agent determines, in its sole discretion, that the
cost of obtaining a Lien on such Property is excessive in relation to the value
afforded thereby); and

 

(ii)                                  to the extent certificated, have received
certificates, together with undated, blank stock powers for each such
certificate, representing any Equity Interests of any of the Guarantors.

 

(h)                                 The Administrative Agent shall have received
an opinion of (i) Thompson & Knight LLP, special counsel to the Borrower and the
other Loan Parties, and (ii) local counsel in any jurisdictions in which any
Security Instruments are to be recorded as reasonably requested

 

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by the Administrative Agent, in each case, in form and substance satisfactory to
the Administrative Agent.

 

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

 

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

 

(k)                                  The Administrative Agent shall have
received three-year financial projections for the Borrower and its Subsidiaries.

 

(l)                                     The Administrative Agent shall have
received appropriate UCC search certificates reflecting no prior Liens
encumbering the Properties of the Borrower and the Guarantors for each of the
following jurisdictions:  Delaware, Texas, and any other jurisdiction requested
by the Administrative Agent, other than those securing the Existing Credit
Agreement on or prior to the Effective Date or Liens permitted by Section 9.03.

 

(m)                               The Administrative Agent shall have received a
solvency certificate from a Financial Officer, in form and substance
satisfactory to the Administrative Agent and the Lenders, certifying that after
giving effect to the Transactions on the Effective Date, each of (i) the Loan
Parties on an individual basis, and (ii) the Loan Parties taken as a whole, is
Solvent.

 

(n)                                 Each document (including any Uniform
Commercial Code financing statement) required by this Agreement or under law or
reasonably requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Administrative Agent, for the
benefit of the Lenders, a perfected Lien on the Collateral described therein,
prior and superior in right to any other Person (other than Excepted Liens),
shall be in proper form for filing, registration or recordation.

 

(o)                                 Concurrently with the initial Loans
hereunder, the Refinancing shall have occurred.

 

(p)                                 The Borrower shall have issued at least
$250,000,000 of senior notes satisfying the requirement of Section 9.02(h) on or
prior to the Effective Date.

 

(q)                                 No event, development or circumstance has
occurred or exists that has resulted in, or could reasonably be expected to have
a Material Adverse Effect since December 31, 2010.

 

(r)                                    The Credit Parties shall have provided
the documentation and other information reasonably requested by the
Administrative Agent that is required by regulatory authorities under applicable
“know your customer” and anti-money-laundering rules and regulations, including,
without limitation, the Patriot Act.

 

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(s)                                  The Borrower shall have received all
necessary governmental and third-party consents and such consents shall be in
full force and effect.

 

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.

 

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

 

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

 

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

 

(c)                                  The receipt by the Administrative Agent of
a Borrowing Request in accordance with Section 2.03, a request for a Letter of
Credit and related Letter of Credit Agreement in accordance with
Section 2.09(b), or a request for a Swingline Loan pursuant to
Section 2.04(b) as applicable.

 

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

 

ARTICLE VII
REPRESENTATIONS AND WARRANTIES

 

The Borrower (on behalf of itself and its Restricted Subsidiaries), and each
Guarantor by its execution of a Guaranty and Collateral Agreement, represents
and warrants to the Administrative Agent, the Issuing Banks and the Lenders
that:

 

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

 

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

 

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

 

Section 7.04                            Financial Condition; No Material Adverse
Change.

 

(a)                                  The Borrower has heretofore furnished to
the Lenders its consolidated balance sheet and statements of income,
stockholders equity and cash flows (i) contained in its Form 10-K as of and for
the fiscal year ended 2010 filed with the SEC, with a report by Deloitte &
Touche LLP, independent public accountants, and (ii) as contained in its
Form 10-Q as of and for each fiscal quarter and the portion of such fiscal year
ended March 31, 2011 filed with the SEC.  Such Financial Statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited
quarterly Financial Statements.

 

(b)                                 Since December 31, 2010, (i) there has been
no event, development or circumstance that has had or could reasonably be
expected to have a Material Adverse Effect and (ii) the business of the Borrower
and its Restricted Subsidiaries has been conducted only in the ordinary course
consistent with past business practices.

 

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(c)                                  Neither the Borrower nor any Restricted
Subsidiary has on the date hereof any material Indebtedness (including
Disqualified Capital Stock) or any contingent liabilities, off-balance sheet
liabilities or partnerships, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements.

 

(d)                                 The projections regarding the financial
performance of the Borrower and its Consolidated Subsidiaries furnished to the
Lenders have been prepared in good faith by the Borrower and based upon
assumptions believed by the Borrower to be reasonable at the time such
projections were provided (and on the Effective Date in the case of forecasts
provided prior to the Effective Date) (it being recognized by the Lenders,
however, that projections as to future events are not to be viewed as facts and
that actual results during the period(s) covered by such projections may differ
from the projected results and that such differences may be material and that
the Loan Parties make no representation that such projections will be realized).

 

Section 7.05                            Litigation.

 

(a)                                  Except as set forth on Schedule 7.05, there
are no actions, suits, investigations or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Restricted Subsidiary or any
of their Properties (i) as to which there is a reasonable possibility of an
adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, or (ii) that involve any Loan Document or the Transactions.

 

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

 

Section 7.06                            Environmental Matters.  Except for such
matters as set forth on Schedule 7.06 or that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:

 

(a)                                  the Borrower and the Restricted
Subsidiaries and each of their respective Properties and operations thereon are,
and within all applicable statute of limitation periods have been, in compliance
with all applicable Environmental Laws;

 

(b)                                 the Borrower and the Restricted Subsidiaries
have obtained all Environmental Permits required for their respective operations
and each of their Properties, with all such Environmental Permits being
currently in full force and effect, and none of Borrower or the Restricted
Subsidiaries has received any written notice or otherwise has knowledge that any
such existing Environmental Permit will be revoked or that any application for
any new Environmental Permit or renewal of any existing Environmental Permit
will be protested or denied;

 

(c)                                  there are no claims, demands, suits,
orders, inquiries, investigations, requests for information or proceedings
concerning any violation of, or any liability (including as a potentially
responsible party) under, any applicable Environmental Law that is pending or,
to

 

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the Borrower’s knowledge, threatened against the Borrower or any Restricted
Subsidiary or any of their respective Properties or as a result of any
operations at such Properties;

 

(d)                                 none of the Properties of the Borrower or
any Restricted Subsidiary contain or have contained any:  (i) underground
storage tanks; (ii) asbestos-containing materials; (iii) landfills or dumps;
(iv) hazardous waste management units as defined pursuant to RCRA or any
comparable state law; or (v) sites on or nominated for the National Priority
List promulgated pursuant to CERCLA or any state remedial priority list
promulgated or published pursuant to any comparable state law;

 

(e)                                  there has been no Release or, to the
Borrower’s knowledge, threatened Release, of Hazardous Materials at, on, under
or from the Borrower’s or any Restricted Subsidiary’s Properties, there are no
investigations, remediations, abatements, removals, or monitorings of Hazardous
Materials required under applicable Environmental Laws at such Properties and,
to the knowledge of the Borrower, none of such Properties are adversely affected
by any Release or threatened Release of a Hazardous Material originating or
emanating from any other real property;

 

(f)                                    neither the Borrower nor any Restricted
Subsidiary has received any written notice asserting an alleged liability or
obligation under any applicable Environmental Laws with respect to the
investigation, remediation, abatement, removal, or monitoring of any Hazardous
Materials at, under, or Released or threatened to be Released from any real
properties offsite the Borrower’s or any Restricted Subsidiary’s Properties and,
to the Borrower’s knowledge, there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written notice;

 

(g)                                 there has been no exposure of any Person or
property to any Hazardous Materials as a result of or in connection with the
operations and businesses of any of the Borrower’s or the Restricted
Subsidiaries’ Properties that would reasonably be expected to form the basis for
a claim for damages or compensation and, to the Borrower’s knowledge, there are
no conditions or circumstances that would reasonably be expected to result in
the receipt of notice regarding such exposure;

 

(h)                                 the Borrower and the Restricted Subsidiaries
have provided to the Lenders complete and correct copies of all environmental
site assessment reports, investigations, studies, analyses, and correspondence
on environmental matters (including matters relating to any alleged
non-compliance with or liability under Environmental Laws) that are in any of
the Borrower’s or the Restricted Subsidiaries’ possession or control and
relating to their respective Properties or operations thereon.

 

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

 

(a)                                  Each of the Borrower and each Restricted
Subsidiary is in compliance with all Governmental Requirements applicable to it
or its Property and all agreements and other instruments binding upon it or its
Property, and possesses all licenses, permits, franchises, exemptions, approvals
and other governmental authorizations necessary for the ownership of its

 

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Property and the conduct of its business, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

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

 

(c)                                  No Default has occurred and is continuing.

 

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

 

Section 7.09                            Taxes.  Each of the Borrower and its
Restricted Subsidiaries has timely filed or caused to be filed all Tax returns
and reports required to have been filed and has paid or caused to be paid all
Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower or
such Restricted Subsidiary, as applicable, has set aside on its books adequate
reserves in accordance with GAAP or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.  Such
returns accurately reflect in all material respects all liability for taxes of
the Borrower and its Restricted Subsidiaries thereof for the periods covered
thereby.  No Governmental Authority has asserted any Lien or other claim against
the Borrower or its Restricted Subsidiaries with respect to unpaid taxes which
has not been discharged or resolved, except (x) any amount the validity of which
is currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided for on the
books of the relevant Loan Party and (y) Permitted Liens.

 

Section 7.10                            ERISA.

 

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

 

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

 

(c)                                  No Plan or any trust created under any such
Plan has been terminated.  No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any Restricted
Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any
Restricted Subsidiary or any ERISA Affiliate to be incurred with respect to any
Plan.  No ERISA Event with respect to any Plan has occurred.

 

(d)                                 Full payment when due has been made of all
amounts which the Borrower, the Restricted Subsidiaries or any ERISA Affiliate
is required under the terms of each

 

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Plan or applicable law to have paid as contributions to such Plan as of the date
hereof, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan.

 

(e)                                  The actuarial present value of the benefit
liabilities under each Plan does not, as of the end of the Borrower’s most
recently ended fiscal year, exceed the current value of the assets (computed on
a plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities.  The term “actuarial present value of the
benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

 

(f)                                    Neither the Borrower, the Restricted
Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to, or
has at any time in the six-year period preceding the date hereof sponsored,
maintained or contributed to, any Multiemployer Plan.

 

(g)                                 Neither the Borrower, the Restricted
Subsidiaries nor any ERISA Affiliate is required to provide security under
section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.

 

Section 7.11                            Disclosure; No Material Misstatements. 
The Borrower has disclosed to the Administrative Agent and the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Restricted Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.  None of the reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower or
any Restricted Subsidiary to the Administrative Agent or any Lender or any of
their Affiliates in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.  There
is no fact peculiar to the Borrower or any Restricted Subsidiary which could
reasonably be expected to have a Material Adverse Effect or in the future is
reasonably likely to have a Material Adverse Effect and which has not been set
forth in this Agreement or the Loan Documents or the other documents,
certificates and statements furnished to the Administrative Agent or the Lenders
by or on behalf of the Borrower or any Restricted Subsidiary prior to, or on,
the date hereof in connection with the transactions contemplated hereby.  There
are no statements or conclusions in any Reserve 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 projections
concerning volumes attributable to the Upstream Component Properties and related
production and cost estimates contained in each Reserve Report are necessarily
based upon professional opinions, estimates and projections and that the
Borrower and the Restricted Subsidiaries do not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate.

 

Section 7.12                            Insurance.  The Borrower has, and has
caused all of its Restricted Subsidiaries to have, (a) all insurance policies
sufficient for the compliance by each of them with

 

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all material Governmental Requirements and all material agreements and
(b) insurance coverage in at least amounts and against such risk (including,
without limitation, public liability) that are usually insured against by
companies similarly situated and engaged in the same or a similar business for
the assets and operations of the Borrower and its Restricted Subsidiaries.  The
Administrative Agent and the Lenders have been named as additional insureds in
respect of such liability insurance policies, and the Administrative Agent has
been named as loss payee with respect to Property loss insurance.  No mortgaged
building, plant, terminal or other surface property is located in a special
flood hazard area as designated by any Governmental Authority, except to the
extent flood insurance is in force with respect to such portion.

