Exhibit 10.17
Execution Copy
CREDIT AGREEMENT
Dated as of
December 13, 2007
among
EAGLE ROCK ENERGY PARTNERS, L.P.,
as Borrower,
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent and Swingline Lender,
BANK OF AMERICA, N.A.,
as Syndication Agent,
HSH NORDBANK AG, NEW YORK BRANCH,
THE ROYAL BANK OF SCOTLAND, plc, and
BNP PARIBAS,
as Co-Documentation Agents
and
The Lenders Party Hereto
Wachovia Capital Markets, LLC And Banc Of America Securities LLC
as Joint Lead Arrangers and Joint Bookrunners

 

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TABLE OF CONTENTS

              Page  
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
    1  
Section 1.01 Defined Terms
    1  
Section 1.02 Types of Loans and Borrowings
    28  
Section 1.03 Terms Generally; Rules of Construction
    28  
Section 1.04 Accounting Terms and Determinations; GAAP
    29  
 
       
ARTICLE II THE CREDITS
    29  
Section 2.01 Commitments
    29  
Section 2.02 Loans and Borrowings
    29  
Section 2.03 Requests for Borrowings
    30  
Section 2.04 Swingline Loans
    31  
Section 2.05 Interest Elections
    32  
Section 2.06 Funding of Borrowings
    34  
Section 2.07 Termination, Reduction and Increase of Commitments
    34  
Section 2.08 Borrowing Base
    37  
Section 2.09 Letters of Credit
    39  
 
       
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
    44  
Section 3.01 Repayment of Loans
    44  
Section 3.02 Interest
    44  
Section 3.03 Alternate Rate of Interest
    45  
Section 3.04 Prepayments
    45  
Section 3.05 Fees
    48  
 
       
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
    49  
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs
    49  
Section 4.02 Presumption of Payment by the Borrower
    50  
Section 4.03 Certain Deductions by the Administrative Agent
    50  
Section 4.04 Disposition of Proceeds
    50    
ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
    51  
Section 5.01 Increased Costs
    51  
Section 5.02 Break Funding Payments
    52  
Section 5.03 Taxes
    52  
Section 5.04 Mitigation Obligations; Replacement of Lenders
    54  
Section 5.05 Illegality
    54  

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              Page  
ARTICLE VI CONDITIONS PRECEDENT
    55  
Section 6.01 Effective Date
    55  
Section 6.02 Each Credit Event
    57  
 
       
ARTICLE VII REPRESENTATIONS AND WARRANTIES
    58  
Section 7.01 Organization; Powers
    58  
Section 7.02 Authority; Enforceability
    58  
Section 7.03 Approvals; No Conflicts
    58  
Section 7.04 Financial Condition; No Material Adverse Change
    59  
Section 7.05 Litigation
    59  
Section 7.06 Environmental Matters
    60  
Section 7.07 Compliance with the Laws and Agreements; No Defaults
    61  
Section 7.08 Investment Company Act
    61  
Section 7.09 Taxes
    61  
Section 7.10 ERISA
    62  
Section 7.11 Disclosure; No Material Misstatements
    63  
Section 7.12 Insurance
    63  
Section 7.13 Restriction on Liens
    63  
Section 7.14 Subsidiaries
    64  
Section 7.15 Location of Business and Offices
    64  
Section 7.16 Properties; Titles, Etc
    64  
Section 7.17 Maintenance of Properties
    65  
Section 7.18 Gas Imbalances, Prepayments
    66  
Section 7.19 Marketing of Production
    66  
Section 7.20 Security Instruments
    66  
Section 7.21 Hedging Agreements
    67  
Section 7.22 Use of Loans and Letters of Credit
    67  
Section 7.23 Solvency
    68  
Section 7.24 Anti-Terrorism Laws
    68  
 
       
ARTICLE VIII AFFIRMATIVE COVENANTS
    69  
Section 8.01 Financial Statements; Ratings Change; Other Information
    69  
Section 8.02 Notices of Material Events
    72  
Section 8.03 Existence; Conduct of Business
    72  
Section 8.04 Payment of Obligations
    72  
Section 8.05 Performance of Obligations under Loan Documents
    73  
Section 8.06 Operation and Maintenance of Properties
    73  
Section 8.07 Insurance
    73  
Section 8.08 Books and Records; Inspection Rights
    74  
Section 8.09 Compliance with Laws
    74  
Section 8.10 Environmental Matters
    74  
Section 8.11 Further Assurances
    75  
Section 8.12 Reserve Reports
    76  
Section 8.13 Title Information
    77  
Section 8.14 Additional Collateral; Additional Guarantors
    78  
Section 8.15 ERISA Compliance
    79  
Section 8.16 Unrestricted Subsidiaries
    80  

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              Page  
ARTICLE IX NEGATIVE COVENANTS
    80  
Section 9.01 Financial Covenants
    80  
Section 9.02 Indebtedness
    83  
Section 9.03 Liens
    84  
Section 9.04 Restricted Payments
    85  
Section 9.05 Investments, Loans and Advances
    85  
Section 9.06 Designation and Conversion of Restricted and Unrestricted
Subsidiaries; Indebtedness of Unrestricted Subsidiaries
    87  
Section 9.07 Nature of Business
    87  
Section 9.08 Proceeds of Loans
    87  
Section 9.09 ERISA Compliance
    88  
Section 9.10 Sale or Discount of Receivables
    89  
Section 9.11 Mergers, Etc
    89  
Section 9.12 Sale of Properties
    90  
Section 9.13 Environmental Matters
    91  
Section 9.14 Transactions with Shareholders and Affiliates
    91  
Section 9.15 Subsidiaries
    91  
Section 9.16 Negative Pledge Agreements; Dividend Restrictions
    91  
Section 9.17 Limitation on Issuance of Equity Interests
    92  
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments
    92  
Section 9.19 Hedging Agreements
    92  
Section 9.20 Sale and Leaseback
    92  
Section 9.21 Amendments to Organization Documents or Fiscal Year End;
Prepayments of other Indebtedness
    92  
Section 9.22 Marketing Activities
    93  
Section 9.23 Anti-Terrorism Law; Anti-Money Laundering
    93  
Section 9.24 Embargoed Person
    93  
 
       
ARTICLE X EVENTS OF DEFAULT; REMEDIES
    94  
Section 10.01 Events of Default
    94  
Section 10.02 Remedies
    96  
 
       
ARTICLE XI THE AGENTS
    97  
Section 11.02 Duties and Obligations of Administrative Agent
    97  
Section 11.03 Action by Administrative Agent
    98  
Section 11.04 Reliance by Administrative Agent
    99  
Section 11.05 Subagents
    99  
Section 11.06 Resignation or Removal of Administrative Agent
    99  
Section 11.07 Agents as Lenders
    100  
Section 11.08 No Reliance
    100  
Section 11.09 Administrative Agent May File Proofs of Claim
    100  
Section 11.10 Authority of Administrative Agent to Release Collateral and Liens
    101  
Section 11.11 The Arrangers, the Syndication Agent and the Co-Documentation
Agents
    101  

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              Page  
ARTICLE XII MISCELLANEOUS
    101  
Section 12.01 Notices
    101  
Section 12.02 Waivers; Amendments
    103  
Section 12.03 Expenses, Indemnity; Damage Waiver
    104  
Section 12.04 Assignments and Participations
    106  
Section 12.05 Survival; Revival; Reinstatement
    109  
Section 12.06 Counterparts; Integration; Effectiveness
    110  
Section 12.07 Severability
    110  
Section 12.08 Right of Setoff
    110  
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
    111  
Section 12.10 Headings
    112  
Section 12.11 Confidentiality
    112  
Section 12.12 Interest Rate Limitation
    113  
Section 12.13 EXCULPATION PROVISIONS
    113  
Section 12.14 Collateral Matters; Hedging Agreements; Treasury Management
Agreements
    114  
Section 12.15 No Third Party Beneficiaries
    114  
Section 12.16 USA Patriot Act Notice
    114  

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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 7.15
  Location of Business and Offices
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 9.12(i)
  Identified Asset Swaps
Schedule 9.14
  Certain Shareholder and Affiliate Transactions

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     THIS CREDIT AGREEMENT dated as of December 13, 2007, 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 WACHOVIA 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., as syndication
agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Syndication Agent”); and HSH NORDBANK AG, NEW YORK BRANCH, THE
ROYAL BANK OF SCOTLAND plc and BNP PARIBAS, as co-documentation agents for the
Lenders (in such capacity, together with their successors in such capacity, the
“Co-Documentation Agents”)
R E C I T A L S
     A. The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower.
     B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
     C. In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Matters
     Section 1.01 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(d)(i).
     “Additional Lender Certificate” has the meaning assigned to such term in
Section 2.07(d)(ii)(G).
     “Adjusted Consolidated EBITDA” means Consolidated EBITDA excluding
Consolidated EBITDA attributable to the Borrowing Base Properties of the
Borrower and its Restricted Subsidiaries and the Hedging Agreements related
thereto; provided that no more than fifteen percent (15%) of Adjusted
Consolidated EBITDA may be attributable to the Royalty Interests.
     “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.

