Exhibit 10.2

Execution Version

 

 

 

SECOND AMENDED AND RESTATED

CREDIT AGREEMENT

dated as of December 16, 2014

among

FOREST OIL CORPORATION,

as Borrower,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

and

THE LENDERS PARTY HERETO

 

 

 

BARCLAYS BANK PLC

as Syndication Agent

and

CAPITAL ONE SECURITIES, INC.,

CITIGROUP GLOBAL MARKETS INC.,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

NATIXIS, NEW YORK BRANCH

and

UBS SECURITIES LLC,

as Co-Documentation Agents

 

 

 

WELLS FARGO SECURITIES, LLC,

BARCLAYS BANK PLC,

CAPITAL ONE SECURITIES, INC.,

CITIGROUP GLOBAL MARKETS INC.,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

NATIXIS, NEW YORK BRANCH

and

UBS SECURITIES,

as Joint Lead Arrangers and Joint Book Runners

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TABLE OF CONTENTS

 

            Page  

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

  

  

Section 1.01

     Terms Defined Above      2   

Section 1.02

     Certain Defined Terms      2   

Section 1.03

     Types of Loans and Borrowings      40   

Section 1.04

     Terms Generally; Rules of Construction      40   

Section 1.05

     Accounting Terms and Determinations; GAAP      40   

Section 1.06

     Pro Forma Basis Calculation      41   

Section 1.07

     Times of Day      41   

Section 1.08

     Timing of Payment or Performance      41   

Section 1.09

     Negative Covenant Compliance      41   

ARTICLE II

THE CREDITS

  

  

Section 2.01

     Commitments      42   

Section 2.02

     Loans and Borrowings      42   

Section 2.03

     Requests for Borrowings      43   

Section 2.04

     Interest Elections      44   

Section 2.05

     Funding of Borrowings      45   

Section 2.06

     Termination and Reduction of Aggregate Maximum Credit Amounts      45   

Section 2.07

     Borrowing Base      46   

Section 2.08

     Borrowing Base Adjustment Provisions      49   

Section 2.09

     Letters of Credit      50   

Section 2.10

     Increase of Aggregate Maximum Credit Amounts      55   

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

  

  

Section 3.01

     Repayment of Loans      56   

Section 3.02

     Interest      56   

Section 3.03

     Inability to Determine Rates      57   

Section 3.04

     Prepayments      58   

Section 3.05

     Fees      59   

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

  

  

Section 4.01

     Payments Generally; Pro Rata Treatment; Sharing of Set-offs      60   

Section 4.02

     Presumption of Payment by the Borrower      61   

Section 4.03

     Disposition of Proceeds      61   

Section 4.04

     Defaulting Lenders      62   

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES

  

  

Section 5.01

     Increased Costs      64   

 

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Section 5.02

     Break Funding Payments      66   

Section 5.03

     Taxes      66   

Section 5.04

     Matters Applicable to All Requests for Compensation      69   

Section 5.05

     Mitigation Obligations- Designation of Different Lending Office      69   

Section 5.06

     Replacement of Lenders      69   

Section 5.07

     Illegality      70   

ARTICLE VI

CONDITIONS PRECEDENT

  

  

Section 6.01

     Closing Date      71   

Section 6.02

     Each Subsequent Credit Event      73   

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

  

  

Section 7.01

     Organization; Powers      74   

Section 7.02

     Authority; Enforceability      74   

Section 7.03

     Approvals; No Conflicts      74   

Section 7.04

     Financial Condition; No Material Adverse Change      74   

Section 7.05

     Litigation      75   

Section 7.06

     Environmental Matters      75   

Section 7.07

     Compliance with the Laws and Agreements; No Defaults      76   

Section 7.08

     Investment Company Act      76   

Section 7.09

     Taxes      76   

Section 7.10

     ERISA      77   

Section 7.11

     Disclosure; No Material Misstatements      77   

Section 7.12

     Subsidiaries; Insurance      77   

Section 7.13

     Location of Business and Offices      77   

Section 7.14

     Properties; Titles, Etc      78   

Section 7.15

     Maintenance of Properties      78   

Section 7.16

     Gas Imbalances, Prepayments      79   

Section 7.17

     Marketing of Production      79   

Section 7.18

     Swap Agreements      79   

Section 7.19

     Use of Loans and Letters of Credit      79   

Section 7.20

     Solvency      79   

ARTICLE VIII

AFFIRMATIVE COVENANTS

  

  

Section 8.01

     Financial Statements; Other Information      80   

Section 8.02

     Notices of Material Events      82   

Section 8.03

     Existence; Conduct of Business      83   

Section 8.04

     Payment of Tax Obligations      83   

Section 8.05

     Operation and Maintenance of Properties      83   

Section 8.06

     Insurance      84   

Section 8.07

     Books and Records; Inspection Rights      84   

Section 8.08

     Compliance with Laws      84   

Section 8.09

     Environmental Matters      84   

Section 8.10

     Further Assurances      85   

Section 8.11

     Reserve Reports      85   

 

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Section 8.12

     Title Information      87   

Section 8.13

     Additional Collateral; Additional Guarantors      88   

Section 8.14

     ERISA Compliance      89   

Section 8.15

     Swap Agreements      89   

Section 8.16

     Unrestricted Subsidiaries; Designation and Redesignation      89   

Section 8.17

     Marketing Activities      90   

Section 8.18

     Post-Closing Obligations      90   

ARTICLE IX

NEGATIVE COVENANTS

  

  