 

Section 7.13                            Restriction on Liens.  Neither the
Borrower nor any of the Restricted Subsidiaries is a party to any material
agreement or arrangement (other than (a) Capital Leases creating Liens and
Purchase Money Indebtedness permitted by Section 9.03(c), but then only on the
Property subject of such Capital Lease or Purchase Money Indebtedness,
(b) customary provisions restricting subletting or assignment of leases or
rights thereunder, (c) restrictions with respect to Property securing
Indebtedness permitted under Section 9.02 pursuant to Liens permitted under
Section 9.03, and (d) temporary restrictions with respect to an Asset Sale
otherwise permitted hereunder pending the consummation of such sale), or subject
to any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to the Administrative Agent and the Lenders
on or in respect of their Properties to secure the Secured Obligations and the
Loan Documents.

 

Section 7.14                            Subsidiaries.  As of the date of this
Agreement, except as set forth on Schedule 7.14, the Borrower has no
Subsidiaries and the Borrower has no Foreign Subsidiaries.  Schedule 7.14
(a) identifies each Subsidiary as either Restricted or Unrestricted and (b) with
respect to each Restricted Subsidiary, states the jurisdiction of organization,
name as listed in the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of organization, and
the location of its principal place of business and chief executive office, and
each Restricted Subsidiary on such Schedule 7.14 is a Wholly-Owned Subsidiary.

 

Section 7.15                            Location of Business and Offices.  The
Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as
listed in the public records of its jurisdiction of organization is Eagle Rock
Energy Partners L.P., and the organizational identification number of the
Borrower in its jurisdiction of organization is 4164963 (or, in each case, as
set forth in a notice delivered to the Administrative Agent pursuant to
Section 8.01(m) in accordance with Section 12.01).  The Borrower’s principal
place of business and chief executive offices are located at the address
specified in Section 12.01 (or as set forth in a notice delivered pursuant to
Section 8.01(m) and Section 12.01(c)).  .

 

Section 7.16                            Properties; Titles, Etc.

 

(a)                                  Each of the Borrower and the Restricted
Subsidiaries has (i) good and defensible title to, valid leasehold interests in,
or valid easements or other property interests in all of its Upstream
Properties, Midstream Properties and other real Property and (ii) good and valid
title to all of its personal Property, in the case of each of (i) and (ii), free
and clear of all Liens except Liens permitted by Section 9.03.

 

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(b)                                 After giving full effect to the Excepted
Liens, the Borrower or the Restricted Subsidiary specified as the owner of the
Upstream Component Properties owns the net interests in Hydrocarbon production
attributable to the Upstream Component Properties as reflected in the most
recently delivered Reserve Report, and the ownership of such Upstream Component
Properties shall not in any material respect obligate the Borrower or such
Restricted Subsidiary to bear the costs and expenses relating to the
maintenance, development and operations of each such Upstream Component Property
in an amount in excess of the working interest of each Upstream Component
Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in the Borrower’s or such
Restricted Subsidiary’s net revenue interest in such Upstream Component
Property.

 

(c)                                  The Borrower and its Restricted
Subsidiaries own the Midstream Properties that generated the Midstream EBITDA
used in the most recent calculation of the Midstream Component as may be
adjusted pursuant to Section 2.08(b)(iii), except for Midstream Properties
Disposed of since the most recent calculation of the Midstream Component that do
not meet the thresholds provided by Section 2.08(b)(iii) with respect to the
Disposition of such Midstream Properties.

 

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

 

(e)                                  The rights and Properties presently owned,
leased or licensed by the Borrower and the Restricted Subsidiaries including,
without limitation, all easements and rights of way, include all rights and
Properties necessary to permit the Borrower and the Restricted Subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the date hereof, except where the failure
to so own, lease or license such rights or Properties could not reasonably be
expected to have a Material Adverse Effect.

 

(f)                                    All of the Properties of the Borrower and
the Restricted Subsidiaries which are reasonably necessary for the operation of
their businesses are in good working condition and are maintained in accordance
with prudent business standards except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

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

 

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production of Hydrocarbons, with such exceptions as could not reasonably be
expected to have a Material Adverse Effect.

 

Section 7.17                            Maintenance of Properties.  Except for
such acts or failures to act as could not be reasonably expected to have a
Material Adverse Effect, the offices, plants, wells, gas processing plants,
platforms, improvements, fixtures, equipment, and other Property (other than
Upstream Properties) owned, leased or used by the Borrower and its Restricted
Subsidiaries in the conduct of their businesses are (i) structurally sound with
no known defects, and (ii) sufficient for the operation of the businesses of the
Borrower and its Restricted Subsidiaries as currently conducted.

 

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

 

Section 7.19                            Marketing of Production.  Except for
Hedging Agreements permitted by Section 9.19, contracts listed and in effect on
the date hereof on Schedule 7.19, and thereafter either disclosed in writing to
the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Restricted Subsidiaries are receiving a price for all Hydrocarbon
production attributable to the Upstream Component Properties sold thereunder
which is computed substantially in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the subject
Property’s delivery capacity), no material agreements exist which are not
cancelable on sixty (60) days notice or less without penalty or detriment for
the sale of Hydrocarbon production attributable to the Upstream Component
Properties (including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that
(a) pertain to the sale of such production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.

 

Section 7.20                            Security Instruments.

 

(a)                                  Guaranty and Collateral Agreement.  The
provisions of the Guaranty and Collateral Agreement are effective to create, in
favor of the Administrative Agent for the benefit of the Secured Parties, a
legal, valid and enforceable Lien on, and security interest in, all of the
Collateral described thereon, and (i) when financing statements and other
filings in appropriate form are filed in the offices specified in the Guaranty
and Collateral Agreement and (ii) upon the taking of possession or control by
the Administrative Agent of the Collateral with respect to which a security
interest may be perfected only by possession or control (which possession or
control shall be given to the Administrative Agent to the extent possession or
control by the Administrative Agent is required by the Guaranty and Collateral
Agreement), the Liens created by the Guaranty and Collateral Agreement shall
constitute fully perfected first priority Liens on, and security interests in,
all right, title and interest of the Loan Parties in the Collateral covered
thereby (other than such Collateral in which a security interest cannot be
perfected by filing,

 

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possession or control under the Uniform Commercial Code as in effect at the
relevant time in the relevant jurisdiction), in each case free of all Liens
other than Excepted Liens, and prior and superior to all other Liens other than
Excepted Liens.

 

(b)                                 Mortgages.  Each Mortgage is effective to
create, in favor of the Administrative Agent (or such other trustee as may be
required or desired under local law) for the benefit of the Secured Parties,
legal, valid and enforceable Liens on, and security interests in, all of the
Mortgaged Property thereunder and the proceeds thereof, subject only to Excepted
Liens, and when the Mortgages are filed in the offices specified on
Schedule 7.20 (or, in the case of any Mortgage executed and delivered after the
date thereof in accordance with the provisions of Section 8.11 and Section 8.14,
when such Mortgage is filed in the appropriate offices), the Mortgages shall
constitute fully perfected first priority Liens on, and security interests in,
all right, title and interest of the Loan Parties in the Mortgaged Property and
the proceeds thereof, in each case prior and superior in right to any other
person, other than Liens permitted by such Mortgage.

 

(c)                                  Valid Liens.  Each Security Instrument
delivered pursuant to Section 8.11 or Section 8.14, upon execution and delivery
thereof, is effective to create in favor of the Administrative Agent, for the
benefit of the Secured Parties, legal, valid and enforceable Liens on, and
security interests in, all of the Collateral thereunder, and when all
appropriate filings or recordings are made in the appropriate offices as may be
required under applicable Governmental Requirements, such Security Instrument
will constitute fully perfected first priority Liens on, and security interests
in, all right, title and interest of the Loan Parties in such Collateral that
can be perfected by such filings or recordings, in each case with no other Liens
except for applicable Excepted Liens.

 

Section 7.21                            Hedging Agreements.  Schedule 7.21, as
of the date hereof, and after the date hereof, each report required to be
delivered by the Borrower pursuant to Section 8.01(e), sets forth, a true and
complete list of all Hedging Agreements of the Borrower and each Restricted
Subsidiary (specifying the category of each Hedging Agreement, which categories
include Upstream Hedges, Midstream Hedges and Interest Rate Hedges), the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net mark to market value thereof, all
credit support agreements relating thereto (including any margin required or
supplied) and the counterparty to each such agreement.

 

Section 7.22                            Use of Loans and Letters of Credit.  The
proceeds of the Loans and the Letters of Credit shall be used to provide working
capital (a) to refinance the Existing Credit Agreement and pay fees and expenses
incurred therewith, (b) for Capital Expenditures and Permitted Acquisitions, and
(c) for general corporate purposes, including distributions permitted under
Section 9.04(d).  The Borrower and its Restricted Subsidiaries are not engaged
principally, or as one of its or their important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying margin stock (within the meaning of Regulation T, U or X of
the Board).  No part of the proceeds of any Loan or Letter of Credit will be
used for any purpose which violates the provisions of Regulations T, U or X of
the Board.  Following the application of any Loan or Letter of Credit, not more
than 25% of the value of the assets of the Borrower and its Restricted
Subsidiaries will be represented by or made up of margin stock.

 

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Section 7.23                            Solvency.  Each Loan Party is Solvent. 
No Loan Party is planning to take any action described in Section 10.01(i) or
Section 10.01(j).

 

Section 7.24                            Anti-Terrorism Laws.

 

(a)                                  The Borrower is not, and to the knowledge
of the Borrower, none of the Borrower’s Affiliates, officers or directors is in
violation of any Governmental Requirement relating to terrorism or money
laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001 (the “Executive Order”), the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, and the Trading
with the Enemy Act, 50 U.S.C. App. 1 et seq., in each case, as amended from time
to time.

 

(b)                                 The Borrower is not, and to the knowledge of
the Borrower, no Affiliate, officer, director, broker or other agent of the
Borrower acting or benefiting in any capacity in connection with the Loans is
any of the following:

 

(i)                                     a Person that is listed in the annex to,
or is otherwise subject to the provisions of, the Executive Order;

 

(ii)                                  a Person owned or controlled by, or acting
for or on behalf of, any Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order;

 

(iii)                               a Person with which any Lender is prohibited
from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)                              a Person that commits, threatens or conspires
to commit or supports “terrorism” as defined in the Executive Order; or

 

(v)                                 a Person that is named as a “specially
designated national and blocked Person” on the most current list published by
the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its
official website or any replacement website or other replacement official
publication of such list.

 

(c)                                  No Loan Party and, to the knowledge of the
Borrower, no broker or other agent of any Loan Party acting in any capacity in
connection with the Loans (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Person described in paragraph (b) above, (ii) deals in, or otherwise engages
in any transaction relating to, any Property or interests in Property blocked
pursuant to the Executive Order, or (iii) engages in or conspires to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

 

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ARTICLE VIII
AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower (on behalf of itself and its Restricted Subsidiaries)
and each Guarantor by its execution of the Guaranty and Collateral Agreement,
covenants and agrees with the Lenders, the Agents and the Issuing Banks that:

 

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

 

(a)                                  Annual Financial Statements.  As soon as
available, but in any event in accordance with then applicable law and not later
than ninety (90) days after the end of each fiscal year of the Borrower, its
audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by Deloitte & Touche LLP, KPMG, LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied; provided, that the timely
filing with the SEC of the Borrower’s annual report on Form 10-K will satisfy
the reporting requirements of this Section 8.01(a).

 

(b)                                 Quarterly Financial Statements.  As soon as
available, but in any event in accordance with then applicable law and not later
than forty-five (45) days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes; provided, that
the timely filing with the SEC of the Borrower’s quarterly reports on Form 10-Q
will satisfy the reporting requirements of this Section 8.01(b).

 

(c)                                  Certificate of Financial Officer —
Compliance.  Concurrently with any delivery of financial statements under
Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in
substantially the form of Exhibit D-2 hereto (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto,
(ii) setting forth reasonably detailed calculations demonstrating compliance
with Section 9.01, (iii) setting forth the calculation of Midstream EBITDA and
the Midstream Component and (iv) stating whether any change in

 

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GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 7.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.

 

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

 

(e)                                  Certificate of Financial Officer — Hedging
Agreements.  Concurrently with the delivery of each Reserve Report hereunder, a
certificate of a Financial Officer, in form and substance satisfactory to the
Administrative Agent, setting forth as of a recent date, a true and complete
list of all Hedging Agreements of the Borrower and each Restricted Subsidiary
(specifying the category of each Hedging Agreement, which categories include
Upstream Hedges, Midstream Hedges and Interest Rate Hedges), the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.21, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.

 

(f)                                    Annual Budget.  As soon as practicable
and in any event no later than thirty (30) days prior to the beginning of each
fiscal year, a consolidated budget for such fiscal year.