 

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     “Administrative Agent” has the meaning assigned to such term in the
introductory paragraph hereto.
     “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.
     “Agents” means, collectively, the Administrative Agent, the Syndication
Agent, and the Co-Documentation Agents; and “Agent” means the Administrative
Agent, the Syndication Agent or any Co-Documentation 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
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective 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 and the then current Total Leverage Ratio then in effect:

                                              Borrowing Base Utilization
Percentage         £ 50%   > 50%   Commitment Total Leverage Ratio   ABR   LIBOR
  ABR   LIBOR   Fee Rate
Less than or equal to 3.00 to 1.00
    0.250 %     1.250 %     0.500 %     1.500 %     0.25 %
 
                                       
Greater than 3.00 to 1.00 but less than or equal to 4.00 to 1.00
    0.500 %     1.500 %     0.750 %     1.750 %     0.30 %
 
                                       
Greater than 4.00 to 1.00 but less than or equal to 5.00 to 1.00
    0.750 %     1.750 %     0.875 %     1.875 %     0.35 %
 
                                       
Greater than 5.00 to 1.00
    0.875 %     1.875 %     1.000 %     2.000 %     0.35 %

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     Each change in the Applicable Margin resulting from changes in the Total
Leverage Ratio or a redesignation of the Borrowing Base Indebtedness shall
become effective on the Business Day immediately following the date on which
financial statements or a compliance certificate, as applicable, is delivered to
the Lenders pursuant to Section 8.01(a), (b) or (c) and shall remain in effect
until the next change to be effected pursuant to this paragraph; provided,
however, that if at any time the Borrower fails to deliver any financial
statements required by Section 8.01(a) or (b) within the time periods specified
therein, then, until the Business Day immediately following the date on which
such financial statements are delivered, the “Applicable Margin” shall mean the
rate per annum set forth on the grid when the Total Leverage Ratio is at its
highest level and at the then current Borrowing Base Utilization Percentage;
provided, further, that if at any time the Borrower fails to deliver a Reserve
Report pursuant to Section 8.12(a), then the “Applicable Margin” shall mean the
rate per annum set forth on the grid when the Borrowing Base Utilization
Percentage is at its highest level and at the then current Total Leverage Ratio
then in effect until such time as the Reserve Report is delivered, whereupon the
Applicable Margin shall be determined as if the Reserve Report had been timely
delivered, and is to be effective as of the first Business Day immediately
following the date such Reserve Report was delivered; and provided, further,
that for the period commencing on the Effective Date and until the Business Day
immediately following the date on which the March 31, 2008 financial statements
are delivered pursuant to Section 8.01(b), the “Applicable Margin” for ABR
Loans, Eurodollar Loans and the Commitment Fee Rate shall not be less than
0.750%, 1.750% and 0.30%, respectively. 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 Sections 3.02(d) and 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
and (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.

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     “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.
     “Arrangers” means Wachovia Capital Markets, LLC and Banc of America
Securities LLC, in their capacities as the joint lead arrangers and joint
bookrunners hereunder.
     “Asset Sale” means any sale, transfer, assignment, conveyance or other
disposition by the Borrower or any Restricted Subsidiary to any Person
(including by way of redemption by such Person) of any Property (including,
without limitation, any capital stock or other securities of, or Equity
Interests in, another Person), but excluding (a) dispositions resulting from
Casualty Events, (b) sales of Property pursuant to Section 9.12(a)-(h) and
(c) sales of Borrowing Base Properties.
     “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 amount determined
in accordance with Section 2.08, as the same may be adjusted from time to time
pursuant to Section 8.13(c), Section 9.11 or Section 9.12(f).
     “Borrowing Base Deficiency” occurs if at any time the total Borrowing Base
Indebtedness exceeds the Borrowing Base then in effect.
     “Borrowing Base Hedges” means all commodity Hedging Agreements entered into
by the Borrower and its Restricted Subsidiaries related to the Borrowing Base
Properties.

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     “Borrowing Base Indebtedness” means the amount of the total Credit
Exposures designated against the available Borrowing Base in the Borrower’s most
recent quarterly compliance certificate submitted in accordance with
Section 8.01(c), and as may be redesignated by the Borrower upon a Borrowing
Base Redetermination in accordance with Section 8.01(p).
     “Borrowing Base Properties” means the Oil and Gas Properties, other than
Royalty Interests, evaluated in the most recently delivered Reserve Report.
     “Borrowing Base Redetermination” means a Scheduled Redetermination or an
Interim Redetermination.
     “Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the Borrowing Base
Indebtedness 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.
     “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 of its Restricted
Subsidiaries.
     “Change in Control” means (a) the Sponsor and the members of the executive
management team of the Ultimate General Partner shall cease to beneficially own
and control, directly or indirectly, at least fifty percent (50%) on a fully
diluted basis of the economic and voting interests in the Equity Interests of
the General Partner, (b) the General Partner shall cease to beneficially own and
control, directly or indirectly, all of the general partner interests of the
Borrower, (c) the majority of the seats (other than vacant seats) on the board
of directors (or similar governing body) of the Ultimate General Partner shall
cease to be occupied by Persons who either (i) were members of the board of
directors of the Ultimate General Partner as of the date hereof or (ii) were
nominated for election by the board of directors of the Ultimate General

5

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Partner, a majority of whom were directors as of the date hereof, or whose
election or nomination for election was previously approved by a majority of
such directors.
     “Change in Law” means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or any Issuing Bank
(or, for purposes of Section 5.01(b), by any lending office of such Lender or by
such Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
     “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
     “Co-Documentation 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, expressed as an amount representing the maximum aggregate amount of
such Lender’s Credit Exposure 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 documentation on file with
the Administrative Agent. The total Commitments for all Lenders on the Effective
Date equal $800,000,000.
     “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(d)(ii)(F).
     “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, the sum of Consolidated Net
Income for such period plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: Consolidated Interest
Expense, income taxes, depreciation, depletion, amortization, and 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), minus
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).

6

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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; and provided further that if the Borrower or any Consolidated
Restricted Subsidiary shall dispose of any Property during such period or a
Subsidiary shall be redesignated as either an Unrestricted Subsidiary or a
Restricted Subsidiary, then Consolidated Net Income shall be calculated after
giving pro forma effect to such disposition or redesignation, as if such
disposition or redesignation had occurred on the first day of such period.
     “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.

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     “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.
     “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.
     “Deficiency Amount” means, at the time of determination, the amount by
which (a) the total Borrowing Base Indebtedness exceeds (b) the lesser of
(i) the Borrowing Base then in effect and (ii) the total Commitments.
     “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.
     “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.

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     “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.
     “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 9.24.
     “Engineering Reports” has the meaning assigned to such term in Section
2.08(c)(i).
     “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.

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     “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.
     “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 Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred

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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 any statutory or
common law provision relating to banker’s liens, rights of set-off or similar
rights and remedies and burdening only deposit accounts or other funds
maintained with a creditor depository institution, provided that no such deposit
account is a dedicated cash collateral account or is subject to restrictions
against access by the depositor in excess of those set forth by regulations
promulgated by the Board and no such deposit account is intended by Borrower or
any of its Restricted Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Restricted Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, 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; (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 (i) 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 imposed on (or measured
by) its net income by the United States of America or such other jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable lending
office is located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located and (c) in the case of a Foreign Lender
(other than an assignee pursuant to a request by the

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Borrower under Section 5.04(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender’s failure to comply with Section 5.03(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts with respect to such withholding tax pursuant to
Section 5.03(a) or Section 5.03(c).
     “Executive Order” has the meaning assigned to such term in Section 7.24(a).
     “Existing Credit Agreement” means that certain Amended and Restated Credit
and Guaranty Agreement, dated as of August 31, 2006, by and among the Borrower,
the guarantors party thereto, the lenders party thereto, and Goldman Sachs
Credit Partners L.P., as administrative agent, as amended from time to time.
     “Existing Letters of Credit” means the Letters of Credit described on
Schedule 1.01(a) that were issued by Wachovia 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.
     “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 Arrangers, and the Syndication Agent to the Borrower dated October 3,
2007 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 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.
     “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.

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     “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, and
     (b) each other Material Domestic Subsidiary or other Domestic Subsidiary
that guarantees the Secured Obligations pursuant to Section 8.14(b).
     “Guaranty and Collateral Agreement” means an agreement executed by the Loan
Parties 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 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.
     “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,

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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
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Loans or on other
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 nonusurious interest
rate than applicable laws allow as of the date hereof.
     “Hydrocarbon Interests” means all rights, titles, interests and estates now
or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
     “Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
     “Indebtedness” means, 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 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

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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, dated as of July 1, 2007, with respect to certain Oil and Gas
Properties of the Borrower and its Restricted Subsidiaries as of January 1,
2007.
     “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 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.
     “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 Redetermination” has the meaning assigned to such term in Section
2.08(b).
     “Interim Redetermination Date” means the date on which a Borrowing Base
that has been redetermined pursuant to an Interim Redetermination becomes
effective as provided in Section 2.08(d).

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     “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) Wachovia 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, $200,000,000.
     “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(d), 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.

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     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two (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 Oil
and Gas Properties. The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall
be deemed to be the owner of any Property which 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 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)).

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     “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
$20,000,000 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 $20,000,000. For purposes of determining
Material Indebtedness, the “principal amount” of the obligations of the Borrower
or any Restricted Subsidiary in respect of any 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, the capital expenditures (determined in
accordance with GAAP) attributable to which exceed $10,000,000.
     “Material Project EBITDA Adjustments” has the meaning assigned to such term
in Section 9.01(e)(i).
     “Maturity Date” means December 13, 2012.
     “Midstream Hedges” means all commodity Hedging Agreements entered into by
the Borrower and its Restricted Subsidiaries, other than the Borrowing Base
Hedges and the Royalty Interest Hedges.
     “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, as the same may be amended, modified,
supplemented or restated from time to time in accordance with the Loan
Documents.
     “Mortgaged Property” means any real Property owned by the Borrower or any
Subsidiary that is subject to a Mortgage.