Section 9.01

     Financial Covenant      90   

Section 9.02

     Debt      91   

Section 9.03

     Liens      93   

Section 9.04

     Dividends, Distributions and Redemptions      94   

Section 9.05

     Investments, Loans and Advances      96   

Section 9.06

     Nature of Business; International Operations      97   

Section 9.07

     Mergers, Etc      98   

Section 9.08

     Disposition of Properties      99   

Section 9.09

     Transactions with Affiliates      101   

Section 9.10

     Subsidiaries      102   

Section 9.11

     Negative Pledge Agreements; Dividend Restrictions      102   

Section 9.12

     Gas Imbalances, Take-or-Pay or Other Prepayments      103   

Section 9.13

     Swap Agreements      103   

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

  

  

Section 10.01

     Events of Default      104   

Section 10.02

     Remedies      106   

Section 10.03

     Equity Cure      107   

ARTICLE XI

THE ADMINISTRATIVE AGENT

  

  

Section 11.01

     Appointment; Powers      108   

Section 11.02

     Duties and Obligations of Administrative Agent      108   

Section 11.03

     Action by Administrative Agent      109   

Section 11.04

     Reliance by Administrative Agent      109   

Section 11.05

     Subagents      109   

Section 11.06

     Resignation or Removal of Administrative Agent      110   

Section 11.07

     Administrative Agent as Lender      110   

Section 11.08

     No Reliance      110   

Section 11.09

     Administrative Agent May File Proofs of Claim      111   

Section 11.10

     Authority of Administrative Agent to Release Guarantors, Collateral and
Liens      111   

Section 11.11

     The Arrangers, Syndication Agent and Co-Documentation Agents      112   

Section 11.12

     Intercreditor Agreement      112   

 

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ARTICLE XII

MISCELLANEOUS

  

  

Section 12.01

     Notices      112   

Section 12.02

     Waivers; Amendments      113   

Section 12.03

     Expenses, Indemnity; Damage Waiver      116   

Section 12.04

     Successors and Assigns      118   

Section 12.05

     Survival; Revival; Reinstatement      122   

Section 12.06

     Counterparts; Integration; Effectiveness      123   

Section 12.07

     Severability      123   

Section 12.08

     Right of Setoff      123   

Section 12.09

     GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS      124   

Section 12.10

     Headings      125   

Section 12.11

     Confidentiality      125   

Section 12.12

     Interest Rate Limitation      126   

Section 12.13

     Collateral Matters; Swap Agreements      126   

Section 12.14

     PATRIOT Act Notice      126   

Section 12.15

     Electronic Execution of Assignments      127   

Section 12.16

     Release of Liens and Release from Guaranty and Pledge Agreement      127   

Section 12.17

     Flood Insurance Provisions      128   

Section 12.18

     No Advisor or Fiduciary Responsibility      128   

Section 12.19

     Swap Agreements under Existing Forest Credit Agreement      129   

Section 12.20

     Effect and Mechanics of Amendment and Restatement      129   

 

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Annexes, Exhibits and Schedules

 

Annex I

   List of Lenders and Maximum Credit Amounts

Exhibit A

   Form of Note

Exhibit B

   Form of Borrowing Request

Exhibit C

   Form of Interest Election Request

Exhibit D

   Form of Compliance Certificate

Exhibit E

   Security Instruments

Exhibit F

   Form of Assignment and Assumption

Exhibit G

   Form of Reserve Report Certificate

Exhibit H

   Form of Solvency Certificate

Exhibit I

   Form of Intercompany Note

Exhibit J

   Form of Mortgage

Exhibit K

   Form of Guaranty and Pledge Agreement

Exhibit L

   Form of Intercreditor Agreement

Exhibit M

   Form of Partial Release

Exhibit N-1

   Form of Opinion of Simpson Thacher & Bartlett LLP

Exhibit N-2

   Form of Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.

Schedule 1.01(a)

   Closing Date Guarantors

Schedule 1.01(b)

   Excluded Equity Interests

Schedule 1.01(c)

   Unrestricted Subsidiaries on Closing Date

Schedule 1.01(d)

   Closing Date Swap Agreements

Schedule 7.04

   Supplemental Information to Financial Statements

Schedule 7.05

   Litigation

Schedule 7.06

   Environmental Matters

Schedule 7.12

   Subsidiaries and Partnerships

Schedule 7.16

   Gas Imbalances

Schedule 7.17

   Marketing Contracts

Schedule 7.18

   Swap Agreements

Schedule 8.18

   Post-Closing Obligations

Schedule 9.02(a)

   Closing Date Debt

Schedule 9.03(a)

   Closing Date Liens

Schedule 9.05

   Investments

Schedule 9.09

   Affiliate Transactions

Schedule 9.11

   Negative Pledge Agreements

Schedule 12.01

   Certain Addresses for Notices

 

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THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 16, 2014,
is among: Forest Oil Corporation, a New York corporation (the “Borrower”); each
of the Lenders from time to time party hereto; Wells Fargo Bank, National
Association (in its individual capacity, together with its successors in such
capacity, “Wells Fargo”), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Administrative
Agent”) and as an Issuing Bank (as defined below), and each other Issuing Bank
from time to time party hereto.

R E C I T A L S

A. On the date hereof, (i) using the initial extensions of credit hereunder, the
Borrower will refinance the existing Third Amended and Restated Credit Agreement
dated as of June 30, 2011, among the Borrower, JPMorgan Chase Bank, N.A., as
administrative agent, and the lenders and other parties party thereto (as
amended, such credit agreement, the “Existing Forest Credit Agreement” and such
refinancing, the “Forest Credit Agreement Refinancing”) and (ii) by execution
and delivery of this Agreement, the parties hereto will amend and restate in its
entirety the existing Amended and Restated Credit Agreement dated as of
April 28, 2009, among Sabine Oil & Gas LLC (“Sabine”) and Wells Fargo Bank,
National Association, as administrative agent, and the lenders and other parties
party thereto (as amended, supplemented or otherwise modified prior to the date
hereof, such credit agreement, the “Existing Sabine Credit Agreement” and such
amendment and restatement, the “Sabine Credit Agreement Refinancing” and,
together with the Forest Credit Agreement Refinancing, the “Closing Date
Refinancing”).