 

(g)                                 SEC and Other Filings; Reports to
Shareholders.  Promptly after the same become publicly available, copies of all
material reports, proxy statements and other materials filed by the Borrower or
any Subsidiary with the SEC, or with any national or foreign securities
exchange, or distributed by the Borrower to its shareholders generally, as the
case may be; provided, that the timely filing with the SEC of any such materials
will satisfy the reporting requirements of this Section 8.01(g).

 

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

 

(i)                                     Lists of Purchasers.  Within 30 days of
a written request by the Administrative Agent, a list of all Persons purchasing
Hydrocarbons related to production attributable to the Upstream Component
Properties from the Borrower or any Restricted Subsidiary.

 

(j)                                     Notice of Sales of Borrowing Base
Properties.  In the event the Borrower or any Restricted Subsidiary intends to
Dispose of any Borrowing Base Properties or any Equity Interests in any
Restricted Subsidiary owning Borrowing Base Properties that would trigger a

 

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reduction of the Upstream Component under Section 2.08(a)(v) or a Midstream
Component recalculation under Section 2.08(b)(iii), prior written notice of such
Disposition to the Administrative Agent.

 

(k)                                  Notice of Casualty Events.  Prompt written
notice, and in any event within three (3) Business Days, of the occurrence of
any Casualty Event or the commencement of any action or proceeding that could
reasonably be expected to result in a Casualty Event, in each case, having a
fair market value in excess of $25,000,000.

 

(l)                                     Permitted Refinancing Indebtedness.  In
the event the Borrower intends to refinance any Indebtedness with the proceeds
of Permitted Refinancing Indebtedness as contemplated by Section 9.02(b), prior
written notice of such intended offering therefor, the amount thereof and the
anticipated date of closing, and a copy of the preliminary offering memorandum
(if any) and the final offering memorandum (if any).

 

(m)                               Information Regarding Loan Parties.  Prompt
written notice (and in any event at least ten (10) days prior thereto) of any
change (i) in any Loan Party’s corporate name, (ii) in the location of any Loan
Party’s chief executive office, (iii) in any Loan Party’s identity or corporate
structure or in the jurisdiction in which such Person is incorporated or formed,
(iv) in any Loan Party’s jurisdiction of organization or such Person’s
organizational identification number in such jurisdiction of organization, and
(v) in any Loan Party’s federal taxpayer identification number.

 

(n)                                 Notice of Issuance of Indebtedness.  In the
event the Borrower intends to issue any Indebtedness permitted under
Section 9.02(h), prior written notice of the amount and terms of such
Indebtedness.

 

(o)                                 Notices of Hedging Agreement Terminations. 
Promptly, but in any event within five (5) Business Days, after any Hedge
Unwind, written notice of such Hedge Unwind, identifying the terminated or
off-set Upstream Hedges.

 

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

 

Section 8.02                            Notices of Material Events.  The
Borrower will furnish to the Administrative Agent for further distribution to
each Lender prompt written notice (and in any event within five (5) Business
Days) of the following:

 

(a)                                  the occurrence of any Default;

 

(b)                                 the filing or commencement of, or the threat
in writing of, any action, suit, proceeding, investigation or arbitration by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof not previously disclosed in writing to the
Lenders or any material adverse development in any action, suit, proceeding,
investigation or

 

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arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect;

 

(c)                                  the occurrence of any ERISA Event that,
alone or together with any other ERISA Events that have occurred, could
reasonably be expected to result in liability of the Borrower and its Restricted
Subsidiaries in an aggregate amount exceeding $25,000,000; and

 

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

 

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

 

Section 8.03                            Existence; Conduct of Business.  The
Borrower will, and will cause each Restricted Subsidiary to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, consents, privileges and
franchises material to the conduct of its business and maintain, if necessary,
its qualification to do business in each other jurisdiction in which its
Properties are located or the ownership of its Properties requires such
qualification, except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect; provided that the foregoing shall
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 9.11.

 

Section 8.04                            Payment of Obligations.  The Borrower
will, and will cause each Restricted Subsidiary to, pay its obligations,
including Tax liabilities of the Borrower and all of its Restricted Subsidiaries
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Restricted Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect or result in the seizure or levy of any
Property of the Borrower or any Restricted Subsidiary.

 

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

 

Section 8.06                            Operation and Maintenance of
Properties.  The Borrower, at its own expense, will, and will cause each
Restricted Subsidiary to:

 

(a)                                  operate its Properties or cause such
Properties to be operated in a careful and efficient manner in accordance with
the practices of the industry and in compliance with all applicable contracts
and agreements and in compliance with all Governmental Requirements, including,
without limitation, applicable proration requirements and Environmental Laws,
and all applicable laws, rules and regulations of every other Governmental
Authority from time to time constituted to regulate the development and
operation of its Properties and the production and

 

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sale of Hydrocarbons and other minerals therefrom, except, in each case, where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect;

 

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

 

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

 

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

 

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

 

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

 

Section 8.10                            Environmental Matters.

 

(a)                                  The Borrower shall at its sole expense: 
(i) comply, and shall cause its Properties and operations and each Restricted
Subsidiary and each Restricted Subsidiary’s Properties and operations to comply,
with all applicable Environmental Laws, the breach of which could be reasonably
expected to have a Material Adverse Effect; (ii) not dispose of or otherwise
release, and shall cause each Restricted Subsidiary not to dispose of or
otherwise release, any Hazardous Material on, under, about or from any of the
Borrower’s or its Restricted Subsidiaries’ Properties or any other Property to
the extent caused by the Borrower’s or any of its Restricted Subsidiaries’
operations except in compliance with applicable Environmental Laws, the disposal
or release of which could reasonably be expected to have a Material Adverse

 

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Effect; (iii) timely obtain or file, and shall cause each Restricted Subsidiary
to timely obtain or file, all notices, permits, licenses, exemptions, approvals,
registrations or other authorizations, if any, required under applicable
Environmental Laws to be obtained or filed in connection with the operation or
use of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure
to obtain or file could reasonably be expected to have a Material Adverse
Effect; (iv) promptly commence and diligently prosecute to completion, and shall
cause each Restricted Subsidiary to promptly commence and diligently prosecute
to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other actual or threatened release of any Hazardous Material
on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’
Properties, which failure to commence and diligently prosecute to completion
could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Subsidiary to establish and
implement, such procedures as may be necessary to continuously determine and
assure that the Borrower’s and its Restricted Subsidiaries’ obligations under
this Section 8.10(a) are timely and fully satisfied, which failure to establish
and implement could reasonably be expected to have a Material Adverse Effect.

 

(b)                                 The Borrower will promptly, but in no event
later than five (5) days of the occurrence of a triggering event, notify the
Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority or any threatened demand
or lawsuit by any landowner or other third party against the Borrower or its
Restricted Subsidiaries or their Properties of which the Borrower has knowledge
in connection with any Environmental Laws (excluding routine testing and
corrective action) if the Borrower reasonably anticipates that such action will
result in liability (whether individually or in the aggregate) in excess of
$25,000,000, not fully covered by insurance, subject to normal deductibles.

 

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

 

Section 8.11                            Further Assurances.

 

(a)                                  The Borrower at its sole expense will, and
will cause each Restricted Subsidiary to, promptly execute and deliver to the
Administrative Agent all such other documents, agreements and instruments
reasonably requested by the Administrative Agent to comply with, cure any
defects or accomplish the conditions precedent, covenants and agreements of the
Borrower or any Restricted Subsidiary, as the case may be, in the Loan
Documents, including the Notes, or to further evidence and more fully describe
the Collateral intended as security for the Secured Obligations, or to correct
any material omissions in the Security Instruments, or to state more fully the
obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or the

 

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priority thereof, or to make any recordings, file any notices or obtain any
consents, all as may be reasonably necessary, in the sole discretion of the
Administrative Agent, in connection therewith.

 

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

 

Section 8.12                            Reserve Reports.

 

(a)                                  On or before March 1st and September 1st of
each year, commencing September 1, 2011, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report evaluating the Upstream
Component Properties of the Borrower and its Restricted Subsidiaries as of the
immediately preceding December 31st and June 30th.  The Reserve Report as of
December 31 of each year shall be prepared by one or more Approved Petroleum
Engineers, and the June 30 Reserve Report of each year shall be prepared by or
under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate (provided, that projections
concerning volumes attributable to the Upstream Component Properties and related
production and cost estimates contained in such Reserve Report are necessarily
based upon professional opinions, estimates and projections and such opinions,
estimates and projections may not ultimately prove accurate) and to have been
prepared in accordance with the procedures used in the immediately preceding
December 31 Reserve Report.

 

(b)                                 In the event of an Interim Upstream
Component Redetermination, the Borrower shall furnish to the Administrative
Agent and the Lenders a Reserve Report prepared by or under the supervision of
the chief engineer of the Borrower who shall certify such Reserve Report to be
true and accurate (provided, that projections concerning volumes attributable to
the Upstream Component Properties and related production and cost estimates
contained in such Reserve Report are necessarily based upon professional
opinions, estimates and projections and such opinions, estimates and projections
may not ultimately prove accurate) and to have been prepared in accordance with
the procedures used in the immediately preceding December 31 Reserve Report. 
For any Interim Upstream Component Redetermination requested by the
Administrative Agent or the Borrower pursuant to Section 2.08(a)(ii), the
Borrower shall provide such Reserve Report with an “as of” date as required by
the Administrative Agent as soon as possible, but in any event no later than
thirty (30) days following the receipt of such request.

 

(c)                                  With the delivery of each Reserve Report,
the Borrower shall provide to the Administrative Agent and the Lenders a
certificate from a Responsible Officer certifying that in all material
respects:  (i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct (provided,
that projections concerning volumes attributable to the Upstream Component
Properties and related production and cost estimates contained in such Reserve
Report are necessarily based upon professional opinions, estimates and
projections and such opinions, estimates and projections may not ultimately
prove accurate), (ii) except as set forth on an exhibit to the certificate, on a
net basis

 

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there are no gas imbalances, take or pay or other prepayments in excess of the
volume specified in Section 7.18 with respect to its Oil and Gas Borrowing Base
Properties which would require the Borrower or any Restricted Subsidiary to
deliver Hydrocarbons either generally or produced from such Oil and Gas
Borrowing Base Properties at some future time without then or thereafter
receiving full payment therefor, (iii) none of their Upstream Component
Properties have been sold since the date of the last Upstream Component
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Upstream Component Properties sold and in such
detail as reasonably required by the Administrative Agent, (iv) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the date hereof or the most recently delivered Reserve Report which the
Borrower could reasonably be expected to have been obligated to list on
Schedule 7.19 had such agreement been in effect on the date hereof, and
(v) attached thereto is a schedule of the Upstream Component Properties that are
Mortgaged Properties and demonstrating the percentage of the total value of the
Upstream Component Properties that the value of such Mortgaged Properties
represent in compliance with Section 8.14(a).

 

(d)                                 Concurrently with the delivery of the
Reserve Reports in connection with Section 8.12(a) and (b), the Borrower shall
furnish to the Administrative Agent and the Lenders a report setting forth, for
the period since the last delivery of such information, the volume of production
and sales attributable to production (and the prices at which such sales were
made and the revenues derived from such sales) during such period from the Oil
and Gas Properties, and setting forth the related ad valorem, severance and
production taxes and lease operating expenses attributable thereto and incurred
during such period.

 

Section 8.13                            Title Information.

 

(a)                                  On or before the delivery to the
Administrative Agent and the Lenders of each Reserve Report required by
Section 8.12(a), the Borrower will deliver title information in form and
substance acceptable to the Administrative Agent covering enough of the Upstream
Component Properties that were not included in the immediately preceding Reserve
Report, so that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total value of the Upstream Component
Properties as set forth in such Reserve Report.

 

(b)                                 If the Borrower has provided title
information for additional Upstream Component Properties under Section 8.13(a),
the Borrower shall, within sixty (60) days of notice from the Administrative
Agent that title defects or exceptions exist with respect to such additional
Upstream Component Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, or (ii) deliver title
information for Upstream Component Properties not previously reviewed in form
and substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 80% of
the value of the Upstream Component Properties as set forth in the most recent
Reserve Report.