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     “Multiemployer Plan” means a Plan which is a multiemployer plan as defined
in section 3(37) or 4001 (a)(3) of ERISA.
     “Net Cash Proceeds” means for any Recovery Event requiring a reduction of
the total Commitments and/or a repayment of Loans pursuant to
Section 3.04(c)(iii) or (iv), the gross cash proceeds (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) from such Recovery Event, net of attorneys’ fees,
accountants’ fees, amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted hereunder on any asset which
is the subject of such Recovery Event (other than any Lien pursuant to a
Security Instrument) and other customary fees and expenses actually incurred in
connection therewith, and net of taxes paid or reasonably estimated to be
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements).
     “Net Sale Proceeds” means for any sale or other disposition of Property
pursuant to an Asset Sale, the gross cash proceeds (including any cash received
by way of deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received from such Asset Sale, net of
(a) reasonable transaction costs (including, without limitation, any
underwriting, brokerage or other customary selling commissions, reasonable
legal, advisory and other fees and expenses (including title and recording
expenses), associated therewith and sales, VAT and transfer taxes arising
therefrom), (b) the amount of such gross cash proceeds required to be used to
permanently repay any Indebtedness (other than the Secured Obligations) which is
secured by the respective Property which was sold or otherwise disposed of,
(c) the estimated net marginal increase in income taxes which will be payable by
the Borrower or any Subsidiary with respect to the fiscal year of the Borrower
in which the sale or other disposition occurs as a result of such sale or other
disposition, and (d) the amount of all reserves required to be maintained by the
Borrower or any Subsidiary in accordance with GAAP for any potential indemnity
obligations that may be required to be made by the Borrower or any Subsidiary of
as a result of such Asset Sale; provided, however, (i) that such gross proceeds
shall not include any portion of such gross cash proceeds which the Borrower
determines in good faith should be reserved for post-closing adjustments (to the
extent the Borrower delivers to the Lenders a certificate signed by a
Responsible Officer as to such determination), it being understood and agreed
that on the day that all such post-closing adjustments have been determined
(which shall not be later than six (6) months following the date of the
respective Asset Sale), the amount (if any) by which the reserved amount in
respect of such Asset Sale exceeds the actual post-closing adjustments payable
by the Borrower or any Subsidiary shall constitute Net Sale Proceeds on such
date received by the Borrower and/or any Subsidiary from such Asset Sale, and
(ii) at such time as the Borrower and the Subsidiaries are no longer required to
maintain any indemnity reserves in accordance with GAAP as a result of any Asset
Sale, the amount (if any) by which such reserved amount in respect of such Asset
Sale exceeds the actual amount of indemnity payments made by the Borrower or any
Subsidiary for which such reserves were required to be maintained in respect of
such Asset Sale shall constitute Net Sale Proceeds at such time.
     “New Borrowing Base Notice” has the meaning assigned to such term in
Section 2.08(d).

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     “Non-Borrowing Base Indebtedness” means the amount of the total Credit
Exposures not designated as Borrowing Base Indebtedness.
     “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).
     “Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
(c) all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including, without
limitation, all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests, 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 all Property used
in the Borrower’s Hydrocarbon gathering, processing and transportation
businesses, including gathering lines, pipelines, surface leases, rights-of-way,
easements and servitudes related thereto.
     “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

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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).
     “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 such acquisition, the Borrower shall
have delivered a written notice and description of such acquisition to the
Administrative Agent and the Lenders; provided that the filing of a press
release or other filing with the SEC on such closing date describing such
acquisition will satisfy the notice requirement of this clause (a);
     (b) the Borrower shall have certified on or before the closing date of such
acquisition, in writing and in a form reasonably acceptable to the
Administrative Agent, that such acquisition has been approved by the board of
directors or equivalent governing body of the Person to be acquired;
     (c) the Person or business to be acquired shall be in a substantially
similar line of business as the Borrower and its Restricted Subsidiaries
pursuant to Section 9.07;
     (d) if such transaction is a merger or consolidation, no Change in Control
shall have been effected thereby and the transaction shall comply with the
requirements of Section 9.11;
     (e) no later than the closing date of such acquisition, 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;
     (f) the Borrower, at the request of the Administrative Agent, shall
promptly deliver copies of the Permitted Acquisition Documents;

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     (g) no Default or Event of Default shall have occurred and be continuing
both before and after giving effect to such acquisition;
     (h) the board of directors of the Person to be acquired (or whose Property
is to be acquired) shall not have indicated publicly its opposition to the
consummation of such acquisition (which opposition has not been publicly
withdrawn); and
     (i) the Borrower shall provide such other documents and other 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 Acquisition Documents” means, with respect to any acquisition
proposed by a Loan Party, final copies (or substantially final drafts if not
executed at the required time of delivery) of the purchase agreement, sale
agreement, merger agreement or other agreement evidencing such acquisition, and
such legal opinions and other documents executed, delivered, contemplated by or
prepared in connection therewith and any amendment, modification or supplement
to any of the foregoing, as the Administrative Agent may reasonably request.
     “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 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.

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     “Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
     “Plan” means any employee pension benefit plan, as defined in section 3(2)
of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at
any time during the six (6) calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or a Subsidiary or an ERISA
Affiliate.
     “Prime Rate” means the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in Charlotte, North Carolina; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective. Such rate is set by the Administrative Agent as a general
reference rate of interest, taking into account such factors as the
Administrative Agent may deem appropriate; it being understood that many of the
Administrative Agent’s commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that the Administrative Agent may make various commercial or other
loans at rates of interest having no relationship to such rate.
     “Property” means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible (including, without
limitation, cash, securities, accounts, contract rights and Equity Interests or
other ownership interests of any Person), whether now in existence or owned or
hereafter acquired.
     “Proposed Borrowing Base” has the meaning assigned to such term in Section
2.08(c)(i).
     “Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.08(c)(ii).
     “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 Restricted
Subsidiary of any cash insurance proceeds or condemnation awards payable by
reason of a Casualty Event.
     “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 Redetermination
or any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.08(d).

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     “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 (66-2/3%)
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 (66-2/3%)
of the outstanding aggregate principal amount of the Loans or participation
interests in Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)).
     “Reserve Report” means a report, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth, as of each January 1st
or July 1st (or such other date in the event of an Interim Redetermination), the
oil and gas reserves attributable to the Oil and Gas Properties of the Borrower
and the Restricted Subsidiaries, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date.
     “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 general partner or manager). Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer of
the 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.
     “Royalty Interest Hedges” means all commodity Hedging Agreements entered
into by the Borrower and its Restricted Subsidiaries related to the Royalty
Interests.

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     “Royalty Interests” means all royalty and overriding royalty interests
owned by the Borrower and its Restricted Subsidiaries.
     “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 Redetermination” has the meaning assigned to such term in
Section 2.08(b).
     “Scheduled Redetermination Date” means the date on which a Borrowing Base
that has been redetermined pursuant to a Scheduled Redetermination becomes
effective as provided in Section 2.08(d).
     “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 (a) with a Secured Hedging Agreement Counterparty that
is a Lender or an Affiliate of a Lender or (b) existing on the Effective Date
with J. Aron & Company.
     “Secured Hedging Agreement Counterparty” means (a) any Person that is a
party to a Hedging Agreement with the Borrower or any Restricted Subsidiary that
enters into such Hedging Agreement while such Person is or before such Person
becomes a Lender or an Affiliate of a Lender, but if such Person at any time
ceases to be a Lender or an Affiliate of a Lender, as the case may be, such
Person shall no longer be a Secured Hedging Agreement Counterparty, and
(b) J. Aron & Company.
     “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 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 Secured
Hedging Agreement Counterparty under any Secured Hedging Agreement; (c) to any
Treasury Management Counterparty under any Treasury Management Agreement; and
(d) all renewals, extensions and/or rearrangements of any of the above.
     “Secured Parties” means, collectively, the Administrative Agent, each
Issuing Bank, each Lender, each Secured Hedging Agreement Counterparty and each
Treasury Management Counterparty.
     “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, 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, or
reimbursement obligations under the Letters of Credit, as such agreements may be
amended, modified, supplemented or restated from time to time.

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     “Senior Secured Funded Indebtedness” means Total Funded Indebtedness of the
Borrower and its Consolidated Restricted Subsidiaries that is secured and not
expressly subordinated to the Secured Obligations on terms satisfactory to the
Administrative Agent.
     “Senior Secured Leverage Ratio” means the ratio of Senior Secured Funded
Indebtedness to Adjusted 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.
     “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.
     “Specified Acquisition” means a Permitted Acquisition for which the
Permitted Acquisition Consideration exceeds five percent (5%) of Consolidated
EBITDA.
     “Specified Acquisition Period” means the period beginning on the date on
which a Specified Acquisition is consummated through and including the last day
of the second (2nd) full fiscal quarter following the date of such Specified
Acquisition.
     “Sponsor” means one or more investment funds ultimately controlled by
Natural Gas Partners.
     “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(d).
     “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

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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 Wachovia Bank, National Association, in its
capacity as lender of Swingline Loans hereunder.
     “Swingline Loan” means a Loan made pursuant to Section 2.04.
     “Syndication Agent” has the meaning assigned to such term in the
introductory paragraph hereto.
     “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),
excluding amounts designated as Borrowing Base Indebtedness.
     “Total Leverage Ratio” means the ratio of Total Funded Indebtedness to
Adjusted 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 party, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder, and the grant of Liens
by the Borrower on Collateral pursuant to the Security

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Instruments, and the refinancing of the Existing Credit Agreement, 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 provided by a Lender or an Affiliate of
a Lender for the benefit of the Borrower or a Restricted Subsidiary.
     “Treasury Management Counterparty” means each Lender or Affiliate of a
Lender that enters into a Treasury Management Agreement.
     “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.
     “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.
     “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.
     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

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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 and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.
     Section 1.04 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 Commitment or (b) the
total Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans.
     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.