B. On the date hereof, pursuant to the Amended and Restated Agreement and Plan
of Merger, dated as of July 9, 2014 as amended by Amendment No. 1 to the Amended
and Restated Agreement and Plan of Merger dated as December 16, 2014 (together
with all exhibits and schedules thereto, as amended, restated, supplemented or
otherwise modified from time to time, the “Merger Agreement”), among Sabine, the
Borrower and the other parties party thereto, (a) FR XI Onshore AIV, LLC (“AIV
Holdings”), a Delaware limited liability company and an entity the majority of
the equity interests of which are currently indirectly held by the Sponsor (as
defined below), will contribute, among other things, all of the issued and
outstanding stock in FR NFR Holdings, Inc. (“FR NFR”), a Delaware corporation
and FR NFR PI, Inc., a Delaware corporation (“FR NFR PI” and, together with FR
NFR, the “Contributed Corporations”) to Forest Oil Corporation, a New York
corporation (“Forest”) and (b) Sabine Investor Holdings LLC (“New Sabine
Holdings”), a Delaware limited liability company and any entity the majority of
the equity interests of which are currently indirectly held by the Sponsor, will
contribute, among other things, its limited liability company interests in
Sabine Oil & Gas Holdings LLC (“Sabine Holdings”), the indirect parent of Sabine
Oil & Gas LLC (“Sabine”), to Forest, in a transaction where the consideration
will be equity, resulting in a majority of the equity interests of Forest being
owned by AIV Holdings and New Sabine Holdings, and the remainder of the equity
interests of Forest being owned by the public shareholders of Forest (such
contribution and transaction, the “Contribution”).

C. On the date hereof, (a) the Contributed Corporations will merge with and into
Forest, with Forest being the surviving entity and (b) Sabine Holdings and other
affiliates of Sabine will merge with and into Forest, with Forest being the
surviving entity and such surviving entity shall be the Borrower referenced
herein (such merger described in clause (b), the “Merger”).

D. The Borrower has requested that the Lenders amend and restate the Existing
Sabine Credit Agreement in its entirety, and the Lenders have indicated their
willingness to amend and restate the Existing Sabine Credit Agreement in its
entirety, on the terms and subject to the conditions hereof.

E. 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:

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ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

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

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

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

“Accepting Lenders” has the meaning set forth in Section 12.02(g).

“Acquisition Swap” has the meaning set forth in Section 9.13(b).

“Additional Lender” has the meaning set forth in Section 2.10(a).

“Adjusted Aggregate Commitments” means, at any time, the Aggregate Commitments
minus the aggregate amount of the Commitments of all Defaulting Lenders.

“Administrative Agent” has the meaning set forth in the preamble hereto.

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

“Affiliate” means, with respect to any 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.

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

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts.

“Agreement” means this Second Amended and Restated Credit Agreement, as amended,
restated, supplemented or otherwise modified from time to time.

“AIV Holdings” has the meaning set forth in the recitals hereto.

“Alternate Base Rate” means, for any day, a fluctuating rate per annum equal to
the greatest of (a) the rate of interest in effect for such day as publicly
announced from time to time by the Administrative Agent as its Prime Rate,
(b) the Federal Funds Effective Rate plus  1⁄2 of one percent (1%) and (c) the
Eurodollar Rate having an Interest Period of one month on such day (or if such
day is not a Business Day, the immediately preceding Business Day) plus one
percent (1.00%), provided that the Eurodollar Rate for any day shall be based on
the LIBO Screen Rate at approximately 11:00 a.m. London time on such day. Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Federal
Funds Effective Rate or the Eurodollar Rate shall be effective from and
including the effective date of such change in the Prime Rate, the Federal Funds
Effective Rate or the Eurodollar Rate, respectively.

 

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“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 in the Borrowing Base Utilization Grid below based
upon the Borrowing Base Utilization Percentage then in effect:

 

Borrowing Base

Utilization Percentage

   <30%
    ³30%
and
<60%     ³60%
and
<80%     ³80%
and
<90%     ³90%
 

ABR Loans

     0.50 %      0.75 %      1.00 %      1.25 %      1.50 % 

Eurodollar Loans

     1.50 %      1.75 %      2.00 %      2.25 %      2.50 % 

Commitment Fee Rate

     0.375 %      0.375 %      0.50 %      0.50 %      0.50 % 

Each change in the Applicable Margin and Commitment Fee Rate shall apply during
the period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change.

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount; provided that if the Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Commitments most
recently in effect. The initial Applicable Percentage of each Lender is set
forth on Annex I.

“Approved Counterparty” means (a) any Lender, any Affiliate of a Lender or other
Secured Swap Party or (b) any other Person whose long term senior unsecured debt
rating is A/A2 by S&P or Moody’s (or their equivalent) or higher.

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

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company and (c) any other independent petroleum engineers
selected by the Borrower and reasonably acceptable to the Administrative Agent.

“Arranger” means Wells Fargo Securities, LLC, Barclays Bank PLC, Capital One
Securities, Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Natixis, New York Branch and UBS Securities in their
capacity as joint lead arrangers and joint book runners hereunder.

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

“Attorney Costs” means and includes all reasonable fees, expenses and
disbursements of any law firm or other external legal counsel.

“Availability Period” means the period from the Closing Date to the earlier of
(a) the Business Day immediately preceding the Maturity Date and (b) the
termination of the Commitments in full.