 

(c)                                  If the Borrower is unable to cure any title
defect requested by the Administrative Agent or the Lenders to be cured within
the 60-day period or the Borrower does

 

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not comply with the requirements to provide acceptable title information
covering 80% of the value of the Upstream Component Properties as set forth in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent shall have the right to exercise the following remedy
in its sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the remedy by
the Administrative Agent.  To the extent that the Administrative Agent are not
satisfied with title to any Upstream Component Property after the 60-day period
has elapsed, such unacceptable Mortgaged Property shall not count towards the
80% requirement, and the Administrative Agent may send a notice to the Borrower
and the Lenders that the then outstanding Upstream Component shall be reduced by
an amount as determined by the Administrative Agent to cause the Borrower to be
in compliance with the requirement to provide acceptable title information on
80% of the value of the Upstream Component Properties as set forth in the most
recent Reserve Report.  This new Upstream Component shall become effective
immediately after receipt of such notice.

 

Section 8.14                            Additional Collateral; Additional
Guarantors.

 

(a)                                  In connection with each Upstream Component
Redetermination, the Borrower shall review the Reserve Report and the list of
current Mortgaged Properties (as described in Section 8.12(c)(iii)) to ascertain
whether the Mortgaged Properties represent at least 80% of the total value of
the Upstream Component Properties as set forth in such Reserve Report after
giving effect to exploration and production activities, acquisitions,
Dispositions and production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Restricted Subsidiaries to, grant, within thirty (30) days of delivery
of the certificate required under Section 8.12(c), to the Administrative Agent
as security for the Secured Obligations a first-priority Lien (provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on additional Upstream Component Properties not already subject to a
Lien of the Security Instruments such that after giving effect thereto, the
Mortgaged Properties will represent at least 80% of such total value.  All such
Liens will be created and perfected by and in accordance with the provisions of
deeds of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.  In order to
comply with the foregoing, if any Restricted Subsidiary places a Lien on its
Upstream Properties and such Restricted Subsidiary is not a Guarantor, then it
shall become a Guarantor and comply with Section 8.14(b).

 

(b)                                 In the event that (i) the Borrower or any
Restricted Subsidiary acquires any Material Domestic Subsidiary, (ii) the
Borrower determines that any Restricted Subsidiary is a Material Domestic
Subsidiary or (iii) any Domestic Subsidiary incurs or guarantees any
Indebtedness, the Borrower shall promptly (and in any event within thirty (30)
days of such acquisition, determination, incurrence or guaranty) cause such
Restricted Subsidiary to guarantee the Secured Obligations pursuant to the
Guaranty and Collateral Agreement.  In connection with any guaranty, the
Borrower shall, or shall cause such Domestic Subsidiary to, (A) execute and
deliver a supplement to the Guaranty and Collateral Agreement executed by such
Domestic Subsidiary, (B) cause the owner of the Equity Interests in such
Domestic Subsidiary to pledge

 

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such Equity Interests (including, without limitation, to the extent
certificated, delivery of original stock certificates evidencing the Equity
Interests of such Domestic Subsidiary, together with an appropriate undated
stock powers for each certificate duly executed in blank by the registered owner
thereof) and (C) execute and deliver such other additional closing documents,
certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.

 

(c)                                  In the event that the Borrower or any
Domestic Subsidiary becomes the owner of a Foreign Subsidiary, then the Borrower
shall promptly, or shall cause such Domestic Subsidiary to promptly (and in any
event within thirty (30) days after such acquisition or formation) (i) execute
and deliver a supplement to the Guaranty and Collateral Agreement, (ii) pledge
66% of all the Equity Interests of such Foreign Subsidiary (including, without
limitation, to the extent certificated, delivery of original stock certificates
evidencing such Equity Interests of such Foreign Subsidiary, together with
appropriate stock powers for each certificate duly executed in blank by the
registered owner thereof), so long as such pledge does not result in adverse tax
consequences to the Borrower or such Domestic Subsidiary, and (iii) execute and
deliver such other additional closing documents, certificates and legal opinions
as shall reasonably be requested by the Administrative Agent.

 

(d)                                 The Borrower will at all times cause the
other material tangible and intangible Property of the Borrower and each
Restricted Subsidiary not covered by clauses (a) through (c) above to be subject
to a Lien pursuant to the Security Instruments; provided, that in the case of a
Permitted Acquisition, the Borrower and the applicable Restricted Subsidiaries
shall have thirty (30) days (subject to extension in the sole discretion of the
Administrative Agent) in which to satisfy this Section 8.14(d); provided
further, that if the Administrative Agent determines, in its sole discretion,
that the cost of obtaining a Lien on any such other material tangible or
intangible Property is excessive in relation to the value afforded thereby, the
Administrative Agent may waive the requirements of this Section 8.14(d) with
respect to such Property.

 

(e)                                  The Liens on such Mortgaged Properties
shall exclude “Buildings” (as defined in 39 C.F.R. § 339.2, as such may be
amended from time to time) except with respect to material Buildings required by
the Administrative Agent to be subject to a Lien, in which case, with respect to
each such material Building (each a “Mortgaged Building”) which is located in a
“flood hazard area,” as indicated on the Flood Insurance Rate Map published by
the Federal Emergency Management Agency (or any successor agency), as such map
may be revised from time to time, Borrower will, upon written notice by
Administrative Agent, obtain flood insurance with respect to such Mortgaged
Building under the National Flood Insurance Program (“NFIP”), if such insurance
is available, in such amount as Administrative Agent may from time to time
reasonably require, not to exceed, however, the maximum coverage available to
Borrower under the NFIP.

 

Section 8.15                            ERISA Compliance.  The Borrower will
promptly furnish and will cause the Restricted Subsidiaries and any ERISA
Affiliate to promptly furnish to the Administrative Agent (a) promptly after the
filing thereof with the United States Secretary of Labor, the Internal Revenue
Service or the PBGC, copies of each annual and other report with respect to each
Plan or any trust created thereunder, (b) immediately upon becoming aware of the
occurrence of any ERISA Event or of any “prohibited transaction,” as described
in section 406 of ERISA or in

 

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section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Restricted Subsidiary or the ERISA Affiliate, as the case may be,
specifying the nature thereof, what action the Borrower, the Restricted
Subsidiary or the ERISA Affiliate is taking or proposes to take with respect
thereto, and, when known, any action taken or proposed by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto, and
(c) immediately upon receipt thereof, copies of any notice of the PBGC’s
intention to terminate or to have a trustee appointed to administer any Plan. 
With respect to each Plan (other than a Multiemployer Plan), the Borrower will,
and will cause each Restricted Subsidiary and ERISA Affiliate to, (i) satisfy in
full and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.

 

Section 8.16                            Unrestricted Subsidiaries.  The
Borrower:

 

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

 

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

 

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

 

ARTICLE IX
NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower (on behalf of itself and its Restricted Subsidiaries)
and each Guarantor by its execution of the Guaranty and Collateral Agreement
covenants and agrees with the Lenders, the Administrative Agent and the Issuing
Banks that:

 

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Section 9.01                            Financial Covenants.

 

(a)                                  Interest Coverage Ratio.  The Borrower will
not, as of the last day of any fiscal quarter, permit the ratio of Consolidated
EBITDA for the period of four (4) fiscal quarters then ending to Consolidated
Interest Expense for such period to be less than 2.50 to 1.00.

 

(b)                                 Total Leverage Ratio.  The Borrower will
not, as of the last day of any fiscal quarter, permit the Total Leverage Ratio
to be greater than 4.50 to 1.00.

 

(c)                                  Current Ratio.  The Borrower will not
permit its ratio of consolidated current assets (including availability under
this Credit Agreement up to the Loan Limit but excluding non-cash assets under
ASC 815) to consolidated current liabilities (excluding non-cash obligations
under ASC 815 and current maturities under this Agreement) to be less than 1.00
to 1.00.

 

(d)                                 Certain Calculations.  With respect to any
period during which (i) a recalculation of Midstream EBITDA has been made
pursuant to Section 2.08(b)(iii) or (ii) an asset acquisition, Permitted
Acquisition, Disposition, or redesignation of a Subsidiary as either an
Unrestricted Subsidiary or a Restricted Subsidiary having , in each case of this
clause (ii), a fair market value in excess of $20,000,000, has occurred (each, a
“Subject Transaction”), for purposes of determining compliance with the
financial covenants set forth in this Section 9.01 and for purposes of
determining Midstream EBITDA as used in Section 2.08(b)(ii), Consolidated EBITDA
shall be calculated with respect to such period on a pro forma basis (including
pro forma adjustments arising out of events which are directly attributable to a
Subject Transaction, are factually supportable and are expected to have a
continuing impact, in each case, determined on a basis consistent with
Article 11 of Regulation S-X promulgated under the Securities Act of 1933 and as
interpreted by the staff of the SEC, which would include cost savings resulting
from head count reduction, closure of facilities and similar restructuring
charges, which pro forma adjustments shall be certified by the chief financial
officer of the Ultimate General Partner) using historical financial statements
(audited, if available) applicable to the subject of such Subject Transaction
and the consolidated financial statements of the Borrower and its Subsidiaries
which shall be reformulated as if such Subject Transaction, and any Indebtedness
incurred or repaid in connection therewith, had been consummated or incurred or
repaid at the beginning of such period (and assuming that such Indebtedness
bears interest during any portion of the applicable measurement period prior to
the relevant acquisition at the weighted average of the interest rates
applicable to outstanding Loans incurred during such period).

 

(e)                                  Material Projects.

 

(i)                                     With respect to any Material Project,
the following adjustments (the “Material Project EBITDA Adjustments”) may be
made, at the Borrower’s discretion, to Consolidated EBITDA:

 

(A)                              not more than 90 days prior to the Commercial
Operation Date of such Material Project (but including the fiscal quarter in
which such Commercial Operation Date occurs) and upon at least 75% completion of
any Material Project supported by fee-based contracts with committed throughput

 

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volumes, a percentage (based on the then-current completion percentage of such
Material Project as of the date of determination) of an amount to be approved by
the Administrative Agent as the projected Consolidated EBITDA attributable to
such Material Project for the first 12-month period following the scheduled
Commercial Operation Date of such Material Project (such amount to be determined
based upon projected revenues from customer contracts, projected revenues that
are determined by the Administrative Agent, in its discretion, to otherwise be
highly probable, the creditworthiness and applicable projected production of the
prospective customers, capital and other costs, operating and administrative
expenses, scheduled Commercial Operation Date, commodity price assumptions and
other factors deemed appropriate by the Administrative Agent), may be added, at
the Borrower’s option, to actual Consolidated EBITDA for the fiscal quarter in
which construction or expansion of such Material Project commences and for each
fiscal quarter thereafter until the Commercial Operation Date of such Material
Project (including the fiscal quarter in which such Commercial Operation Date
occurs, but net of any actual Consolidated EBITDA attributable to such Material
Project following such Commercial Operation Date); provided that if the actual
Commercial Operation Date does not occur by the scheduled Commercial Operation
Date, then the foregoing amount shall be reduced for quarters ending after the
scheduled Commercial Operation Date to (but excluding) the first full quarter
after the actual Commercial Operation Date, by the following percentage amounts
depending on the period of delay (based on the period of actual delay or
then-estimated delay, whichever is longer):  (1) 60 days or less, 0%, (2) longer
than 60 days, but not more than 90 days, 50%, and 3) longer than 90 days, 100%;
and

 

(B)                                beginning with the first full fiscal quarter
following the Commercial Operation Date of such Material Project and for the two
(2) immediately succeeding fiscal quarters, an amount equal to the projected
Consolidated EBITDA attributable to such Material Project for the balance of the
four (4) full fiscal quarter period following such Commercial Operation Date,
may be added, at the Borrower’s option, to actual Consolidated EBITDA for such
fiscal quarters.

 

(ii)                                  Notwithstanding anything else contained in
this Section 9.01(e):

 

(A)                              no Material Project EBITDA Adjustment shall be
allowed with respect to any Material Project unless at least thirty (30) days
prior to the last day of the fiscal quarter for which the Borrower desires to
commence inclusion of such Material Project EBITDA Adjustment in Consolidated
EBITDA with respect to a Material Project (the “Initial Quarter”), the Borrower
shall have delivered to the Administrative Agent written pro forma projections
of Consolidated EBITDA attributable to such Material Project and such other
documentation as the Administrative Agent may reasonably request, all in form
and substance satisfactory to the Administrative Agent,

 

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(B)                                no Material Project EBITDA Adjustment shall
be allowed with respect to any Material Project unless prior to the last day of
the Initial Quarter, the Administrative Agent shall have approved (such approval
not to be unreasonably withheld) such projections and shall have received such
other information and documentation as the Administrative Agent may reasonably
request, all in form and substance satisfactory to the Administrative Agent,

 

(C)                                the aggregate amount of all Material Project
EBITDA Adjustments with respect to a particular Material Project shall not
exceed twenty percent (20%) of the capital cost of such Material Project, and

 

(D)                               the aggregate amount of all Material Project
EBITDA Adjustments during any period shall be limited to ten percent (10%) of
the total actual Consolidated EBITDA for such period (which total actual
Consolidated EBITDA shall be determined without including any Material Project
EBITDA Adjustments).