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          (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(d), 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,
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

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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 e-mail 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 aggregate principal amount of
outstanding Swingline Loans exceeding $25,000,000 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 e-mail), 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

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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 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

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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 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.
          (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

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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 by the Borrower in the Notice of Account Designation delivered to the
Administrative Agent on or prior to the Effective Date or to such other account
designated by the Borrower in writing to the Administrative Agent, or applicable
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 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.
     Section 2.07 Termination, Reduction and Increase of Commitments.
          (a) Mandatory Termination and Reduction of Commitments.
               (i) Unless previously terminated, all Commitments shall terminate
on the earlier to occur of (A) the Maturity Date and (B) any date specified
pursuant to Section 10.02.

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               (ii) The total Commitments shall automatically reduce by the
amount of any mandatory prepayments required pursuant to Sections 3.04(c)(ii)
and (iii) on the date of each such mandatory prepayment.
          (b) 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(b)(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(b)(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 the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.
          (c) Terminations and Reductions of Commitments. Any termination or
reduction of the Commitments shall be permanent and may not be reinstated except
pursuant to Section 2.07(d). Each reduction of the Commitments shall be made
ratably among the Lenders in accordance with each Lender’s Applicable
Percentage.
          (d) Optional Increase in Commitments.
          (i) Subject to the conditions set forth in Section 2.07(d)(ii), the
Borrower may increase the total Commitments then in effect with the prior
written consent of the Administrative Agent 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) such increase shall not be less than $50,000,000 unless the
Administrative Agent otherwise consents; provided, that all such increases
pursuant to this Section 2.07(d) shall not exceed $200,000,000 in the aggregate;
          (B) such increase shall occur prior to December 13, 2011;
          (C) no Default shall have occurred and be continuing at the effective
date of such increase;

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          (D) the Borrower shall have paid all compensation required by Section
5.02 (if any);
          (E) no Lender’s Commitment may be increased without the consent of
such Lender;
          (F) 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;
          (G) if the Borrower elects to increase the total Commitments by
causing an Additional Lender to become a party to this Agreement, then 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
          (H) 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(d)(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(d)(ii),
if applicable, the written consent of the Administrative Agent to such increase
required by Section 2.07(d)(i), and

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all other documents and payments required by this Section 2.07(d), 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) Initial Borrowing Base. For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be $140,000,000. Notwithstanding the foregoing, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to Section 8.13(c), Section 9.11(a) or Section 9.12.
          (b) Borrowing Base Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.08 (a “Scheduled
Redetermination”), and subject to Section 2.08(d), such redetermined 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 April 1, 2008. In addition, (a) the Borrowing Base shall be
redetermined as required by Section 9.02(h) and Section 9.02(m) and (b) the
Borrower may, by notifying the Administrative Agent thereof, and the
Administrative Agent may, at the direction of the Required Lenders, by notifying
the Borrower thereof, elect to cause the Borrowing Base to be redetermined one
time each between Scheduled Redeterminations, in the case of clauses (a) and
(b), in accordance with this Section 2.08 (each such redetermination, an
“Interim Redetermination”).
          (c) Borrowing Base Redetermination Procedure.
          (i) Each Borrowing Base 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 Redetermination, pursuant to Section 8.12(a)
and (c), and, in the case of an Interim 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 Borrowing Base (the “Proposed Borrowing
Base”) based upon such information and such other information (including,
without limitation, the status of title information with respect to the
Borrowing Base Properties as described in the Engineering Reports and the
existence of any other Indebtedness) as the Administrative Agent deems
appropriate in its sole discretion and consistent with its normal oil and gas
lending criteria as it exists at the particular time. In no event shall the
Proposed Borrowing Base exceed the total Commitments.
          (ii) The Administrative Agent shall notify the Borrower and the
Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):

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          (A) in the case of a Scheduled Redetermination (1) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to 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 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 Borrowing Base in accordance with Section 2.08(c)(i); and
          (B) in the case of an Interim Redetermination, promptly, and in any
event, within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.
          (iii) Any Proposed Borrowing Base that would increase the Borrowing
Base then in effect must be approved or deemed to have been approved by all of
the Lenders as provided in this Section 2.08(c)(iii); and any Proposed Borrowing
Base that would decrease or maintain the Borrowing Base then in effect must be
approved or be deemed to have been approved by the Required Lenders as provided
in this Section 2.08(c)(iii). Upon receipt of the Proposed Borrowing Base
Notice, each Lender shall have fifteen (15) days to agree with the Proposed
Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
alternate Borrowing Base. If at the end of such fifteen (15) days, any Lender
has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base. If, at the end of such 15-day period, all of the
Lenders, in the case of a Proposed Borrowing Base that would increase the
Borrowing Base then in effect, or the Required Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect, have approved or deemed to have approved, as aforesaid, then the
Proposed Borrowing Base shall become the new Borrowing Base, effective on the
date specified in Section 2.08(d). 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 the Administrative Agent
shall poll the Lenders to ascertain the highest Borrowing Base then acceptable
to a number of Lenders sufficient to constitute the Required Lenders for
purposes of this Section 2.08 and, so long as such amount does not increase the
Borrowing Base then in effect, such amount shall become the new Borrowing Base,
effective on the date specified in Section 2.08(d).
          (d) Effectiveness of a Redetermined Borrowing Base. After a
redetermined Borrowing Base 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(c)(iii), the Administrative Agent shall notify the Borrower and the
Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing
Base Notice”), and such amount shall become the new Borrowing Base, effective
and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders:

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          (i) in the case of a Scheduled 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
          (ii) in the case of an Interim Redetermination or an adjustment to the
Borrowing Base under Section 8.13(c), Section 9.11(a) or Section 9.12, on the
Business Day next succeeding delivery of such notice.
Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 8.13(c), Section 9.11(a) or
Section 9.12, whichever occurs first. Notwithstanding the foregoing, no
Borrowing Base Redetermination shall become effective until the New Borrowing
Base Notice related thereto is received by the Borrower.
     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);

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               (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;
               (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, (i) the LC
Exposure shall not exceed the LC Commitment, and (ii) 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

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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 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,

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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 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

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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.
          (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.

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Such deposit shall be held as collateral securing the payment and performance of
the Borrower’s and the Guarantor’s obligations under this Agreement and the
other Loan Documents. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. 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 to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan on the Termination Date.
     Section 3.02 Interest.
          (a) ABR Loans. The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate.
          (b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing
shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect
for such Borrowing plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate.
          (c) 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, or if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower or any Guarantor
hereunder or under any other Loan Document is not paid when due, whether at
stated maturity, upon acceleration or otherwise, then all Loans outstanding, in
the case of an Event of Default, and such overdue amount, in the case of a
failure to pay amounts when due, shall bear interest, after as well as before
judgment, at a rate per annum equal to two percent (2%) plus the rate applicable
to ABR Loans as provided in Section 3.02(a), but in no event to exceed the
Highest Lawful Rate, all Loans outstanding at such time

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shall bear interest, after as well as before judgment, at the rate then
applicable to such Loans, plus the Applicable Margin, if any, plus an additional
two percent (2%), but in no event to exceed the Highest Lawful Rate.
          (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 at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.
     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).

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          (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 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(b), then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.07(b).
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(b), the total Credit Exposures
exceeds the total Commitments, then the Borrower shall make a prepayment in
accordance with Section 3.04(c)(vi) on the date of such termination or reduction
in an aggregate principal amount equal to such excess.
               (ii) On each date on or after the Effective Date upon which the
Borrower or any Restricted Subsidiary receives any cash proceeds from any Asset
Sale made pursuant to Section 9.12(k), an amount equal to 100% of the Net Sale
Proceeds therefrom shall be applied on such date as a mandatory repayment and/or
commitment reduction in accordance with Section 3.04(c)(vi); provided, however,
that such Net Sale Proceeds shall not be required to be so applied on such date
so long as no Event of Default then exists and such Net Sale Proceeds shall be
used to purchase Property (other than inventory and working capital) used or to
be used in the businesses permitted pursuant to Section 9.07 within 270 days
following the date of such Asset Sale, and provided further, that if all or any
portion of such Net Sale Proceeds not required to be so applied as provided
above in this Section 3.04(c)(ii) are not so reinvested within such 270 day
period (or such earlier date, if any, as the Borrower or relevant Restricted
Subsidiary determines not to reinvest the Net Sale Proceeds from such Asset Sale
as set forth above), such remaining portion shall be applied on the last day of
such period (or such earlier date, as the case may be) as provided above in this
Section 3.04(c)(ii) without regard to the preceding proviso.
               (iii) On each date on or after the Effective Date upon which the
Borrower or any Restricted Subsidiary receives any cash proceeds from any
Recovery Event (other than Recovery Events where the Net Cash Proceeds therefrom
do not exceed five percent (5%) of Consolidated Net Tangible Assets), an amount
equal to 100% of the Net Cash Proceeds from such Recovery Event shall be applied
on such date as a mandatory repayment in accordance with the requirements of
Section 3.04(c)(vi); provided, however, that so long as no Event of Default then
exists, such Net Cash Proceeds shall not be required to be so applied on such
date to the extent that such Net Cash Proceeds shall be used to replace or
restore any