 

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“Available Amount” means, at any time (the “Available Amount Reference Time”),
an amount equal to:

(a) the amount of any capital contributions made in cash to, or any net cash
proceeds of an equity issuance, received by, the Borrower during the period from
and including the Business Day immediately following the Closing Date through
and including the Available Amount Reference Time, in each case including
proceeds from the issuance of Equity Interests of the Borrower, but excluding
all proceeds from the issuance of Disqualified Capital Stock or constituting a
Cure Amount or utilized pursuant to Section 9.04(a)(ii)(B);

minus

(b) the sum, without duplication, of:

(i) the aggregate amount of any Restricted Payments and Redemptions of Debt made
by the Borrower pursuant to Section 9.04(c)(i)(A)(1) after the Closing Date, and
prior to the Available Amount Reference Time; and

(ii) the aggregate amount of any Investments made by the Borrower or any
Restricted Subsidiary pursuant to Section 9.05(d)(iii)(B) and
Section 9.05(k)(ii)(B) after the Closing Date, and prior to the Available Amount
Reference Time in reliance of the Available Amount.

It is understood that (A) any Investment shall only be considered made under the
foregoing Sections for purposes of this definition, if at the time it is made,
it cannot be made without using the Available Amount (e.g., in Section 9.05(d),
an Investment shall be considered to use availability under
Section 9.05(d)(iii)(A) before Section 9.05(d)(iii)(B)) and (B) only the portion
of the amount of the Investment made in reliance upon the Available Amount shall
reduce the Available Amount).

“Available Amount Reference Time” has the meaning set forth in the definition of
Available Amount.

“Bank Price Deck” means the Administrative Agent’s forward curve for each of
oil, natural gas and other Hydrocarbons, as applicable, furnished to the
Borrower by the Administrative Agent from time to time in accordance with the
terms of this Agreement.

“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 set forth in the preamble 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.

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to the Borrowing Base Adjustment Provisions.

“Borrowing Base Adjustment Provisions” means (a) Section 2.08(a),
Section 2.08(b), Section 2.08(c), Section 2.08(d) and Paragraph 3 of Schedule
8.18 and (b) any other provisions hereunder which adjust the amount of the
Borrowing Base.

“Borrowing Base Deficiency” occurs if, at any time, the total Revolving Credit
Exposures (excluding all LC Exposure that has been Cash Collateralized in
accordance with Section 3.04(c)) at such time exceeds the Borrowing Base in
effect at such time. The amount of the Borrowing Base Deficiency

 

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at such time is the amount by which the total Revolving Credit Exposures of all
Lenders (excluding all LC Exposure that has been Cash Collateralized in
accordance with Section 3.04(c)) at such time exceeds the Borrowing Base in
effect at such time.

“Borrowing Base Properties” means the Oil and Gas Properties of the Loan Parties
(other than Holdings) (a) that constitute Proved Reserves, (b) that are included
(i) in the Initial Reserve Reports or (ii) thereafter in the Reserve Reports
most recently delivered pursuant to Section 8.11 and (c) for which Borrowing
Base credit is, or is being, given.

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

“Borrowing Base Value” means, with respect to any Oil and Gas Property of a Loan
Party or any Swap Agreement in respect of commodities, the value attributed to
such asset in connection with the most recent determination of the Borrowing
Base (which Borrowing Base was approved by all of the Lenders or the Required
Lenders, as applicable, in accordance with Section 2.07), as such value is
determined by the Administrative Agent and approved by the Required Lenders.

“Borrowing Request” means a request by the Borrower in substantially the form of
Exhibit B 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 New York City or Houston, Texas are authorized or
required by law to remain closed and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
dealings in Dollar deposits are carried out in the London interbank market.

“Capital Debt” has the meaning set forth in Section 9.02(g).

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

“Cash Collateralize” means, with respect to any amount to be cash
collateralized, to pledge and deposit with or deliver to the Administrative
Agent, for the benefit of the Issuing Banks (and/or the Lenders, other Secured
Parties and other Person as the context requires) as collateral such (a) cash or
deposit account balances in an amount equal to such amount required to be Cash
Collateralized (the “Required Cash Collateral Amount”) or (b) if the relevant
Issuing Bank benefiting from such collateral shall agree in its reasonable
discretion, other forms of credit support (including any backstop letter of
credit) in a face amount equal to one hundred three percent (103%) of the
Required Cash Collateral Amount from an issuer reasonably satisfactory to such
Issuing Bank, in each case under clause (a) and (b) above pursuant to
documentation in form and substance reasonably satisfactory to the
Administrative Agent and the relevant Issuing Bank (which documents are hereby
consented to by the Lenders). Derivatives of Cash Collateralize shall have a
corresponding meaning.

 

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“Cash Equivalents” means:

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

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

(c) deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any commercial bank
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
and surplus in excess of 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;

(d) securities or readily marketable direct obligations issued or fully
guaranteed by any state, territory or commonwealth of the United States of
America or any political subdivision of any such state, territory or
commonwealth or any public instrumentality thereof or any political subdivision
of any such state, territory or commonwealth or any public instrumentality
thereof having maturities of not more than two years from the date of
acquisition thereof and, at the time of acquisition, having an investment grade
rating generally obtainable from either S&P or Moody’s of at least “A+” and
“A-1”, respectively (or, if at any time neither S&P nor Moody’s shall be rating
such obligations, then from another nationally-recognized rating service);

(e) repurchase obligations for underlying securities of the types described in
clauses (a), (c) and (d) above entered into with any financial institution
meeting the qualifications specified in clause (c) above;

(f) money market and investment funds at least ninety-five percent (95%) of the
assets of which constitute Cash Equivalents of the kinds described in clauses
(a) through (h) of this definition;

(g) money market funds and similar funds that (i) comply with the criteria set
forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA
by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least
$500,000,000; and

(h) obligations or preferred stock issued by Persons with a rating of “A” or
higher from S&P or “A-2” from Moody’s with maturities of two years or less from
the date of acquisition.

“Cash Management Agreement” means any agreement entered into from time to time
by the Borrower or any of the Borrower’s Restricted Subsidiaries in connection
with Cash Management Services.