 

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

 

(a)                                  the Secured Obligations arising under or
secured by the Loan Documents or any guaranty of or suretyship arrangement for
the Secured Obligations arising under the Loan Documents;

 

(b)                                 Indebtedness of the Borrower and its
Restricted Subsidiaries existing on the date hereof that is set forth on
Schedule 9.02, and any Permitted Refinancing Indebtedness in respect thereof;

 

(c)                                  accounts payable and accrued expenses,
liabilities or other obligations to pay the deferred purchase price of Property
or services, from time to time incurred in the ordinary course of business which
are not greater than ninety (90) days past the date of invoice or delinquent or
which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP;

 

(d)                                 Indebtedness (i) under Capital Leases and
(ii) that constitutes Purchase Money Indebtedness; provided that the aggregate
amount of all Indebtedness described in this Section 9.02(d) at any one time
outstanding shall not exceed an amount equal to two and half percent (2.5%) of
Consolidated Tangible Net Worth;

 

(e)                                  Indebtedness associated with bonds or
surety obligations required by Governmental Requirements in connection with the
operation of the Upstream Properties;

 

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

 

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

 

(h)                                 unsecured Indebtedness in respect of a
private placement or public sale of unsecured senior or subordinated notes by
the Borrower and unsecured guarantees of such notes by one or more of the
Guarantors; provided that (i) no Event of Default has occurred and is continuing
or would occur after giving effect to such incurrence, (ii) after giving effect
to the incurrence of such Indebtedness on a pro forma basis, the Borrower shall
be in compliance with all covenants set forth in Section 9.01 as of the date of
incurrence, (iii) the latest maturity date of such Indebtedness shall not be
prior to the ninety-first (91st) day after the Maturity Date and shall not have
a weighted average life to maturity that is shorter than that of the existing
Loans, and (iv) such Indebtedness does not have the benefit of, directly or
indirectly, any covenants and related definitions that are materially more
restrictive than those set forth herein; provided further that upon the
incurrence of such Indebtedness after the date hereof, the Upstream Component in
effect at such time will be reduced at the time of such issuance as provided in
Section 2.08(a)(vi).

 

(i)                                     Indebtedness arising from agreements
providing for indemnification or from guaranties or letters of credit, surety
bonds or performance bonds securing the performance of (but not the payment of
the purchase price by) the Borrower or any Restricted Subsidiary pursuant to
such agreements, in connection with Permitted Acquisitions or Asset Sales by the
Borrower or any of its Restricted Subsidiaries;

 

(j)                                     Indebtedness which may be deemed to
exist pursuant to any guaranty, performance, surety, statutory, appeal or
similar obligations (but not obligations for borrowed money) incurred in the
ordinary course of business;

 

(k)                                  Indebtedness under Treasury Management
Agreements;

 

(l)                                     guaranties by any Loan Party of
Indebtedness of any other Loan Party with respect to Indebtedness otherwise
permitted to be incurred pursuant to this Section 9.02; and

 

(m)                               other Indebtedness not to exceed five percent
(5%) of Consolidated Tangible Net Worth in the aggregate at any one time
outstanding; provided that if such Indebtedness exceeds ten percent (10%) of the
Borrowing Base, upon the incurrence of such Indebtedness, the Borrowing Base
will be redetermined using the procedures for an Interim Upstream Component
Redetermination in accordance with Section 2.08.

 

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

 

(a)                                  Liens securing the payment of any Secured
Obligations pursuant to the Security Instruments;

 

(b)                                 Excepted Liens;

 

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(c)                                  Liens securing Capital Leases and Purchase
Money Indebtedness permitted by Section 9.02(d) but only on the Property under
lease or the Property purchased with such Purchase Money Indebtedness, as
applicable;

 

(d)                                 Liens described on Schedule 9.03;

 

(e)                                  any interest or title of a lessor or
sublessor under any lease of real estate permitted hereunder;

 

(f)                                    Liens solely on any cash earnest money
deposits made by the Borrower or any Restricted Subsidiary in connection with
any letter of intent or purchase agreement permitted hereunder;

 

(g)                                 purported Liens evidenced by the filing of
precautionary UCC financing statements relating solely to operating leases of
personal property entered into in the ordinary course of business;

 

(h)                                 licenses of patents, trademarks and other
intellectual property rights granted by the Borrower or any Restricted
Subsidiary in the ordinary course of business and not interfering in any respect
with the ordinary conduct of the business of the Borrower or any Restricted
Subsidiary;

 

(i)                                     Liens on Property acquired in a
Permitted Acquisition that as of the date of such Permitted Acquisition secure
Hedging Agreements; provided that such Liens shall only be permitted for thirty
(30) days after the date of such Permitted Acquisition; and

 

(j)                                     Liens on Property not constituting
Collateral or Upstream Component Property and not otherwise permitted by the
foregoing clauses of this Section 9.03; provided that the aggregate principal or
face amount of all Indebtedness secured under this Section 9.03(j) shall not
exceed four percent (4%) of Consolidated Tangible Net Worth in the aggregate at
any one time outstanding.

 

Section 9.04                            Restricted Payments.  The Borrower will
not, and will not permit any of its Restricted Subsidiaries to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, return
any capital to its stockholders or make any distribution of its Property to its
Equity Interest holders, except:

 

(a)                                  the Borrower may declare and pay dividends
with respect to its Equity Interests payable solely in additional shares of its
Equity Interests (other than Disqualified Capital Stock);

 

(b)                                 Restricted Subsidiaries may declare and pay
dividends ratably with respect to their Equity Interests;

 

(c)                                  the Borrower may make Restricted Payments
pursuant to and in accordance with equity incentive plans or other benefit plans
for management or employees of the Borrower and its Restricted Subsidiaries;

 

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(d)                                 the Borrower may make cash distributions in
an amount not to exceed “Available Cash” (as such term is defined in the
Partnership Agreement as in effect on the date hereof); provided that
immediately before and after giving effect to such distribution, (i) no
Borrowing Base Deficiency exists and (ii) no Default or Event of Default has
occurred or would be caused by such distribution; and

 

(e)                                  the Borrower and Restricted Subsidiaries
may make Restricted Payments to their equity holders as otherwise permitted
pursuant to clauses (a) through (d) of Section 9.14; provided that immediately
before and after giving effect to such distribution, no Default or Event of
Default has occurred or would be caused by such distribution.

 

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

 

(a)                                  Investments which are disclosed to the
Lenders in Schedule 9.05;

 

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

 

(c)                                  direct obligations of the United States or
any agency thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one (1) year from the date of creation
thereof;

 

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

 

(e)                                  deposits maturing within one (1) year from
the date of creation thereof with, including certificates of deposit issued by,
any Lender or any office located in the United States of any other bank or trust
company which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000 (as of the date of such bank or trust company’s most recent
financial reports) and has a short term deposit rating of no lower than A2 or
P2, as such rating is set forth from time to time, by S&P or Moody’s,
respectively or, in the case of any Foreign Subsidiary, a bank organized in a
jurisdiction in which the Foreign Subsidiary conducts operations having assets
in excess of $500,000,000 (or its equivalent in another currency);

 

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

 

(g)                                 Investments (i) made by the Borrower in or
to the Guarantors, (ii) made by any Restricted Subsidiary in or to the Borrower
or any Guarantor, and (iii) made by the Borrower or any Restricted Subsidiary in
or to all other Domestic Subsidiaries which are not Guarantors in an aggregate
amount at any one time outstanding not to exceed $10,000,000;

 

(h)                                 loans or advances in the ordinary course of
business to employees, officers or directors of the Borrower or any of its
Restricted Subsidiaries, in each case only as permitted by applicable law,
including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to
exceed $1,000,000 in the aggregate at any time;

 

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(i)            Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any Restricted Subsidiary as a result of a bankruptcy
or other insolvency proceeding of the obligor in respect of such debts or upon
the enforcement of any Lien in favor of the Borrower or any of its Restricted
Subsidiaries; provided that the Borrower shall give the Administrative Agent
prompt written notice in the event that the aggregate amount of all Investments
held at any one time under this Section 9.05(i) exceeds $10,000,000;

 

(j)            Investments pursuant to Hedging Agreements otherwise permitted
under this Agreement;

 

(k)           Investments in Unrestricted Subsidiaries, provided that (i) the
aggregate amount of all such Investments at any one time shall not exceed
$25,000,000 (or its equivalent in other currencies as of the date of Investment)
and (ii) the Borrowing Base Utilization Percentage is less than 80% immediately
before and immediately after giving effect such Investment;

 

(l)            Permitted Acquisitions; and

 

(m)          other Investments not to exceed $25,000,000 in the aggregate at any
time.

 

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

 

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

 

(b)           The Borrower may designate, by written notification thereof to the
Administrative Agent, any Restricted Subsidiary, including a newly formed or
newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base
Deficiency would exist and (ii) such designation is deemed to be an Investment
in an Unrestricted Subsidiary in an amount equal to the fair market value as of
the date of such designation of the Borrower’s direct and indirect Equity
Interests in such Subsidiary and such Investment would be permitted to be made
at the time of such designation under Section 9.05(k).  Except as provided in
this Section 9.06(b), no Restricted Subsidiary may be redesignated as an
Unrestricted Subsidiary.

 

(c)           The Borrower may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if, after giving effect to such designation, (i) the
representations and warranties of the Borrower and its Restricted Subsidiaries
contained in each of the Loan Documents are true and correct on and as of such
date as if made on and as of the date of such redesignation (or, if stated to
have been made expressly as of an earlier date, were true and correct as of such
date), (ii) no Default would exist and (iii) the Borrower complies with the
requirements of Section 8.14, Section 8.16 and Section 9.15.

 

Section 9.07         Nature of Business.  The Borrower will not, and will not
permit any Restricted Subsidiary to, engage (directly or indirectly) in any
business other than those

 

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businesses in which the Borrower and its Restricted Subsidiaries are engaged on
the Effective Date (or which are reasonably related thereto or are reasonable
extensions thereof).

 

Section 9.08         Proceeds of Loans.  The Borrower will not permit the
proceeds of the Loans to be used for any purpose other than those permitted by
Section 7.22.  Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulations T, U or X or any other regulation of the Board
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

 

Section 9.09         ERISA Compliance.  The Borrower will not, and will not
permit any Restricted Subsidiary to, at any time:

 

(a)           terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Borrower, a Restricted Subsidiary or any ERISA Affiliate
to the PBGC.

 

(b)           fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Restricted
Subsidiary or any ERISA Affiliate is required to pay as contributions thereto.

 

(c)           permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.

 

(d)           permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, a Restricted Subsidiary or any ERISA Affiliate to exceed the current
value of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities.  The term
“actuarial present value of the benefit liabilities” shall have the meaning
specified in section 4041 of ERISA.

 

(e)           contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any Multiemployer Plan.

 

(f)            acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Borrower or a Restricted Subsidiary or with respect to any ERISA Affiliate
of the Borrower or a Restricted Subsidiary if such Person sponsors, maintains or
contributes to, or has any liability with respect to, (i) any Multiemployer
Plan, or (ii) any other Plan under which the actuarial present value of the
benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan

 

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termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities.

 

(g)           incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.

 

(h)           amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Borrower, a Restricted Subsidiary
or any ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code.

 

Section 9.10         Sale or Discount of Receivables.  Except for receivables
obtained by the Borrower or any Restricted Subsidiary out of the ordinary course
of business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, the Borrower will not, and will not
permit any Restricted Subsidiary to, discount or sell (with or without recourse)
any of its notes receivable or accounts receivable.