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Property in respect of which such Net Cash Proceeds were paid within 270 days
following the date of the receipt of such Net Cash Proceeds, and provided
further, that if all or any portion of such Net Cash Proceeds are not so used
within 270 days after the date of the receipt of such Net Cash Proceeds (or such
earlier date, if any, as the Borrower or relevant Restricted Subsidiary
determines not to reinvest the Net Cash Proceeds relating to such Recovery Event
as set forth above), such remaining portion shall be applied on the last day of
such period (or such earlier date, as the case may be) as provided above in this
Section 3.04(c)(iii) without regard to the proviso or the immediately preceding
proviso.
               (iv) On each date on or after the Effective Date upon which
(A) the Borrower or any Restricted Subsidiary receives any cash proceeds from a
sale or other disposition of any interest in any Borrowing Base Properties or a
Restricted Subsidiary owning any Borrowing Base Properties pursuant to
Section 9.12(f), and (B) a Borrowing Base Deficiency exists or results
therefrom, an amount equal to 100% of the Net Sale Proceeds therefrom (up to the
amount of the Borrowing Base Deficiency) shall be applied on such date as a
mandatory repayment in accordance with the requirements of Section 3.04(c)(vi);
provided, that if a Borrowing Base Deficiency continues to exist after such
mandatory repayment, (1) the Borrower shall, subject to the conditions in
Section 6.02, be deemed to have requested, and the Borrower does hereby request
under such circumstances, that an amount equal to such remaining Deficiency
Amount (or such lesser amount equal to the amount of the Commitments then
available for Non-Borrowing Base Indebtedness) be transferred from Borrowing
Base Indebtedness to Non-Borrowing Base Indebtedness and that the Deficiency
Amount be reduced by an amount equal to the amount of Borrowing Base
Indebtedness transferred to Non- Borrowing Base Indebtedness, and (2) the
Borrower shall make a mandatory prepayment in an amount equal to the balance of
such Deficiency Amount in accordance with Section 3.04(c)(vi).
               (v) If a Borrowing Base Deficiency results from or exists
immediately after any adjustment to the Borrowing Base pursuant to Section 2.08,
Section 8.13(c) or Section 9.11(a) (but not in connection with an adjustment as
a result of Section 9.12(f)), the Borrower shall, subject to the conditions in
Section 6.02, be deemed to have requested, and the Borrower does hereby request
under such circumstances, that an amount equal to such Deficiency Amount (or
such lesser amount equal to the amount of the Commitments then available for
Non-Borrowing Base Indebtedness) be transferred from Borrowing Base Indebtedness
to Non-Borrowing Base Indebtedness and that the Deficiency Amount be reduced by
an amount equal to the amount of Borrowing Base Indebtedness transferred to
Non-Borrowing Base Indebtedness. The Borrower shall (A) make mandatory
prepayments within six (6) months of such Borrowing Base adjustment (in six (6)
equal monthly installments) in an aggregate amount equal to the balance of such
Deficiency Amount in accordance with Section 3.04(c)(vi), or (B) grant Liens to
the Administrative Agent in accordance with Section 8.14(a) on additional Oil
and Gas Properties of the Loan Parties that are not Royalty Properties that
(1) are not Borrowing Base Properties, and (2) are satisfactory to the
Administrative Agent and are deemed by the Administrative Agent to have a value
equal to or in excess of such balance of the Deficiency Amount.
               (vi) Each payment made pursuant to this Section 3.04(c) shall be
used to prepay the Borrowings, and if any excess 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

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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, 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.
     (vii) 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 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 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 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, provided that in no event shall such fee be less than $500 during any
quarter, 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

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fees and fronting fees accrued through and including the last day of March,
June, September and December of each year shall be payable on the third (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 Borrowing Base 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.
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:
               (i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
               (ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such
Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered;
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

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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.
          (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

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clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower or any Guarantor shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 5.03(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.
          (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.
          (d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
          (e) Foreign Lenders. Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement or any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.
          (f) Tax Refunds. If the Administrative Agent or a Lender determines,
in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to
which the Borrower has paid additional amounts pursuant to this Section 5.03, it
shall pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this
Section 5.03 with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket

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expenses of the Administrative Agent or such Lender and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund); provided, that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event
the Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This Section 5.03 shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.
     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 defaults in its obligation to fund
Loans hereunder, (iv) any Lender declines to make a Eurodollar Loan under
Section 5.05 or (v) any Lender declines to enter into any amendment hereto
executed and delivered by the Required Lenders, 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

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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 Arrangers 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 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.

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          (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 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 Borrowing Base 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 the Royalty Interests or any such other 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);
               (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 Alabama, Mississippi and any other
jurisdictions requested 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 title information as
the Administrative Agent may reasonably require satisfactory to the
Administrative Agent setting forth the status of title to at least 80% of the
total value of the Borrowing Base Properties.
          (k) The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries.
          (l) 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).
          (m) The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Subsidiaries for each of the following jurisdictions: Delaware,
Texas, and any other jurisdiction requested by the Administrative Agent, other
than those being assigned or released on or prior to the Effective Date or Liens
permitted by Section 9.03.

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          (n) 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.
          (o) 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.
          (p) Concurrently with the initial Loans hereunder, all commitments
under the Existing Credit Agreement shall have been terminated in full, all
amounts outstanding under the Existing Credit Agreement shall have been paid in
full, and all Liens granted in connection therewith shall have been released or
assigned to the Administrative Agent.
          (q) The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent may
reasonably request.
     The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of any Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 12.02)
at or prior to 5:00 p.m., Eastern time, on December 31, 2007 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).
     Section 6.02 Each Credit Event. The obligation of each Lender to make a
Loan on the occasion of any Borrowing (including the initial funding), and of
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) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no event, development or circumstance has occurred or
shall then exist that has resulted in, or could reasonably be expected to have,
a Material Adverse Effect.
          (c) The representations and warranties of the Borrower and the
Guarantors set forth in this Agreement and in the other Loan Documents shall be
true and correct 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

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Credit, as applicable, such representations and warranties shall continue to be
true and correct in all material respects as of such specified earlier date.
          (d) The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit and related
Letter of Credit Agreement in accordance with Section 2.09(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 (d).
ARTICLE VII
Representations and Warranties
     The Borrower (on behalf of itself and its 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.
     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

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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
2006 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, 2007,
June 30, 2007 and September 30, 2007 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, 2006, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Restricted
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.
          (c) Neither the Borrower nor any Restricted Subsidiary has on the date
hereof any material 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

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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 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;

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          (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 Property and the
conduct of its business, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
          (b) Neither the Borrower nor any Restricted Subsidiary is in default
nor has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or a Restricted Subsidiary to Redeem or
make any offer to Redeem under any indenture, note, credit agreement or
instrument pursuant to which any Material Indebtedness is outstanding or by
which the Borrower or any Restricted Subsidiary or any of their Properties is
bound.
          (c) No Default has occurred and is continuing.
     Section 7.08 Investment Company Act. Neither the Borrower nor any
Subsidiary is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
     Section 7.09 Taxes. Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as

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applicable, has set aside on its books adequate reserves in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect. The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower, adequate.
     Section 7.10 ERISA.
          (a) The Borrower, the Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
          (b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
          (c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
          (d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or
is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be
incurred with respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
          (e) Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan as of the
date hereof, 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.
          (f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA 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.
          (g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.

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          (h) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
          (i) Neither the Borrower, the 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 Borrowing Base 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 all material Governmental Requirements and all
material agreements and (b) insurance coverage in at least amounts and against
such risk (including, without limitation, public liability) that are usually
insured against by companies similarly situated and engaged in the same or a
similar business for the assets and operations of the Borrower and its
Restricted Subsidiaries. The Administrative Agent and the Lenders have been
named as additional insureds in respect of such liability insurance policies,
and the Administrative Agent has been named as loss payee with respect to
Property loss insurance.
     Section 7.13 Restriction on Liens. Neither the Borrower nor any of the
Restricted Subsidiaries is a party to any material agreement or arrangement
(other than (a) Capital Leases

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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. Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower
has no Subsidiaries and the Borrower has no Foreign Subsidiaries. Schedule 7.14
identifies each Subsidiary as either Restricted or Unrestricted, and each
Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.
     Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction
of organization is Delaware; the name of the Borrower as listed in the public
records of its jurisdiction of organization is 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(n) 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(n) and Section 12.01(c)). Each
Restricted Subsidiary’s jurisdiction of organization, name as listed in the
public records of its jurisdiction of organization, organizational
identification number in its jurisdiction of organization, and the location of
its principal place of business and chief executive office is stated on
Schedule 7.15 (or as set forth in a notice delivered to the Administrative Agent
pursuant to Section 8.01(n) in accordance with Section 12.01).
     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 Oil and Gas 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.
          (b) After giving full effect to the Excepted Liens, the Borrower or
the Restricted Subsidiary specified as the owner of the Borrowing Base
Properties owns the net interests in Hydrocarbon production attributable to the
Borrowing Base Properties as reflected in the most recently delivered Reserve
Report, and the ownership of such Borrowing Base 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 Borrowing Base Property in an amount in excess of the working interest
of each Borrowing Base Property set forth in the most recently delivered Reserve
Report that is not offset by a

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corresponding proportionate increase in the Borrower’s or such Restricted
Subsidiary’s net revenue interest in such Borrowing Base Property.
          (c) 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.
          (d) 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 Subsidiaries to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the date hereof.
          (e) 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.
          (f) The Borrower and each Restricted Subsidiary owns, or is licensed
to use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and such
Restricted Subsidiary does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect. The Borrower
and its Restricted Subsidiaries either own or have valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information used
in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.
     Section 7.17 Maintenance of Properties.
          (a) Except for such acts or failures to act as could not be reasonably
expected to have a Material Adverse Effect, the Oil and Gas Properties (and
Properties unitized therewith) of the Borrower and its Restricted Subsidiaries
have been maintained, operated and developed in a good and workmanlike manner
and in conformity with all Governmental Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties of the Borrower and its Restricted Subsidiaries.
Specifically in connection with the foregoing, except for those as could not be
reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas
Property (other than Royalty Interests) of the Borrower or any Restricted
Subsidiary is subject to having allowable production reduced below the full and
regular allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and
(ii) none of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) (other than Royalty Interests) of

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the Borrower or any Restricted Subsidiary is deviated from the vertical more
than the maximum permitted by Governmental Requirements, and such wells are, in
fact, bottomed under and are producing from, and the well bores are wholly
within, the Oil and Gas Properties (or in the case of wells located on
Properties unitized therewith, such unitized Properties) (other than Royalty
Interests) of the Borrower or such Restricted Subsidiary.
          (b) 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 Oil and Gas 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, (ii) in good operating condition
and repair, subject to ordinary wear and tear, (iii) not in need of maintenance
or repair except for ordinary, routine maintenance and repair the cost of which
is immaterial, (iv) sufficient for the operation of the businesses of the
Borrower and its Restricted Subsidiaries as currently conducted, and (v) in
conformity with all Governmental Requirements relating thereto.
     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 Borrowing Base Properties
of the Borrower or any Restricted Subsidiary at some future time without then or
thereafter receiving full payment therefor exceeding one-half bcf of gas (on an
mcf equivalent basis) in the aggregate.
     Section 7.19 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.19, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Restricted Subsidiaries are receiving a price for all Hydrocarbon
production attributable to the Borrowing Base 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 Borrowing Base 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, 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

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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 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, 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 Borrowing Base
Hedges, Royalty Interest 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 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.