“Cash Management Bank” means any Person that (a) at the time it provides Cash
Management Services, (b) on the Closing Date or (c) at any time after it has
provided any Cash Management Services, is a Lender or the Administrative Agent
or an Affiliate of a Lender or the Administrative Agent.

“Cash Management Obligations” means all debt, liabilities and obligations owed
by the Borrower, its Restricted Subsidiaries or any Loan Party in connection
with, or in respect of, any Cash Management Services.

 

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“Cash Management Services” means (a) commercial credit cards, merchant card
services, purchase or debit cards, including non-card e-payables services,
(b) treasury management services (including controlled disbursement, overdraft,
automated clearing house services, return items, interstate depository network
services, electronic funds transfer services, lockbox services and stop payment
services), (c) any other demand deposit or operating account relationships and
(d) any other cash management services, including for collections and for
operating, payroll and trust accounts of the Borrower, its Restricted
Subsidiaries or any Loan Party.

“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 Subsidiaries
having a Fair Market Value in excess of the greater of (i) $25,000,000 or
(ii) five percent (5%) of the then effective Borrowing Base.

“CFC” means a “controlled foreign corporation” within the meaning of Section 957
of the Code.

“Change in Control” means, any person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect
on the Closing Date) other than any combination of the Permitted Holders or any
“group” which includes any Permitted Holders shall have acquired beneficial
ownership of 35% or more on a fully diluted basis of the voting interest in the
Borrower’s Equity Interests and the Permitted Holders shall own, directly or
indirectly, less than such Person or “group” on a fully diluted basis of the
voting interest in the Borrower’s Equity Interests.

“Change in Law” means the occurrence, after the Closing Date, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or
treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that notwithstanding anything herein to the
contrary (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued to the extent, but only to the extent, that a Lender is
generally imposing applicable increased costs or costs on similarly situated
borrowers in connection with capital adequacy and liquidity requirements similar
to those described in Sections 5.01(a) and (b) under other syndicated credit
facilities to which such borrowers and Lender are a party.

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

“Closing Date Refinancing” has the meaning set forth in the recitals hereto.

“Co-Documentation Agents” means Barclays Bank PLC, Capital One Securities, Inc.,
Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Natixis, New York Branch and UBS Securities in their capacity as
co-documentation agents hereunder .

“Co-Investors” means (a) the Sponsor and Sponsor Fund Affiliates, (b) the
Management Group and (c) any other investors disclosed to the Arrangers on or
prior to the Closing Date and each of their Affiliates but excluding, however,
any operating portfolio companies of any of such investors.

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

 

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“Collateral” has the meaning provided to such term in each of the Security
Instruments and shall include any and all assets securing or intended to secure
any or all of the Indebtedness by the terms of the Security Instruments;
provided that with respect to any Mortgages, “Collateral,” as defined herein,
shall include “Deed of Trust Property” and “Mortgaged Property” (or similar
term) as defined therein.

“Commitment” means, with respect to each Lender, the obligation of such Lender
to make or continue Loans and to incur or acquire participations in Letters of
Credit hereunder, as such obligation may be (a) modified from time to time
pursuant to Section 2.06, (b) modified from time to time pursuant to assignments
by or to such Lender pursuant to Section 12.04(b) or (c) otherwise modified
pursuant to the terms of this Agreement. The amount representing each Lender’s
Commitment shall at any time be the lesser of (i) such Lender’s Maximum Credit
Amount and (ii) such Lender’s Applicable Percentage of the then effective
Borrowing Base.

“Commitment Fee Rate” means, for any date, the applicable rate per annum set
forth under the heading “Commitment Fee Rate” in the Borrowing Base Utilization
Grid contained in the definition of Applicable Margin. Each change in the
Commitment Fee Rate shall apply during the period commencing on the effective
date of such change in the Borrowing Base Utilization Percentage and ending on
the date immediately preceding the effective date of the next such change.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

“Compliance Certificate” means the Compliance Certificate substantially in the
form of Exhibit D.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Consolidated First Lien Secured Debt” means, as of any date of determination,
the sum of (a) the total Revolving Credit Exposures of all Lenders on such date
plus (b) without duplication of any amounts included in clause (a), the
aggregate principal amount of Consolidated Total Indebtedness of the Borrower
and its Restricted Subsidiaries on such date that is secured by a first priority
Lien on any asset or Property of the Borrower or any Restricted Subsidiary.

“Consolidated Net Income” means, for any period, the Net Income of the Borrower
and its Restricted Subsidiaries for such period determined on a consolidated
basis; provided that

(a) any net after-tax extraordinary, unusual or nonrecurring gains or losses
(less all fees and expenses related thereto) or income or expenses or charges
(including, without limitation, any pension expense, casualty losses, severance
expenses, facility closure expenses, system establishment costs, operating
expenses directly attributable to the implementation of cost savings
initiatives, relocation expenses and other restructuring expenses, benefit plan
curtailment expenses, bankruptcy reorganization claims, settlement and related
expenses and fees, expenses or charges related to any offering of Equity
Interests of the Borrower or any of its Restricted Subsidiaries, any Investment,
acquisition, disposition or Debt permitted to be incurred hereunder (in each
case, whether or not successful), including all fees, expenses, charges and
change of control payments related to the Transactions), in each case, shall be
excluded, provided, that with respect to each nonrecurring item, the Borrower
shall have delivered to the Administrative Agent a certificate from a
Responsible Officer of the Borrower specifying and quantifying such item and
stating that such item is a nonrecurring item;

 

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(b) any net after-tax income or loss from discontinued operations and any net
after-tax gain or loss on disposal of discontinued operations shall be excluded
(but if such operations are classified as discontinued due to the fact that they
are subject to an agreement to dispose of such operations, only when and to the
extent such operations are actually disposed of);