 

Section 9.11         Mergers, Etc.  The Borrower will not, and will not permit
any Restricted Subsidiary to, merge into or with or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its Property to any other Person (whether now owned or
hereafter acquired) (any such transaction, a “consolidation”), or liquidate or
dissolve; provided that the Borrower or any Restricted Subsidiary may
participate in a consolidation with any other Person; provided that:

 

(a)           (i) no Default is continuing, (ii) any such consolidation would
not cause a Default hereunder, (iii) if the Borrower consolidates with any
Person, the Borrower shall be the surviving Person (or, so long as no Change in
Control shall have occurred, the surviving entity is a Person organized under
the laws of the United States or any state thereof that expressly assumes in
writing (in form and substance satisfactory to the Administrative Agent) all
obligations and liabilities applicable to it under the Loan Documents), (iv) if
any Restricted Subsidiary consolidates with any Person (other than the Borrower
or another Restricted Subsidiary) and such Restricted Subsidiary is not the
surviving Person, such surviving Person shall expressly assume in writing (in
form and substance satisfactory to the Administrative Agent) all obligations and
liabilities of such Restricted Subsidiary under the Loan Documents and (v) the
Upstream Component will be redetermined using the procedures for an Interim
Upstream Component Redetermination in accordance with Section 2.08 (but shall be
in addition to any Interim Upstream Component Redetermination  provided in
Section 2.08) and the Midstream Component will be recalculated in accordance
with Section 2.08(b)(iii);

 

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

 

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

 

Section 9.12         Sale of Properties.  The Borrower will not, and will not
permit any Restricted Subsidiary to Dispose of any Borrowing Base Property
(other than a Disposition by a Loan Party to another Loan Party), including any
Subsidiary, unless (i) 75% of the consideration received in respect of such
Disposition is cash or cash equivalents, (ii) the consideration received in
respect of such Disposition shall be equal to or greater than the fair market
value of such Property, (iii) if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect, and (iv) no Default or Event of Default shall occur
as a result of such Disposition; provided (A) certain Dispositions of Upstream
Component Properties permitted hereby may, pursuant to Section 2.08(a)(v),
result in a redetermination of the Upstream Component as provided therein and
(B) certain Dispositions of Midstream Component Properties permitted hereby may,
pursuant to Section 2.08(b)(iii), result in a recalculation of the Midstream
Component as provided therein.

 

Section 9.13         Environmental Matters.  The Borrower will not, and will not
permit any Restricted Subsidiary to, cause or permit any of its Property to be
in violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.

 

Section 9.14         Transactions with Shareholders and Affiliates.  The
Borrower will not, and will not permit any Restricted Subsidiary to, enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate (other
than a Loan Party) unless such transactions are otherwise permitted under this
Agreement and are upon fair and reasonable terms no less favorable to it than it
would obtain in a comparable arm’s length transaction with a Person not an
Affiliate; provided, that the foregoing restriction shall not apply to
(a) reasonable and customary fees paid to members of the board of directors (or
similar governing body) of the Borrower and its Restricted Subsidiaries,
(b) compensation arrangements for directors, officers and other employees of the
Borrower and its Restricted Subsidiaries entered into in the ordinary course of
business, (c) transactions approved by the Conflicts Committee, and
(d) transactions described in Schedule 9.14.

 

Section 9.15         Subsidiaries.  The Borrower will not, and will not permit
any Restricted Subsidiary to, create or acquire any additional Restricted
Subsidiary or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary
unless the Borrower complies with Section 8.14(b), Section 8.14(c) and
Section 9.06.  The Borrower shall not, and shall not permit any Restricted
Subsidiary to, sell, assign or otherwise Dispose of any Equity Interests in any
Restricted Subsidiary except in compliance with Section 9.12.  Neither the
Borrower nor any Restricted Subsidiary shall have any Foreign Subsidiaries.

 

Section 9.16         Negative Pledge Agreements; Dividend Restrictions.  The
Borrower will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist

 

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any contract, agreement or understanding (other than (a) this Agreement and the
Security Instruments, (b) restrictions with respect to Property securing
Indebtedness pursuant to Liens permitted under Section 9.03, (c) customary
provisions restricting subletting or assignment of leases or rights thereunder,
and (d) temporary restrictions with respect to an Asset Sale otherwise permitted
hereunder pending the consummation of such sale), which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property in favor of the Administrative Agent and the Lenders or restricts
any Restricted Subsidiary from paying dividends or making distributions to the
Borrower or any Guarantor, or which requires the consent of or notice to other
Persons in connection therewith.

 

Section 9.17         Limitation on Issuance of Equity Interests.  The Borrower
shall not permit any Restricted Subsidiary to issue any Equity Interest
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, any Equity Interest, except for Equity
Interest issued to another Loan Party.  The Borrower and the Restricted
Subsidiaries shall comply with Section 8.11 and Section 8.14 with respect to any
such issued Equity Interests.

 

Section 9.18         Gas Imbalances, Take-or-Pay or Other Prepayments.  The
Borrower will not, and will not permit any Restricted Subsidiary to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Borrowing Base
Properties of the Borrower or any Restricted Subsidiary that would require the
Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future
time without then or thereafter receiving full payment therefor to exceed one
bcf of gas (on an mcf equivalent basis) in the aggregate.

 

Section 9.19         Hedging Agreements.  The Borrower will not, and will not
permit any Restricted Subsidiary to, enter into any Hedging Agreements with any
Person other than (a) Upstream Hedges (i) with an Approved Counterparty and
(ii) the notional volumes for which do not exceed, as of the date such Hedging
Agreement is executed, the greater of (A) 90% of the reasonably anticipated
projected production from proved, developed, producing Upstream Component
Properties for each month during the period during which such Hedging Agreement
is in effect for each of crude oil and natural gas, calculated separately and
(B) 85% (for the first three years after the date such Hedging Agreement is
executed and 75% thereafter) of forecasted production from total proved Upstream
Component Properties for each month during the period during which such Hedging
Agreement is in effect for each of crude oil and natural gas, calculated
separately; provided that the notional volumes of such Upstream Hedges that
constitute commodity puts or floors purchased by the Borrower or any Restricted
Subsidiary shall not be included in the calculations described in this clause
(ii), (b) Midstream Hedges with an Approved Counterparty and that are not
speculative in nature, and (c) Interest Rate Hedges with an Approved
Counterparty and that are not speculative in nature.

 

References in this Section 9.19 to Upstream Component Properties shall include
Upstream Properties anticipated to be acquired by the Borrower pursuant to an
executed purchase agreement, to the extent that such properties represent proved
developed producing properties; provided, that to the extent the Borrower has
entered into Hedging Agreements based upon projected production from Upstream
Properties anticipated to be acquired pursuant to such purchase agreement, and
such purchase agreement is terminated or the Borrower determines that all or a
portion of such acquisition will not occur, the Borrower will, not later than 60
days after

 

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the earliest to occur of such termination, determination, and the date of
entering into such Hedging Agreement, terminate such Hedging Agreements to the
extent of the projected production attributable to the Upstream Properties that
will not be so acquired.

 

Section 9.20         Amendments to Fiscal Year End; Prepayments of Other
Indebtedness.

 

(a)           The Borrower shall not, and shall not permit any Restricted
Subsidiary to, amend or otherwise modify (or permit to be amended or modified)
its Organization Documents in a manner that would be adverse to the Lenders in
any material respect.

 

(b)           The Borrower shall not, and shall not permit any Restricted
Subsidiary to, change the last day of its fiscal year from December 31 of each
year, or the last days of the first three fiscal quarters in each of its fiscal
years from March 31, June 30 and September 30 of each year, respectively.

 

(c)           The Borrower shall not, and shall not permit any Restricted
Subsidiary to, make (or give any notice in respect of) any voluntary or optional
payment or prepayment on or redemption or acquisition for value of, or any
prepayment or redemption as a result of any asset sale, change of control or
similar event of, any outstanding subordinated Indebtedness or other
Indebtedness permitted by Section 9.02(h), except as otherwise permitted by this
Agreement.

 

Section 9.21         Marketing Activities.  The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, engage in marketing activities for
any Hydrocarbons attributable to the Borrowing Base Properties or enter into any
contracts related thereto other than (a) contracts for the sale of Hydrocarbons
attributable to the Upstream Component Properties scheduled or reasonably
estimated to be produced therefrom during the period of such contract,
(b) contracts for the sale of such Hydrocarbons scheduled or reasonably
estimated to be produced from proved Upstream Component Properties of third
parties during the period of such contract associated with the Upstream
Component Properties of the Borrower and its Restricted Subsidiaries that the
Borrower or one of its Restricted Subsidiaries has the right to market pursuant
to joint operating agreements, unitization agreements or other similar contracts
that are usual and customary in the oil and gas business, (c) other contracts
for the purchase and/or sale of such Hydrocarbons of third parties (i) which
have generally offsetting provisions (i.e., corresponding pricing mechanics,
delivery dates and points and volumes) such that no material “position” is taken
and (ii) for which appropriate credit support has been taken to alleviate the
material credit risks of the counterparty thereto, and (d) contracts for the
sale of Hydrocarbons scheduled or reasonably estimated to be received from third
parties for processing by the Borrower or any Restricted Subsidiary.

 

Section 9.22         Anti-Terrorism Law; Anti-Money Laundering.

 

(a)           The Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly, (i) knowingly conduct any business or engage in making
or receiving any contribution of funds, goods or services to or for the benefit
of any Person described in Section 7.24, (ii) knowingly deal in, or otherwise
engage in any transaction relating to, any Property or interests in Property
blocked pursuant to the Executive Order or any other Anti-Terrorism Law,

 

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or (iii) knowingly engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the
Borrower shall deliver to any Lender any certification or other evidence
requested from time to time by such Lender confirming the Borrower’s and the
Subsidiaries’ compliance with this Section 9.22(a)).

 

(b)           The Borrower shall not, and shall not permit any Subsidiary to,
cause or permit any of the funds of the Borrower or any Subsidiary that are used
to repay the Loans to be derived from any unlawful activity with the result that
the making of the Loans would be in violation of any Governmental Regulation.

 

Section 9.23         Embargoed Person.  The Borrower shall not, and shall not
permit any Subsidiary to, permit (a) any of the funds or Properties of the
Borrower or any Subsidiary that are used to repay the Loans to constitute
Property of, or be beneficially owned directly or indirectly by, any Person
subject to sanctions or trade restrictions under United States law (“Embargoed
Person” or “Embargoed Persons”) that is identified on (i) the “List of Specially
Designated Nationals and Blocked Persons” maintained by OFAC and/or on any other
similar list maintained by OFAC pursuant to any authorizing statute including,
but not limited to, the International Emergency Economic Powers Act, 50 U.S.C.
§§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and
any Executive Order or Governmental Regulation promulgated thereunder, with the
result that the investment in the Borrower or any Subsidiary (whether directly
or indirectly) is prohibited by a Governmental Regulation, or the Loans would be
in violation of a Governmental Regulation, or (ii) the Executive Order, any
related enabling legislation or any other similar Executive Orders or (b) any
Embargoed Person to have any direct or indirect interest, of any nature
whatsoever in the Borrower or any Subsidiary, with the result that the
investment in the Borrower or any Subsidiary (whether directly or indirectly) is
prohibited by a Governmental Regulation or the Loans are in violation of a
Governmental Regulation.

 

ARTICLE X
EVENTS OF DEFAULT; REMEDIES

 

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

 

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

 

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

 

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

 

(d)           The Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 8.02(a),
Section 8.03 (solely with respect to legal existence), Section 8.14 or
Article IX.

 

(e)           The Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 8.01(a),
Section 8.01(b) or Section 8.01(c), and such failure shall continue unremedied
for a period of fifteen (15) days.

 

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

 

(g)           The Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable, and
any grace or cure period related thereto shall have expired.

 

(h)           Any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits, subject to any applicable grace or cure period, the holder or holders
of such Material Indebtedness or any trustee or agent on its or their behalf to
cause such Material Indebtedness to become due, or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or require the Borrower or any Restricted Subsidiary to make
an offer in respect thereof.

 

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

 

(j)            The Borrower or any Restricted Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in

 

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effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in Section 10.01(i),
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Restricted
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing; or any
stockholder of the Borrower shall make any request or take any action for the
purpose of calling a meeting of the stockholders of the Borrower to consider a
resolution to dissolve and wind-up the Borrower’s affairs.

 

(k)           (i) One or more judgments for the payment of money in an aggregate
amount in excess of $25,000,000 (to the extent not covered by independent third
party insurance provided by insurers of the highest claims paying rating or
financial strength as to which the insurer does not dispute coverage and is not
subject to an insolvency proceeding) or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, shall be rendered against the
Borrower, any Restricted Subsidiary or any combination thereof and the same
shall remain undischarged for a period of thirty (30) consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor or judgment creditors to attach or levy upon any
assets of the Borrower or any Restricted Subsidiary to enforce any such
judgment.

 

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

 

(m)          An ERISA Event shall have occurred that when taken together with
all other ERISA Events that have occurred, results in liability of the Borrower
and its Restricted Subsidiaries in an aggregate amount exceeding $25,000,000 in
the aggregate.

 

(n)           A Change in Control shall occur.

 

Section 10.02       Remedies.