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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 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 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 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
financial

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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 Borrowing Base
Hedges, Royalty Interest 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) Financial Plan. As soon as practicable and in any event no later
than thirty (30) days prior to the beginning of each fiscal year, a consolidated
plan and financial forecast for such fiscal year, including (i) forecasted
consolidated statements of income and cash flows of the Borrower and its
Consolidated Subsidiaries for each quarter of such fiscal year and (ii)
forecasts demonstrating projected compliance with the requirements of
Section 9.01 for each quarter of such fiscal year.
          (g) Management Letters. Promptly upon receipt thereof, a copy of each
“management letter” submitted to the Borrower or any of its Subsidiaries by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower or any such Subsidiary, and a copy of
any response by the Borrower or any such Subsidiary, or the board of directors
of the Borrower or any such Subsidiary, to such letter.
          (h) 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 Borrower
and any Subsidiary shall be deemed to have furnished the Administrative Agent
and each Lender the information filed with the SEC on the date that the Borrower
or such Subsidiary provides notice to the Administrative Agent that such
information has been posted on the EDGAR system.
          (i) Notices Under Material Instruments. Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to or by
any Person pursuant to the terms of any indenture, loan or credit or other
similar agreement, other than this

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Agreement and not otherwise required to be furnished to the Lenders pursuant to
any other provision of this Section 8.01.
          (j) Lists of Purchasers. Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of all
Persons purchasing Hydrocarbons related to production attributable to the
Borrowing Base Properties from the Borrower or any Restricted Subsidiary.
          (k) Notice of Sales of Borrowing Base Properties. In the event the
Borrower or any Restricted Subsidiary intends to sell, transfer, assign or
otherwise dispose of any Borrowing Base Properties or any Equity Interests in
any Subsidiary owning Borrowing Base Properties in accordance with Section 9.12
with a fair market value in excess of five percent (5%) of the Borrowing Base,
prior written notice of such disposition.
          (l) 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.
          (m) 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).
          (n) 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.
          (o) Notices of Certain Changes. Promptly, but in any event within five
(5) Business Days, after the execution thereof, copies of any material
amendment, modification or supplement to the certificate or articles of
incorporation, by-laws, any preferred stock designation or any other
Organization Document of the Borrower or any Restricted Subsidiary.
          (p) Borrowing Base Indebtedness Designations. Concurrently with the
delivery of each compliance certificate pursuant to Section 8.01(c) and
promptly, but in any event within five (5) Business Days, after the receipt by
the Borrower of a New Borrowing Base Notice, a certificate of a Responsible
Officer of the Borrower designating the amount of the Borrowing Base
Indebtedness as of such date (whether or not there is a change in the amount of
the Borrowing Base Indebtedness since the immediately preceding certificate
delivered pursuant to this Section 8.01(p)).

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          (q) Notices of Hedging Agreement Terminations. Promptly, but in any
event within five (5) Business Days, after the early termination of any
Borrowing Base Hedge, written notice of such termination, identifying the
terminated Borrowing Base Hedge.
          (r) Other Requested Information. Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA), or compliance with the terms of this
Agreement or any other Loan Document, as the Administrative Agent or any Lender
may reasonably request.
     Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and 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
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 Subsidiaries in an aggregate amount exceeding
$20,000,000; 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 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

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Borrower or such Restricted Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect or result in the seizure or levy of any Property of
the Borrower or any Subsidiary.
     Section 8.05 Performance of Obligations under Loan Documents. The Borrower
will 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
pro ration requirements and Environmental Laws, and all applicable laws, rules
and regulations of every other Governmental Authority from time to time
constituted to regulate the development and operation of its Properties (other
than Royalty Interests) and the production and 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;
          (c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Properties (other than Royalty Interests), and do
all other things necessary to keep unimpaired their rights with respect thereto
and prevent any forfeiture thereof or default thereunder;
          (d) promptly perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards, the obligations required
by each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its material Properties (other than
Royalty Interests); and
          (e) to the extent the Borrower is not the operator of any Property,
the Borrower shall use reasonable efforts to cause the operator to comply with
this Section 8.06.
     Section 8.07 Insurance.
          (a) 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). The loss

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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.
          (b) With respect to each portion of the real property (other than
pipelines) of the Borrower or any Restricted Subsidiary on which improvements
are located, the Borrower will, and will cause each Restricted Subsidiary to,
obtain flood insurance in such total amount as the Administrative Agent or the
Majority Lenders may from time to time require, if at any time the area in which
any improvements located on any such real property is designated a “flood hazard
area” in any Flood Insurance Rate Map published by the Federal Emergency
Management Agency (or any successor agency), and otherwise comply with the
National Flood Insurance Program as set forth in the Flood Disaster Protection
Act of 1973, as amended from time to time.
     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 Subsidiary and each Subsidiary’s
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not dispose of or otherwise release, and shall cause each Subsidiary not to
dispose of or otherwise release, any Hazardous Material on, under, about or from
any of the Borrower’s or its Subsidiaries’ Properties or any other Property to
the extent caused by the Borrower’s or any of its Subsidiaries’ operations
except in compliance with applicable Environmental Laws, the disposal or release
of which could reasonably be expected to have a Material Adverse Effect;
(iii) timely obtain or file, and shall cause each Subsidiary to timely obtain or
file, all notices, permits, licenses, exemptions, approvals, registrations or
other authorizations, if any, required under applicable Environmental Laws to be
obtained or filed in connection with the operation or use of the Borrower’s or
its Subsidiaries’ Properties, which failure to obtain or file could reasonably
be expected to have a Material Adverse Effect; (iv) promptly commence and
diligently prosecute to completion, and shall cause each Subsidiary to

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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 Subsidiaries’ Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause each
Subsidiary to establish and implement, such procedures as may be necessary to
continuously determine and assure that the Borrower’s and its Subsidiaries’
obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.
          (b) The Borrower will promptly, but in no event later than five
(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 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 $10,000,000, not fully
covered by insurance, subject to normal deductibles.
          (c) The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders and
no more than once per year in the absence of any Event of Default (or as
otherwise required to be obtained by the Administrative Agent or the Lenders by
any Governmental Authority), in connection with any future acquisitions of Oil
and Gas Properties (other than Royalty Interests).
     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 priority thereof, or to make any
recordings, file any notices or obtain any consents, all as may be reasonably
necessary or appropriate, 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

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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
March 1, 2008, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report evaluating the Borrowing Base Properties of the
Borrower and its Subsidiaries as of the immediately preceding January 1st and
July 1st. The Reserve Report as of January 1 of each year shall be prepared by
one or more Approved Petroleum Engineers, and the July 1 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 Borrowing
Base 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 January 1 Reserve Report.
          (b) In the event of an Interim Redetermination, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate (provided, that projections
concerning volumes attributable to the Borrowing Base 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
January 1 Reserve Report. For any Interim Redetermination requested by the
Administrative Agent or the Borrower pursuant to Section 2.08(b), the Borrower
shall provide such Reserve Report with an “as of” date as required by the
Administrative Agent as soon as possible, but in any event no later than thirty
(30) days following the receipt of such request.
          (c) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct (provided, that projections
concerning volumes attributable to the Borrowing Base 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) the Borrower
or its Restricted Subsidiaries own good and defensible title to the Borrowing
Base Properties and such Properties are free of all Liens except for Liens
permitted by Section 9.03, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments in excess of the volume specified in Section 7.18 with respect to
its Borrowing Base Properties which would require the Borrower or any Restricted
Subsidiary to deliver Hydrocarbons either generally or produced from such
Borrowing Base Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their Borrowing Base Properties
have been sold since the date

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of the last Borrowing Base determination except as set forth on an exhibit to
the certificate, which certificate shall list all of its Borrowing Base
Properties sold and in such detail as reasonably required by the Administrative
Agent, (v) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the date hereof or the most recently
delivered Reserve Report which the Borrower could reasonably be expected to have
been obligated to list on Schedule 7.19 had such agreement been in effect on the
date hereof and (vi) attached thereto is a schedule of the Borrowing Base
Properties that are Mortgaged Properties and demonstrating the percentage of the
total value of the Borrowing Base 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 Sections 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 Borrowing Base 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 Borrowing Base Properties as set forth in such Reserve
Report.
          (b) If the Borrower has provided title information for additional
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 Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% of the value of the Borrowing Base 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 not comply with the requirements to provide acceptable title
information covering 80% of the value of the Borrowing Base Properties as set
forth in the most recent Reserve Report, such default shall not be a Default,
but instead the Administrative Agent and/or the Majority Lenders shall have the
right to exercise the following remedy in their sole discretion from time to
time,

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and any failure to so exercise this remedy at any time shall not be a waiver as
to future exercise of the remedy by the Administrative Agent or the Lenders. To
the extent that the Administrative Agent or the Majority Lenders are not
satisfied with title to any Mortgaged Property after the 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 Borrowing Base shall be reduced by an
amount as determined by the Required Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 80%
of the value of the Borrowing Base Properties as set forth in the most recent
Reserve Report. This new Borrowing Base shall become effective immediately after
receipt of such notice.
     Section 8.14 Additional Collateral; Additional Guarantors.
          (a) In connection with each Borrowing Base Redetermination, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% of the total value of the Borrowing
Base 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 interest (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 Borrowing Base Properties not already subject to a Lien of the
Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value. All such Liens will
be created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes. In order to
comply with the foregoing, if any Restricted Subsidiary places a Lien on its Oil
and Gas Properties and such Restricted Subsidiary is not a Guarantor, then it
shall become a Guarantor and comply with Section 8.14(b).
          (b) In the event that (i) the Borrower 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, (i) execute and deliver a supplement to the Guaranty and
Collateral Agreement executed by such Domestic Subsidiary, (ii) cause the owner
of the Equity Interests in such Domestic Subsidiary to pledge 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

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owner thereof) and (iii) execute and deliver such other additional closing
documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.
          (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 (other than the Royalty Interests) 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.
     Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will
cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) 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 section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying
the nature thereof, what action the Borrower, the Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (iii) 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 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.