(c) any net after-tax gain or loss (including the effect of all fees and
expenses or charges relating thereto) attributable to business dispositions or
asset dispositions other than in the ordinary course of business (as determined
in good faith by the board of directors of the Borrower) shall be excluded;

(d) any net after-tax income or loss (including the effect of all fees and
expenses or charges relating thereto) attributable to the refinancing,
modification of or early extinguishment of Debt (including obligations under
Swap Agreements) shall be excluded;

(e) (i) the Net Income (loss) for such period of any Person that is not a
Restricted Subsidiary of the Borrower, or that is accounted for by the equity
method of accounting, shall be included only to the extent of the amount of
dividends or distributions or other payments paid in cash (or to the extent
converted into cash) to the Borrower or a Restricted Subsidiary thereof in
respect of such period and (ii) the Net Income for such period shall include any
dividend, distribution or other payment in respect of equity paid in cash by
such Person in excess of the amounts included in clause (i) above;

(f) Consolidated Net Income for such period shall not include the cumulative
effect of a change in accounting principles during such period;

(g) any non-cash charges from the application of the purchase method of
accounting in connection with the Transactions or any future acquisition, to the
extent such charges are deducted in computing such Consolidated Net Income shall
be excluded;

(h) accruals and reserves that are established within twelve months after the
Closing Date and that are so required to be established in accordance with GAAP
shall be excluded;

(i) any non-cash expenses (including, without limitation, write-offs,
write-downs and impairment of property, plant, equipment, goodwill and
intangibles and other long-lived assets (including ceiling test write-downs, on
Oil and Gas Properties under GAAP or SEC guidelines)), any gains or losses on
interest rate and foreign currency derivatives and any foreign currency
transaction gains or losses shall be excluded;

(j) any long-term incentive plan accruals and any non-cash compensation expense
realized from grants of stock appreciation or similar rights, stock options, any
restricted stock plan or other rights to officers, directors and employees of
the Borrower or any of its Restricted Subsidiaries shall be excluded;

(k) (i) the Net Income for such period of any Unrestricted Subsidiary shall be
included only to the extent of the amount of dividends or distributions or other
payments paid in cash (or to the extent converted into cash) by such
Unrestricted Subsidiary to the Borrower or a Restricted Subsidiary in respect of
such period and (ii) the Net Income for such period shall include any dividend,
distribution or other payment in respect of equity paid in cash by such Person
to the Borrower or a Restricted Subsidiary in excess of the amounts included in
clause (i) above;

(l) any costs or expenses incurred during such period relating to environmental
remediation, litigation or other disputes shall be excluded; and

 

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(m) (i) to the extent covered by insurance and actually reimbursed, or, so long
as such Person has made a determination that there exists reasonable evidence
that such amount will in fact be reimbursed by the insurer and only to the
extent that such amount is (A) not denied by the applicable carrier in writing
within 180 days and (B) in fact reimbursed within 365 days of the date of such
evidence (with a deduction for any amount so added back to the extent not so
reimbursed within 365 days), expenses with respect to liability or casualty
events or business interruption shall be excluded, (ii) amounts estimated in
good faith to be received from insurance in respect of lost revenues or earnings
in respect of liability or casualty events or business interruption shall be
included (with a deduction for amounts actually received up to such estimated
amount to the extent included in Net Income in a future period) and (iii) to the
extent not already included in Consolidated Net Income, any expenses and charges
that are reimbursed by indemnification or other similar provisions in connection
with any investment or any sale, conveyance, transfer or other permitted
disposition of assets permitted.

“Consolidated Net Tangible Assets” means, as of any date of determination,
(a) the amount that would, in conformity with GAAP, be set forth opposite the
caption “total assets” (or any like caption) on a consolidated balance sheet of
the Borrower and the Restricted Subsidiaries at such date minus (b) the sum of
all amounts that would, in accordance with GAAP, be set forth opposite the
captions “goodwill” or other intangible asset categories (or any like caption)
on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries
at such date.

“Consolidated Total Assets” mean, as of any date of determination, the amount
that would, in conformity with GAAP, be set forth opposite the caption “total
assets” (or any like caption) on a consolidated balance sheet of the Borrower
and the Restricted Subsidiaries, without giving effect to any amortization of
the amount of intangible assets since December 31, 2013.

“Consolidated Total Indebtedness” means, as of any date of determination, the
aggregate principal amount of Debt of the Borrower and its Restricted
Subsidiaries on such date, in an amount that would be reflected on a balance
sheet of the Borrower and its Restricted Subsidiaries prepared as of such date
determined on a consolidated basis in accordance with GAAP, consisting of
obligations under Capital Leases and Debt for borrowed money (including Debt
obligations evidenced by bonds, debentures, promissory notes or similar
instruments); provided that Consolidated Total Indebtedness shall not include
Debt (a) in respect of letters of credit, except to the extent of unreimbursed
amounts thereunder; provided that any unreimbursed amount under commercial
letters of credit shall not be counted as Consolidated Total Indebtedness until
three Business Days after such amount is drawn and (b) of Unrestricted
Subsidiaries; it being understood, for the avoidance of doubt, that obligations
under Swap Agreements do not constitute Consolidated Total Indebtedness except
to the extent such obligations are due and payable and would be required to be
reflected as a liability on the consolidated balance sheet of the Borrower and
its Restricted Subsidiaries in accordance with GAAP.

“Continuing Directors” means the directors of the Borrower or a Subsidiary, as
applicable, on the Closing Date, and each other director, if, in each case, such
other director’s nomination for election to the board of directors of Holdings,
the Borrower or such Subsidiary, as applicable, is recommended by a majority of
the then Continuing Directors or such other director receives the vote of the
Permitted Holders in his or her election by the stockholders of Holdings, the
Borrower or such Subsidiary, as applicable.