 

(a)           In the case of an Event of Default other than one described in
Section 10.01(i) or Section 10.01(j), at any time thereafter during the
continuance of such Event of Default, the Administrative Agent may, and at the
request of the Majority Lenders, shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times:  (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the

 

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Borrower and the Guarantors accrued hereunder and under the Loan Documents
(including, without limitation, the payment of cash collateral to secure the LC
Exposure as provided in Section 2.09(j)), shall become due and payable
immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(i) or Section 10.01(j), the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and the other obligations of
the Borrower and the Guarantors accrued hereunder and under the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.09(j)), shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower and each Guarantor.

 

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

 

(c)           All proceeds realized from the liquidation or other Disposition of
Collateral or otherwise received after maturity of the Loans, whether by
acceleration or otherwise, shall be applied:

 

(i)            first, to payment or reimbursement of that portion of the Secured
Obligations constituting fees, expenses and indemnities payable to the
Administrative Agent in its capacity as such;

 

(ii)           second, pro rata to payment or reimbursement of that portion of
the Secured Obligations constituting fees, expenses and indemnities payable to
the Lenders;

 

(iii)          third, pro rata to payment of accrued interest on the Loans;

 

(iv)          fourth, pro rata to payment of (A) principal outstanding on the
Loans, (B) Secured Obligations referred to in clause (b) of the definition of
Secured Obligations owing in respect of Secured Hedging Agreements, (C) Secured
Obligations referred to in clause (c) of the definition of Secured Obligations
owing in respect of Secured Treasury Management Agreements, and (D) cash
collateral to be held by the Administrative Agent to secure the LC Exposure;

 

(v)           fifth, pro rata to any other Secured Obligations; and

 

(vi)          sixth, any excess, after all of the Secured Obligations shall have
been paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

 

ARTICLE XI
THE AGENTS

 

Section 11.01       Appointment; Powers.  Each of the Lenders and each Issuing
Bank hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are

 

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delegated to the Administrative Agent by the terms hereof and the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.

 

Section 11.02       Duties and Obligations of Administrative Agent.  The
Administrative Agent shall have no duties or obligations except those expressly
set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term “agent” herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in Article VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower and its Subsidiaries or any other
obligor or guarantor, or (vii) any failure by the Borrower or any other Person
(other than itself) to perform any of its obligations hereunder or under any
other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein.  For
purposes of determining compliance with the conditions specified in Article VI,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the
Administrative Agent shall have received written notice from such Lender prior
to the proposed closing date specifying its objection thereto.

 

Section 11.03       Action by Administrative Agent.  The Administrative Agent
shall have no duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Majority Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) and in all cases the Administrative
Agent shall be

 

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

 

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

 

Section 11.05       Sub-agents.  The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this Article XI shall apply to any such sub-

 

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agent and to the Related Parties of the Administrative Agent and any such
sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

 

Section 11.06       Resignation or Removal of Administrative Agent.  Subject to
the appointment and acceptance of a successor Administrative Agent as provided
in this Section 11.06, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Banks and the Borrower.  Upon any such
resignation, the Majority Lenders shall have the right, in consultation with the
Borrower, to appoint a successor.  If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within thirty
(30) days after the retiring Administrative Agent gives notice of its
resignation or removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Banks,
appoint a successor Administrative Agent which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank.  Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder.  The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor.  After the Administrative Agent’s resignation hereunder, the
provisions of this Article XI and Section 12.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

 

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

 

Section 11.08       No Reliance.  Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, any other
Agent, any Issuing Bank or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and each other Loan Document to which it
is a party.  Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent, any other Agent, any Issuing
Bank or any other Lender and based on such documents and information as it shall
from time to time deem appropriate, continue to make its own decisions in taking
or not taking action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished hereunder or
thereunder.  The Agents shall not be required to keep themselves informed as to
the performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries.  Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, neither the Agents nor the Arranger shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs,

 

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financial condition or business of the Borrower (or any of its Affiliates) which
may come into the possession of such Agent or Arranger or any of its
Affiliates.  In this regard, each Lender acknowledges that Vinson & Elkins
L.L.P. is acting in this transaction as special counsel to the Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document.  Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

 

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

 

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

 

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

 

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

 

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

 

Section 11.10       Authority of Administrative Agent to Release Collateral and
Liens.  Each Lender and each Issuing Bank hereby authorizes the Administrative
Agent to release any Collateral that is permitted to be sold or released
pursuant to the terms of the Loan Documents.  Each Lender and each Issuing Bank
hereby authorizes the Administrative Agent to execute and deliver to the
Borrower, at the Borrower’s sole cost and expense, any and all releases of
Liens, termination statements, assignments or other documents reasonably
requested by the Borrower in

 

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connection with any Disposition of Property to the extent such Disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents.

 

Section 11.11       The Arranger, the Documentation Agent and the Co-Syndication
Agents.  The Arranger, the Documentation Agent and the Co-Syndication Agents
shall have no duties, responsibilities or liabilities under this Agreement and
the other Loan Documents other than their duties, responsibilities and
liabilities in their capacity as Lenders hereunder.  No Arranger, Documentation
Agent or Co-Syndication Agent shall have or be deemed to have any fiduciary
relationship with any Lender.

 

ARTICLE XII
MISCELLANEOUS

 

Section 12.01       Notices.

 

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

 

(i)            if to the Borrower, to it at the following:

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Jeff Wood

Phone:  281-408-1203

Fax:  281-715-4157

Email:  jeff.wood@eaglerockenergy.com

 

with a copy to:

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Charles C. Boettcher

Phone:  (281) 408-1260

Fax:  (281) 715-4142

Email:  c.boettcher@eaglerockenergy.com

 

(ii)           if to the Administrative Agent or the Issuing Bank, as follows:

 

Wells Fargo Bank, National Association

1000 Louisiana Street, 9th Floor

Houston, TX 77002

Attention: Michael Real

 

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Phone: (713) 319-1914

Fax: (713) 319-1925

Email: realm@wellsfargo.com

 

with a copy to:

 

Wells Fargo Bank, National Association

1525 West W.T. Harris Blvd - 1B1

Mailcode: MACD1109-019

Charlotte, NC 28262

Attention: Agency Services

Fax: (704) 590-2782

Email: agencyservices.requests@wachovia.com

 

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

 

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

 

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

 

Section 12.02       Waivers; Amendments.

 

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

 

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of a Letter of Credit shall not be construed as a waiver of any Default,
regardless of whether the Administrative Agent, any Lender or any Issuing Bank
may have had notice or knowledge of such Default at the time.

 

(b)           Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall
(i) increase the Commitment of any Lender without the written consent of such
Lender, (ii) increase the Upstream Component without the written consent (or
deemed consent pursuant to Section 2.08(a)(iii)(C)) of each Lender, decrease or
maintain the Upstream Component without the consent (or deemed consent pursuant
to Section 2.08(a)(iii)(C)) of the Required Lenders, or modify in any manner
Section 2.08 without the consent of each Lender, (iii) change the definition of
“Midstream Component” in a manner that would have the direct effect of
increasing the Borrowing Base without the consent of each Lender; (iv) reduce
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, or reduce any other
Secured Obligations hereunder or under any other Loan Document, without the
written consent of each Lender affected thereby, (v) postpone the scheduled date
of payment or prepayment of the principal amount of any Loan or LC Disbursement,
or any interest thereon, or any fees payable hereunder, or any other Secured
Obligations hereunder or under any other Loan Document, or reduce the amount of,
waive or excuse any such payment, or postpone or extend the Termination Date
without the written consent of each Lender affected thereby, (vi) change
Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (vii) waive or amend Section 8.14 or change the definition of the terms
“Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or
“Subsidiary”, without the written consent of each Lender, (viii) release any
Guarantor (except as set forth in the Guaranty and Collateral Agreement),
release all or substantially all of the Collateral (other than as provided in
Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less
than 80%, without the written consent of each Lender, or (ix) change any of the
provisions of this Section 12.02(b) or the definitions of “Required Lenders” or
“Majority Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, any Issuing Bank or the
Swingline Lender hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent, such Issuing Bank or the Swingline
Lender as the case may be.  Notwithstanding the foregoing, (A) any supplement to
Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders, (B) 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 or the principal thereof reduced or
forgiven without the consent of such Lender, except as provided in
Section 2.07(a)(iv) and (C) the provisions of clause (B) may not be amended
without the consent of each Lender (including any Defaulting Lender).

 

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Section 12.03       Expenses, Indemnity; Damage Waiver.

 

(a)           The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of one counsel for
the Administrative Agent and, if necessary, of one local counsel to the Lenders
in each necessary jurisdiction retained by the Administrative Agent and other
outside consultants for the Administrative Agent, the reasonable travel,
photocopy, mailing, courier, telephone and other similar expenses, and the cost
of environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by the Administrative Agent in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by any
Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder, (iv) upon the
occurrence and during the continuance of an Event of Default, all out-of-pocket
expenses incurred by any Agent, any Issuing Bank, the Swingline Lender or any
Lender, including the reasonable fees, charges and disbursements of any counsel,
in connection with the enforcement or protection of its rights in connection
with this Agreement or any other Loan Document, including its rights under this
Section 12.03, or in connection with the Loans made or Letters of Credit issued
hereunder, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit; provided, that to the extent that the costs and
expenses referred to in this clause (iv) consist of fees, charges and
disbursements of counsel, the Borrower shall be obligated to pay such fees,
costs and expenses for only one counsel to Administrative Agent and for only on
counsel acting for all Lenders (other than Administrative Agent) (absent a
conflict of interest, in which case the Lenders may engage and be reimbursed for
additional counsel to the affected Lenders similarly situated, taken as a whole.

 

(b)           THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH
ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF
ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR
DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR
INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO
OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS

 

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CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN
DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT,
(iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR
COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS
OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION
THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS
THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY AN ISSUING BANK TO
HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED
IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH
LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT
NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION
OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER ASPECT OF THE
LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE
LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,
DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE
BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR
ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY
ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO
ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND

 

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OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES (i) ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE, OR MATERIAL BREACH IN BAD
FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR (ii) ARISES SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS NOT
INVOLVING (A) AN ACT OR OMISSION OF OR A BREACH OF THE LOAN DOCUMENTS BY THE
BORROWER OR ANY RELATED PARTIES OR (B) A CLAIM AGAINST THE ADMINISTRATIVE AGENT,
SWINGLINE LENDER OR ISSUING BANK IN SUCH CAPACITY.

 

(c)           To the extent that the Borrower fails to pay any amount required
to be paid by it to the Agents, the Arranger, any Issuing Bank or the Swingline
Lender under Section 12.03(a) or (b), but without affecting such payment
obligations of the Borrower, each Lender severally agrees to pay to such Agents,
Arranger, Issuing Bank, Swingline Lender, as the case may be, such Lender’s
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against such Agent, Arranger, Issuing Bank or Swingline Lender in its capacity
as such.

 

(d)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.

 

(e)           All amounts due under this Section 12.03 shall be payable upon
written demand therefor.

 

Section 12.04       Assignments and Participations.

 

(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this

 

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Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Banks and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(iii)          Subject to Section 12.04(b)(iv) and the acceptance and recording
thereof, from and after the effective date specified in each Assignment and
Assumption

 

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

 

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

 

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

 

(c)           (i)            Any Lender may, without the consent of the
Borrower, the Administrative Agent or any Issuing Bank, sell participations to
one or more banks or other entities (a “Participant”) in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative Agent,
the Issuing Banks and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant.  In
addition, such

 

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agreement must provide that the Participant be bound by the provisions of
Section 12.03.  Subject to Section 12.04(c)(ii), the Borrower agrees that each
Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and
Section 5.03 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.04(b).  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 12.08 as
though it were a Lender, provided that such Participant agrees to be subject to
Section 4.01(c) as though it were a Lender.

 

(ii)           A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower’s prior written consent.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.03 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 5.03(e) as though it were a Lender.  Each Lender that sells
a participation shall, acting solely for this purpose as an agent of the
Borrower, maintain a register on which it enters the name and address of each
Participant in such Lender’s Loans and the principal amounts (and stated
interest) of each such Participant’s interest in such Lender’s 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 its
Participant Register to any Person (including the identity of any Participant or
any information relating to a Participant’s interest in such Lender’s
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.103-1(c) of the Treasury regulations.  The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person whose name is recorded in such Lender’s
Participant Register as the owner of such participation for all purposes of this
Agreement notwithstanding any notice to the contrary.  For the avoidance of
doubt, the Administrative Agent (in its capacity as Administrative Agent) shall
have no responsibility for maintaining a Participant Register.

 

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

 

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

 

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Section 12.05       Survival; Revival; Reinstatement.