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     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 that is a corporation will be treated as a corporate entity separate
and distinct from Borrower and the Restricted Subsidiaries;
          (b) will not, and will not permit any of the Restricted Subsidiaries
to, incur, assume, guarantee or be or become liable for any 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 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:
     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.
               (i) If the Borrower has no Indebtedness of the type described in
Section 9.02(h), the Borrower will not, at any time, permit the Total Leverage
Ratio to be greater than 5.00 to 1.00; provided that during a Specified
Acquisition Period, the Total Leverage Ratio shall not exceed 5.25 to 1.00.
               (ii) If the Borrower has Indebtedness of the type described in
Section 9.02(h), the Borrower will not, at any time, permit the Total Leverage
Ratio to be greater than 5.25 to 1.00; provided that during a Specified
Acquisition Period, the Total Leverage Ratio shall not exceed 5.75 to 1.00.

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          (c) Senior Secured Leverage Ratio. If the Borrower has Indebtedness of
the type described in Section 9.02(h), then the Borrower will not permit the
Senior Secured Leverage Ratio to exceed 4.25 to 1.00; provided that during a
Specified Acquisition Period, the Senior Secured Leverage Ratio shall not exceed
4.75 to 1.00.
          (d) Certain Calculations. With respect to any period during which a
Permitted Acquisition has occurred (a “Subject Transaction”), for purposes of
determining compliance with the financial covenants set forth in this
Section 9.01, Adjusted 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 specific 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 General Partner) using the
historical audited financial statements of any business so acquired or to be
acquired 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 Adjusted Consolidated EBITDA:
          (A) prior to the Commercial Operation Date of such Material Project
(but including the fiscal quarter in which such Commercial Operation Date
occurs), 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 Adjusted 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 Adjusted 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,

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but net of any actual Adjusted 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): (i) 90 days or less, 0%, (ii) longer
than 90 days, but not more than 180 days, 50%, and (iii) longer than 180 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
Adjusted 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 Adjusted
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 Adjusted 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 Adjusted 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,
          (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 fifteen percent (15%) of the total actual
Adjusted Consolidated EBITDA for such period (which total actual Adjusted
Consolidated EBITDA shall be determined without including any Material Project
EBITDA Adjustments).

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     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 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 Oil and Gas
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;
          (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, (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 or definitions that
are more restrictive than those set forth herein; provided further that upon the
incurrence of such Indebtedness, the Borrowing Base will be redetermined using
the procedures for an Interim Redetermination in accordance with Section 2.08

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          (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 not to exceed
$5,000,000 in the aggregate at any time outstanding for all 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 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;
          (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;

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          (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 Borrowing Base
Property and not otherwise permitted by the foregoing clauses of this
Section 9.03; provided that (i) the aggregate principal or face amount of all
Indebtedness secured under this Section 9.03(j) shall not exceed $25,000,000 at
any time and (ii) the aggregate value of all Property subject to Liens under
this Section 9.03(j) shall not exceed $75,000,000 at any time.
     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 stock option plans or other benefit plans for management or
employees of the Borrower and its Subsidiaries;
          (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, 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 (i) in an aggregate amount not to exceed
$500,000 in any fiscal year, to the extent necessary to permit such equity
holders to pay general administrative costs and expenses and (ii) as otherwise
permitted pursuant to clauses (a) through (d) of Section 9.14; provided that, in
the case of clauses (i) and (ii), 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:

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          (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;
          (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 $1,000,000;
          (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
$20,000,000 (or its equivalent in

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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 $20,000,000 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 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.

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     Section 9.09 ERISA Compliance. The Borrower will not, and will not permit
any Subsidiary to, at any time:
          (a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code.
          (b) 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 Subsidiary or any ERISA Affiliate to the
PBGC.
          (c) fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.
          (d) 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.
          (e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, a Subsidiary or any ERISA Affiliate which is regulated under Title IV
of ERISA 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.
          (f) 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.
          (g) 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 Subsidiary or with respect to any ERISA Affiliate of the
Borrower or a Subsidiary if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan, or (ii) any other
Plan that is subject to Title IV of ERISA under which the actuarial present
value of the benefit liabilities under such Plan exceeds 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.
          (h) 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.
          (i) 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 employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan

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maintained to provide benefits to former employees of such entities, that may
not be terminated by such entities in their sole discretion at any time without
any material liability.
          (j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Borrower, a 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
sell, transfer, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its Property to any other
Person (whether now owned or hereafter acquired) (any such transaction, a
“consolidation”), or liquidate or dissolve; provided that the Borrower or any
Restricted Subsidiary may participate in a consolidation with any other Person;
provided that:
          (a) (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
Borrowing Base will be redetermined using the procedures for an Interim
Redetermination in accordance with Section 2.08;
          (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
          (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.

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     Section 9.12 Sale of Properties. The Borrower will not, and will not permit
any Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer any Property except for:
          (a) the sale of Hydrocarbons in the ordinary course of business;
          (b) farmouts of undeveloped acreage and assignments in connection with
such farmouts;
          (c) the sale or transfer of equipment that is no longer necessary for
the business of the Borrower or such Restricted Subsidiary or is replaced by
equipment of at least comparable value and use;
          (d) the transfer of Property to another Loan Party;
          (e) the sale, transfer or other disposition of Equity Interests in
Unrestricted Subsidiaries;
          (f) the sale or other disposition of any Borrowing Base Property or
any interest therein or any Restricted Subsidiary owning Borrowing Base
Properties; provided that (i) 75% of the consideration received in respect of
such sale or other disposition shall be cash, (ii) the consideration received in
respect of such sale or other disposition shall be equal to or greater than the
fair market value of the Borrowing Base Property, interest therein or Restricted
Subsidiary subject of such sale or other disposition (as reasonably determined
by the board of directors of the Borrower and, if requested by the
Administrative Agent, the Borrower shall deliver a certificate of a Responsible
Officer of the Borrower certifying to that effect), (iii) if such sale or other
disposition of such Borrowing Base Property or Restricted Subsidiary owning
Borrowing Base Properties during any period between two (2) successive Scheduled
Redetermination Dates has a fair market value in excess of ten percent (10%) of
the Borrowing Base, individually or in the aggregate when combined with all
other sales for such period, the Borrowing Base shall be reduced, effective
immediately upon such sale or disposition, by an amount equal to the value
designated by the Required Lenders and (iv) if any such sale or other
disposition is of a Restricted Subsidiary owning Borrowing Base Properties, such
sale or other disposition shall include all the Equity Interests of such
Restricted Subsidiary;
          (g) the sale or transfer of non-core assets acquired in a Permitted
Acquisition;
          (h) the sale of Investments described in Sections 9.05(c), (d), (e)
and (f) for fair market value;
          (i) an exchange or “swap” of pipeline or other fixed, tangible,
non-Borrowing Base Property assets of any Loan Party for the assets of a Person
other than another Loan Party in the ordinary course of business; provided that
such Loan Party receives reasonable equivalent value for such assets, such value
to be demonstrated to the reasonable satisfaction of the Administrative Agent;
provided, further, that the fair market value of all such assets of the Loan
Parties exchanged or “swapped”, other than exchanges or swaps of the assets
described in Schedule 9.12(i), does not exceed $50,000,000 for the term of this
Agreement;

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          (j) Asset Sales having, in the aggregate for all Asset Sales by the
Borrower or any Restricted Subsidiary, a fair market value not to exceed
$25,000,000 during any fiscal year of the Borrower; and
          (k) other Asset Sales, subject to Section 3.04(c)(ii).
     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 Subsidiaries, (b) compensation
arrangements for directors, officers and other employees of the Borrower and its
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(f). 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 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.

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     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-half 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) Borrowing Base Hedges and Royalty Interest 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
Borrowing Base Properties and Royalty Interests 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% of forecasted production from
total proved Borrowing Base Properties and Royalty Interests for each month
during the period during which such Hedging Agreement is in effect for each of
crude oil and natural gas, calculated separately, (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. The Borrower will not, and will not permit any Restricted Subsidiary to,
after January 11, 2008, permit any Secured Hedging Agreement to be with, or any
Secured Hedging Agreement Counterparty to be, any Person other than a Lender or
an Affiliate of a Lender.
     Section 9.20 Sale and Leaseback. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any Property,
whether now owned or hereafter acquired, and thereafter rent or lease such
Property which it intends to use for substantially the same purpose or purposes
as the Property being sold or transferred.
     Section 9.21 Amendments to Organization Documents or 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

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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 9.22 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 (i) contracts for the sale of Hydrocarbons
attributable to the Borrowing Base Properties scheduled or reasonably estimated
to be produced therefrom during the period of such contract, (ii) contracts for
the sale of such Hydrocarbons scheduled or reasonably estimated to be produced
from proved Borrowing Base Properties of third parties during the period of such
contract associated with the Borrowing Base 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, (iii) other contracts for the purchase and/or sale of such
Hydrocarbons of third parties (A) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (B) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto, and (iv) 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 9.23 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, 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 9.23(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 9.24 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

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

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          (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 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 $20,000,000 (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.