“Contractual Requirement” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

“Contribution” has the meaning set forth in the recitals hereto.

 

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“Contributed Corporations” has the meaning set forth in the recitals hereto.

“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.

“Cure Amount” has the meaning set forth in Section 10.03.

“Cure Deadline” has the meaning set forth in Section 10.03.

“Cure Right” has the meaning set forth in Section 10.03.

“Current Production” means the lesser of (a) the average of the prior month’s
production of each of crude oil and natural gas, calculated separately, of the
Borrower and the Restricted Subsidiaries and (b) the forecasted production of
each of crude oil and natural gas, calculated separately, for each month for the
period ending no sooner than the latest month for which volumes are hedged under
Swap Agreements.

“Customary Intercreditor Agreement” means, at the option of the Borrower, either
(a) the Intercreditor Agreement, (b) an intercreditor agreement substantially in
the form of the Intercreditor Agreement (with such modifications as may be
necessary or appropriate in light of prevailing market conditions and reasonably
acceptable to the Administrative Agent) or (c) a customary intercreditor
agreement substantially in the form of Exhibit L or such other form acceptable
to the Administrative Agent.

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) the
principal component of all obligations under Capital Leases; (e) all obligations
under Synthetic Leases; (f) all Debt (as defined in the other clauses of this
definition) of others secured by (or for which the holder of such Debt is
secured by) a Lien on any Property of such Person, whether or not such Debt is
assumed by such Person, to the extent of the lesser of (i) the aggregate unpaid
amount of such Debt and (ii) the Fair Market Value of the property encumbered
thereby as determined by such Person in good faith; (g) all Debt (as defined in
the other clauses of this definition) of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the Debt
(howsoever such assurance shall be made) to the extent of the least of (i) the
amount of such Debt and (ii) the maximum stated amount of such guarantee or
assurance against loss; (h) any Debt of a partnership for which such Person is
liable either by agreement, by operation of law or by a Governmental Requirement
but only to the extent of such liability; (i) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase in
respect of Disqualified Capital Stock (excluding accrued dividends that have not
increased the liquidation preference of such Disqualified Capital Stock);
(j) all Volumetric Production Payments and Dollar-Denominated Production
Payments of such Person; and (k) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment. The Debt of any Person shall include all
obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP, provided
that with respect to determining the amount of any debt, any application of
Financial Accounting Standard No. 133 which would have the effect of increasing
or decreasing the principal amount of any obligation for borrowed money shall be
disregarded. The Debt of any Person shall exclude obligations under firm
transportation contracts or ship/take or pay contracts and any deferred
compensation amounts owed to the directors, officers or employees of such
Person.

 

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“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 or
otherwise remedied, become an Event of Default.

“Defaulting Lender” means any Lender whose acts or failure to act, whether
directly or indirectly, cause it to meet any part of the definition of Lender
Default.

“Deficiency Notice Date” has the meaning set forth in Section 3.04(c)(iii).

“Developed Producing Reserves” means oil and gas mineral interests that, in
accordance with Petroleum Industry Standards, are classified as both “Proved
Reserves” and “Developed Producing Reserves”.

“Disclosure Restrictions” has the meaning set forth in Section 8.07.

“Dispose” or “Disposed of” shall have a correlative meaning to the defined term
of “Disposition”.

“Disposition” has the meaning set forth in Section 9.08.

“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 Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the Maturity
Date as in effect at the time of issuance. Notwithstanding the preceding
sentence, any Equity Interests will not constitute Disqualified Stock because
(a) the holders of the Equity Interests have the right to require the Borrower
to repurchase such Equity Interests upon the occurrence of a change of control
or an asset sale, (b) with respect to any Equity Interests issued pursuant to
any plan for the benefit of employees of the Borrower or its Subsidiaries or by
any such plan to such employees, the Borrower or its Subsidiaries may be
required to repurchase it in order to satisfy applicable statutory or regulatory
obligations or (c) with respect to any Equity Interests held by any future,
present or former employee, director, manager or consultant of Holdings, the
Borrower or any of its Subsidiaries, in each case pursuant to any equity
holders’ agreement, management equity plan or stock incentive plan or any other
management or employee benefit plan or agreement, Holdings, the Borrower or its
Subsidiaries may be required to repurchase it. The amount of Disqualified Stock
deemed to be outstanding at any time for purposes of this Agreement will be the
maximum amount that the Borrower and its Restricted Subsidiaries may become
obligated to pay upon the maturity of, or pursuant to any mandatory redemption
provisions of, such Disqualified Capital Stock, exclusive of accrued dividends.

“Distressed Person” has the meaning set forth in the definition of
Lender-Related Distress Event.

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

“Dollar-Denominated Production Payments” means production payment obligations
recorded as liabilities in accordance with GAAP, together with all undertakings
and obligations in connection therewith.

 

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

“EBITDA” means, with respect to the Borrower and its Restricted Subsidiaries on
a consolidated basis for any period, the Consolidated Net Income of the Borrower
and its Restricted Subsidiaries for such period plus (a) the sum of (in each
case without duplication and to the extent the respective amounts described in
subclauses (i) through (xii) of this clause (a) reduced such Consolidated Net
Income for the respective period for which EBITDA is being determined):

(i) provision for Taxes based on income, profits, losses or capital of the
Borrower and its Restricted Subsidiaries for such period, including, state,
franchise and similar taxes and foreign withholding taxes as well as penalties
and interest related to taxes or arising from tax examinations, in each case, to
the extent that such provision for taxes was deducted in calculating
Consolidated Net Income; adjusted for the tax effect of all adjustments made to
Consolidated Net Income;

(ii) Interest Expense of the Borrower and its Restricted Subsidiaries for such
period (net of interest income of the Borrower and its Restricted Subsidiaries
for such period) and to the extent not reflected in Interest Expense, costs of
surety bonds in connection with financing activities;