 

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

 

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

 

Section 12.06       Counterparts; Integration; Effectiveness.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO
THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR,
CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE
STATE WHERE SUCH LENDER IS LOCATED.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF

 

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FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING
JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

 

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

 

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

 

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

 

Section 12.11       Confidentiality.  Each of the Administrative Agent, the
Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement or any other
Loan

 

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Document, (e) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 12.11, to (i) any assignee of or Participant in,
or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty
(or its advisors) to any Hedging Agreement relating to the Borrower and its
obligations, (g) with the consent of the Borrower, or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 12.11 or (ii) becomes available to the Administrative Agent, any
Issuing Bank or any Lender on a nonconfidential basis from a source other than
the Borrower.  For the purposes of this Section 12.11, “Information” means all
information received from the Borrower or any Restricted Subsidiary relating to
the Borrower or any Restricted Subsidiary and their businesses, other than any
such information that is available to the Administrative Agent, any Issuing Bank
or any Lender on a nonconfidential basis prior to disclosure by the Borrower or
a Restricted Subsidiary; provided that, in the case of information received from
the Borrower or any Restricted Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any
Person required to maintain the confidentiality of Information as provided in
this Section 12.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Section 12.12       Interest Rate Limitation.  It is the intention of the
parties hereto that each Lender shall conform strictly to usury laws applicable
to it.  Accordingly, if the Transactions contemplated hereby would be usurious
as to any Lender under laws applicable to it (including the laws of the United
States of America or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Secured Obligations, it is agreed as follows:  (a) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Loans shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Secured Obligations (or, to the extent that the principal amount of the
Secured Obligations shall have been or would thereby be paid in full, refunded
by such Lender to the Borrower); and (b) in the event that the maturity of the
Loans is accelerated by reason of an election of the holder thereof resulting
from any Event of Default under this Agreement or otherwise, or in the event of
any required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Secured Obligations (or, to the extent that the principal amount of the
Secured Obligations shall have been or would thereby be paid in full, refunded
by such Lender to the Borrower).  All sums paid or agreed to be paid to any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by law applicable to such Lender, be amortized, prorated,
allocated and spread throughout the stated term of the

 

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Loans until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law.  If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.

 

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

 

Section 12.14       Collateral Matters; Hedging Agreements; Treasury Management
Agreements.  Notwithstanding anything to the contrary contained herein, the
terms and provisions of this Agreement shall not apply to any Hedging Agreements
or Treasury Management Agreements, except to the extent necessary for all
Secured Hedging Agreements and Secured Treasury Management Agreements to be
secured by the Security Instruments on a pari passu basis with other
Indebtedness and for the proceeds from the Security Instruments to be applied as
set forth in Section 10.02(c) hereof.  No Lender or Affiliate of a Lender shall
have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Secured Hedging Agreements or Secured
Treasury Management Agreements.

 

Section 12.15       No Third Party Beneficiaries.  This Agreement, the other
Loan Documents, and the agreement of the Lenders to make Loans and the Issuing
Banks to issue, amend, renew or extend Letters of Credit hereunder are solely
for the benefit of the Borrower,

 

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and no other Person (including, without limitation, any Subsidiary of the
Borrower, any obligor, contractor, subcontractor, supplier or materialsman)
shall have any rights, claims, remedies or privileges hereunder or under any
other Loan Document against the Administrative Agent, any other Agent, any
Issuing Bank or any Lender for any reason whatsoever.  There are no third party
beneficiaries.

 

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

 

Section 12.17       Existing Credit Agreement.  On the date of this Agreement,
the Existing Credit Agreement shall be amended and restated in its entirety by
this Agreement, and the Existing Credit Agreement shall be replaced hereby;
provided that the Borrower, the Administrative Agent and the Lenders agree that
on the date of the initial funding of Loans hereunder, the loans and other
Indebtedness of the Borrower under the Existing Credit Agreement shall be
renewed, rearranged, modified and extended with the proceeds of the initial
funding and the “Commitments” of the lenders under the Existing Credit Agreement
shall be superseded by this Agreement and terminated.  This Agreement is not in
any way intended to constitute a novation of the obligations and liabilities
existing under the Existing Credit Agreement or evidence payment of all or any
portion of such obligations and liabilities.  The terms and conditions of this
Agreement and the Administrative Agent’s, the Lenders’ and the Issuing Banks’
rights and remedies under this Agreement and the other Loan Documents shall
apply to all of the Indebtedness incurred under the Existing Credit Agreement
and in respect of the Existing Letters of Credit.  The undersigned hereby waive
(i) any right to receive any notice of such termination,  (ii) any right to
receive any notice of prepayment of amounts owed under the Existing Credit
Agreement, and (iii) any right to receive compensation under Section 5.02 of the
Existing Credit Agreement in respect of Eurodollar Loans outstanding under the
Existing Credit Agreement resulting from such rearrangement.  Each Lender that
was a party to the Existing Credit Agreement hereby agrees to return to the
Borrower, with reasonable promptness, any promissory note delivered by the
Borrower to such Lender in connection with the Existing Credit Agreement.

 

Section 12.18       No Fiduciary Duty.  Each Lender and their Affiliates
(collectively, solely for purposes of this paragraph, the “Lenders”), may have
economic interests that conflict with those of the Loan Parties, their
stockholders and/or their affiliates.  The Loan Parties acknowledge and agree
that (i) the transactions contemplated by the Loan Documents (including the
exercise of rights and remedies hereunder and thereunder) are arm’s-length
commercial transactions between the Lenders, on the one hand, and the Loan
Parties, on the other, and (ii) in connection therewith and with the process
leading thereto, (x) no Lender has assumed an advisory or fiduciary
responsibility in favor of any Loan Party, its stockholders or its affiliates
with respect to the transactions contemplated hereby (or the exercise of rights
or remedies with respect thereto) or the process leading thereto (irrespective
of whether any Lender has advised, is currently advising or will advise any Loan
Party, its stockholders or its Affiliates on other matters) or any other
obligation to any Loan Party except the obligations expressly set forth in

 

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the Loan Documents and (y) each Lender is acting solely as principal and not as
the agent or fiduciary of any Loan Party, its management, stockholders,
creditors or any other Person.  Each Loan Party acknowledges and agrees that it
has consulted its own legal and financial advisors to the extent it deemed
appropriate and that it is responsible for making its own independent judgment
with respect to such transactions and the process leading thereto.  Each Loan
Party agrees that it will not claim that any Lender has rendered advisory
services of any nature or respect, or owes a fiduciary or similar duty to such
Loan Party, in connection with such transaction or the process leading thereto.

 

[SIGNATURES BEGIN NEXT PAGE]

 

126

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

 

BORROWER:

EAGLE ROCK ENERGY PARTNERS, L.P.

 

By:  Eagle Rock Energy GP, L.P.

 

By:  Eagle Rock Energy G&P, LLC

 

 

 

 

 

 

By:

/s/ Jeffrey P. Wood

 

 

Name:

Jeffrey P. Wood

 

 

Title:

Senior Vice President & Chief Financial Officer

 

Signature Page to Credit Agreement

 

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ADMINISTRATIVE AGENT and LENDER

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent and Lender

 

 

 

 

 

By:

/s/ Michael Real

 

Name:

Michael Real

 

Title:

Director

 

Signature Page to Credit Agreement

 

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DOCUMENTATION AGENT and LENDER

BNP PARIBAS,

as Documentation Agent and Lender

 

 

 

 

 

By:

/s/ Andrew Ostrov

 

Name:

Andrew Ostrov

 

Title:

Director

 

 

 

 

 

BNP PARIBAS,

as Documentation Agent and Lender

 

 

 

 

 

By:

/s/ Rick Hawthorne

 

Name:

Rick Hawthorne

 

Title:

Director

 

Signature Page to Credit Agreement

 

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CO-SYNDICATION AGENT and LENDER

THE ROYAL BANK OF SCOTLAND plc,

 

as Co-Syndication Agent and Lender

 

 

 

 

 

By:

/s/ Sanjay Remond

 

Name:

Sanjay Remond

 

Title:

Authorised Signatory

 

Signature Page to Credit Agreement

 

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 CO-SYNDICATION AGENT and LENDER

BANK OF AMERICA, N.A.,

 

as Co-Syndication Agent and Lender

 

 

 

 

 

By:

/s/ Christopher Renyi

 

Name:

Christopher Renyi

 

Title:

Vice President

 

Signature Page to Credit Agreement

 

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LENDER

COMPASS BANK,

 

as Lender

 

 

 

 

 

By:

/s/ Greg Determann

 

Name:

Greg Determann

 

Title:

Senior Vice President

 

Signature Page to Credit Agreement

 

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LENDER

CITIBANK, N.A.,

 

as Lender

 

 

 

 

 

By:

/s/ John F. Miller

 

Name:

John F. Miller

 

Title:

Attorney-in-fact

 

Signature Page to Credit Agreement

 

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LENDER

COMERICA BANK,

 

as Lender

 

 

 

 

 

By:

/s/ Justin Crawford

 

Name:

Justin Crawford

 

Title:

Vice President

 

Signature Page to Credit Agreement

 

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LENDER

ING CAPITAL, LLC,

 

as Lender

 

 

 

 

 

By:

/s/ Charles Hall

 

Name:

Charles Hall

 

Title:

Managing Director

 

Signature Page to Credit Agreement

 

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LENDER

ROYAL BANK OF CANADA,

 

as Lender

 

 

 

 

 

By:

/s/ Jason S. York

 

Name:

Jason S. York

 

Title:

Authorized Signatory

 

Signature Page to Credit Agreement

 

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LENDER

REGIONS BANK,

 

as Lender

 

 

 

 

 

By:

/s/ Kelly L. Elmore III

 

Name:

Kelly L. Elmore III

 

Title:

Senior Vice President

 

Signature Page to Credit Agreement

 

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LENDER

THE BANK OF NOVA SCOTIA,

 

as Lender

 

 

 

 

 

By:

/s/ John Frazell

 

Name:

John Frazell

 

Title:

Director

 

Signature Page to Credit Agreement

 

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LENDER

UBS LOAN FINANCE LLC,

 

as Lender

 

 

 

 

 

By:

/s/ Irja R. Otsa

 

Name:

Irja R. Otsa

 

Title:

Associate Director

 

 

 

 

 

 

 

By:

/s/ April Varner-Nanton

 

Name:

April Varner-Nanton

 

Title:

Director

 

Signature Page to Credit Agreement

 

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LENDER

CAPITAL ONE, N.A.,

 

as Lender

 

 

 

 

 

By:

/s/ Matthew L. Molero

 

Name:

Matthew L. Molero

 

Title:

Vice President

 

Signature Page to Credit Agreement

 

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LENDER

U.S. BANK NATIONAL ASSOCIATION,

 

as Lender

 

 

 

 

 

By:

/s/ Justin M. Alexander

 

Name:

Justin M. Alexander

 

Title:

Vice President

 

Signature Page to Credit Agreement

 

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LENDER

GOLDMAN SACHS LENDING PARTNERS LLC,

 

as Lender

 

 

 

 

 

By:

/s/ Mark Walton

 

Name:

Mark Walton

 

Title:

Authorized Signatory

 

Signature Page to Credit Agreement

 

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Annex I

 

NAME OF LENDER

 

APPLICABLE PERCENTAGE

 

COMMITMENT

 

Wells Fargo Bank, N.A.

 

11.1111111111111000

%

$

75,000,000

 

Bank of America, N.A.

 

10.3703703703704000

%

$

70,000,000

 

The Royal Bank of Scotland plc

 

10.3703703703704000

%

$

70,000,000

 

BNP Paribas

 

9.62962962962963000

%

$

65,000,000

 

Compass Bank

 

6.2962962962963000

%

$

42,500,000

 

Citibank, N.A.

 

6.2962962962963000

%

$

42,500,000

 

Comerica Bank

 

6.2962962962963000

%

$

42,500,000

 

ING Capital LLC

 

6.2962962962963000

%

$

42,500,000

 

Royal Bank of Canada

 

6.2962962962963000

%

$

42,500,000

 

Regions Bank

 

6.2962962962963000

%

$

42,500,000

 

The Bank of Nova Scotia

 

6.2962962962963000

%

$

42,500,000

 

UBS Loan Finance LLC

 

6.2962962962963000

%

$

42,500,000

 

Capital One, N.A.

 

3.7037037037037000

%

$

25,000,000

 

U.S. Bank National Association

 

3.7037037037037000

%

$

25,000,000

 

Goldman Sachs Lending Partners LLC

 

0.7407407407407410

%

$

5,000,000

 

TOTAL:  

 

100.00

%

$

675,000,000

 

 

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