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          (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, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding $20,000,000 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 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:

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                    (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 to a Secured Hedging Agreement
Counterparty, (C) Secured Obligations referred to in clause (c) of the
definition of Secured Obligations owing to a Treasury Management Counterparty,
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
          (a) 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 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

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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 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 Syndication Agent nor any Co-Documentation 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

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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 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
     Section 11.06 Resignation or Removal of 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, and the
Administrative Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right, 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

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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 Arrangers shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of such Agent or 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

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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 connection with any sale or other disposition of
Property to the extent such sale or other disposition is permitted by the terms
of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.
     Section 11.11 The Arrangers, the Syndication Agent and the Co-Documentation
Agents. The Arrangers, the Syndication Agent and the Co-Documentation Agents
shall have no duties, responsibilities or liabilities under this Agreement and
the other Loan Documents other than their duties, responsibilities and
liabilities in their capacity as Lenders hereunder.
ARTICLE XII
Miscellaneous
     Section 12.01 Notices.
          (a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing 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:

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Eagle Rock Energy Partners, L.P.
16701 Greenspoint Park Drive, Suite 200
Houston, Texas 77060
Attention: Alfredo Garcia
Phone: (281) 408-1204
Fax: (281) 408-1399
Email: a.garcia@eaglerockenergy.com
               With a copy to:
Natural Gas Partners
125 East John Carpenter Freeway, Suite 600
Irving, Texas 75062
Attention: Christopher Ray
Fax: (972) 432-1441
               (ii) if to the Administrative Agent or the Issuing Bank, as
follows:
Wachovia Capital Markets, LLC
301 South College Street
NC5562
Charlotte, North Carolina 28288
Attention: Leanne Phillips
Phone: (704) 374-6278
Fax: (704) 383-6647
Email: leanne.phillips@wachovia.com
               With a copy to:
Wachovia Bank, National Association
1525 W.W.T. Harris Blvd.
Charlotte, North Carolina 28262
Attention: Syndication Agency Services
Fax: (704) 590-3481
               (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.

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          (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 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 Borrowing Base without the written consent (or deemed
consent pursuant to Section 2.08(c)(iii)) of each Lender, decrease or maintain
the Borrowing Base without the consent (or deemed consent pursuant to
Section 2.08(c)(iii)) of the Required Lenders, or modify in any manner
Section 2.08 without the consent of each Lender, (iii) 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, (iv) 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, (v) change
Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (vi) 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, (vii) 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

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80%, without the written consent of each Lender, or (viii) 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, any supplement to
Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.
     Section 12.03 Expenses, Indemnity; Damage Waiver.
          (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and other
outside consultants for the Administrative Agent, the reasonable travel,
photocopy, mailing, courier, telephone and other similar expenses, and the cost
of environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by any Agent or any Lender in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or any Security Instrument or any other document referred to
therein, (iii) all reasonable out-of-pocket expenses incurred by any Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket
expenses incurred by any Agent, any Issuing Bank, the Swingline Lender or any
Lender, including the fees, charges and disbursements of any counsel for the any
Agent, any Issuing Bank or any Lender, 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.
          (b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS, 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 FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY

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INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN
DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT,
(iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR
COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS
OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION
THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS
THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY 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

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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 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 WILFUL MISCONDUCT OF SUCH INDEMNITEE OR BREACH IN BAD
FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR (ii) ARISE SOLELY BY REASON OF CLAIMS BETWEEN THE ADMINISTRATIVE
AGENT AND LENDERS OR BY THEIR SHAREHOLDERS AGAINST SUCH PERSONS.
          (c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Agents, the Arrangers, 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

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

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               (iii) Subject to Section 12.04(b)(iv) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of
Section 5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 12.04 shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(c).
               (iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the 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.
          (d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
          (e) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would require the Borrower and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any
state.
     Section 12.05 Survival; Revival; Reinstatement.
          (a) All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
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

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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.
          (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

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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 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.

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          (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 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
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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: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
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 (ii) in the event that the maturity of the Loans is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the 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 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

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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,
except to the extent necessary for all Secured Hedging Agreements and 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
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, 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.
[SIGNATURES BEGIN NEXT PAGE]

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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/ Alfredo Garcia
 
           
 
          Alfredo Garcia
 
          Senior Vice President, Corporate
 
          Development and Chief Financial Officer

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          ADMINISTRATIVE AGENT   WACHOVIA BANK, NATIONAL ASSOCIATION, and LENDER
  as Administrative Agent and Lender
 
       
 
  By:   /s/ Leanne S. Phillips
 
       
 
  Name:   Leanne S. Phillips
 
  Title:   Director

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          SYNDICATION AGENT   BANK OF AMERICA, N.A., and LENDER   as Syndication
Agent and Lender
 
       
 
  By:   Jeffrey H. Rathkamp
 
       
 
  Name:   Jeffrey H. Rathkamp
 
  Title:   Managing Director

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          CO-DOCUMENTATION AGENT   HSH NORDBANK AG, NEW YORK BRANCH, and LENDER
  as Co-Documentation Agent and Lender
 
       
 
  By:   /s/ Tony K. Muoser
 
       
 
  Name:   Tony K. Muoser
 
  Title:   Senior Vice President
 
      HSH Nordbank AG, New York Branch
 
       
 
  By:   /s/ Rohan Singh
 
       
 
  Name:   Rohan Singh
 
  Title:   Vice President
 
      HSH Nordbank AG, New York Branch

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          CO-DOCUMENTATION AGENT   THE ROYAL BANK OF SCOTLAND plc, and LENDER  
as Co-Documentation Agent and Lender
 
       
 
  By:   /s/ Mark Lumpkin, Jr.
 
       
 
  Name:   Mark Lumpkin, Jr.
 
  Title:   Vice President

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          CO-DOCUMENTATION AGENT   BNP PARIBAS, and LENDER   as Co-Documentation
Agent and Lender
 
       
 
  By:   /s/ Betsy Jocher
 
       
 
  Name:   Betsy Jocher
 
  Title:   Director
 
       
 
  By:   /s/ Larry Robinson
 
       
 
  Name:   Larry Robinson
 
  Title:   Director

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          LENDER:   Comerica Bank
     
 
       
 
  By:   /s/ Juli Bieser
 
       
 
  Name:   Juli Bieser
 
  Title:   Senior Vice President

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          LENDER:   Calyon New York Branch
     
 
       
 
  By:   /s/ Sharada Manne
 
       
 
  Name:   Sharada Manne
 
  Title:   Vice President
 
       
 
  By:   /s/ Tom Byargeon
 
       
 
  Name:   Tom Byargeon
 
  Title:   Managing Director

Signature Page to Credit Agreement

 

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          LENDER:   The Bank of Nova Scotia
     
 
       
 
  By:   /s/ Andrew Ostrov
 
       
 
  Name:   Andrew Ostrov
 
  Title:   Director

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          LENDER:   Union Bank of California, N.A.
     
 
       
 
  By:   /s/ Scott Gildea
 
       
 
  Name:   Scott Gildea
 
  Title:   Vice President

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          LENDER:   Compass Bank
     
 
       
 
  By:   /s/ Murray Brasseux
 
       
 
  Name:   Murray Brasseux
 
  Title:   Executive Vice President

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          LENDER:       Sterling Bank      
 
       
 
  By:   /s/ Jeff A. Forbis
 
       
 
  Name:   Jeff A. Forbis
 
  Title:   Senior Vice President
 
      Sterling Bank

Signature Page to Credit Agreement

 

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          LENDER:   Credit Suisse, Cayman Islands Branch
     
 
       
 
  By:   /s/ Vanessa Gomez
 
       
 
  Name:   Vanessa Gomez
 
  Title:   Vice President
 
       
 
       
 
  By:   /s/ Morenikeji Ajayi
 
       
 
  Name:   Morenikeji Ajayi
 
  Title:   Associate

Signature Page to Credit Agreement

 

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          LENDER:   LEHMAN BROTHERS COMMERICAL BANK
 
       
 
  By:   /s/ Brian McNany
 
       
 
  Name:   Brian McNany
 
  Title:   Authorized Signatory

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          LENDER:       UBS Loan Finance LLC      
 
       
 
  By:   /s/ Mary E. Evans
 
       
 
  Name:   Mary E. Evans
 
  Title:   Associate Director
 
      Banking Products
 
      Services, US
 
       
 
       
 
  By:   /s/ Irja R. Otsa
 
       
 
  Name:   Irja R. Otsa
 
  Title:   Associate Director
 
      Banking Products
 
      Services, US

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          LENDER:       U.S. Bank National Association      
 
       
 
  By:   /s/ Justin M. Alexander
 
       
 
  Name:   Justin M. Alexander
 
  Title:   Vice President

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          LENDER:       GUARANTY BANK      
 
       
 
  By:   /s/ Jim R. Hamilton
 
       
 
  Name:   Jim R. Hamilton
 
  Title:   Senior Vice President

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          LENDER:   Wells Fargo Bank, National Association
     
 
       
 
  By:   /s/ Doug McDowell
 
       
 
  Name:   Doug McDowell
 
  Title:   Vice President

Signature Page to Credit Agreement