(iii) depreciation, depletion, amortization (including, without limitation,
amortization of intangibles and deferred financing fees) and other non-cash
expenses (including, without limitation, write-downs and impairment of property,
plant, equipment, goodwill and intangibles and other long-lived assets and the
impact of purchase accounting on the Borrower and its Restricted Subsidiaries
for such period);

(iv) business optimization expenses and the amount of any restructuring charges,
costs and reserves (which, for the avoidance of doubt, shall include retention,
severance, systems establishment, facility closure, facility consolidations and
contract termination costs, future lease commitments or excess pension, other
post-employment benefits, curtailment or other excess charges) relating to
acquisitions or otherwise, provided that with respect to such business
optimization expenses and restructuring charges, the Borrower shall have
delivered to the Administrative Agent a certificate from a Responsible Officer
of the Borrower specifying and quantifying such expenses or charges and stating
that such expenses and charges are business optimization expenses and
restructuring charges;

(v) any other non-cash charges;

(vi) equity earnings or losses in Unrestricted Subsidiaries, joint ventures or
other minority investments;

(vii) other non-operating expenses;

(viii) the minority interest expense consisting of subsidiary income
attributable to minority equity interests of third parties in any non-wholly
owned Subsidiary that is a Restricted Subsidiary in such period or any prior
period, except to the extent of dividends declared or paid on Equity Interests
held by third parties;

(ix) costs of reporting and compliance requirements pursuant to the
Sarbanes-Oxley Act of 2002 or required by the SEC or any securities exchange;

(x) accretion of asset retirement obligations in accordance with SFAS No. 143,
Accounting for Asset Retirement Obligations, and any similar accounting in prior
periods or any other deductions, costs and expenses related to asset retirement
and decommissioning costs;

 

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(xi) extraordinary losses and unusual or non-recurring cash charges, severance,
relocation costs and curtailments or modifications to pension and
post-retirement employee benefit plans;

(xii) the amount of any loss attributable to a new plant or facility or the
development of any Oil and Gas Property, until the date that is 12 months after
the date of completing construction or development of or acquiring such plant or
facility or Oil and Gas Property, as the case may be and

minus (b) to the extent such amounts increased such Consolidated Net Income for
the respective period for which EBITDA is being determined, non-cash items
increasing Consolidated Net Income of the Borrower and its Restricted
Subsidiaries for such period (but excluding any such items which represent the
reversal in such period of any accrual of, or cash reserve for, anticipated cash
charges in any prior period where such accrual or reserve is no longer
required).

“Engineering Reports” has the meaning set forth in Section 2.07(c)(i).

“Environmental Laws” means any and all applicable Governmental Requirements
relating to the prevention of pollution, protection of the environment or of
human health and safety (to the extent relating to exposure to Hazardous
Materials), or the preservation or reclamation of natural resources including
without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean
Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as
amended; the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended and the Hazardous Materials Transportation Act, as amended.

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

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

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

“ERISA Event” means (a) a “reportable event” described in section 4043 of ERISA
and the regulations issued thereunder (other than an event for which the 30-day
notice period is waived), (b) the withdrawal of the Borrower, a Restricted
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 in a distress termination under
section 4041 of ERISA or the treatment of a Plan amendment by the PBGC 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 by the Borrower, any Restricted Subsidiary or
any ERISA Affiliate with respect to any Multiemployer Plan or (f) any other
event or condition that might reasonably be expected to constitute grounds under
section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.

 

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

“Eurodollar Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the London interbank offered rate as administered by ICE
Benchmark Administration (or any other Person that takes over the administration
of such rate) for Dollars for a period equal in length to such Interest Period
as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays
such rate (or, in the event such rate does not appear on a Reuters page or
screen, on any successor or substitute page on such screen that displays such
rate, or on the appropriate page of such other information service that
publishes such rate from time to time as selected by the Administrative Agent in
consultation with the Borrower; in each case the “LIBO Screen Rate”) at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period. In the event that such rate is not
available at such time for any reason, then the rate with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which Dollar
deposits of an amount comparable to such Eurodollar Borrowing and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period; provided that (a) to the extent a
comparable or successor rate is approved by the Administrative Agent and
Borrower in connection herewith, the approved rate shall be applied in a manner
consistent with market practice; (b) to the extent such market practice is not
administratively feasible for the Administrative Agent, such approved rate shall
be applied in a manner as otherwise reasonably determined by the Administrative
Agent, in consultation with the Borrower and (c) if the LIBO Screen Rate shall
be less than zero, such rate shall be deemed to be zero for the purposes of this
Agreement.

“Event of Default” has the meaning set forth in Section 10.01.

“Excepted Liens” means:

(a) Liens for Taxes, assessments or other governmental charges or levies which
are not yet overdue 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 similar 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
(i) are not overdue for a period of more than sixty (60) days and are unfiled or
(ii) are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP;

(d) Liens which arise in the ordinary course of business under operating
agreements, joint venture agreements, oil and gas partnership agreements, oil
and gas leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits
agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water

 

15

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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, rights of way, servitudes, permits, conditions,
covenants, exceptions, reservations and similar encumbrances in any Property of
the Borrower or any Subsidiary, 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,
bids, trade contracts, leases, statutory obligations, insurance premiums or
reimbursement obligations under insurance policies, obligations for unemployment
insurance and other social legislation, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business;

(h) judgment and attachment Liens not giving rise to an Event of Default;

(i) (i) leases, licenses, consignment, bailment, subleases or sublicenses
granted to other Persons in the ordinary course of business which do not
(A) interfere in any material respect with the business of the Borrower or any
of its Restricted Subsidiaries or (B) secure any Indebtedness for borrowed money
or (B) the rights reserved or vested in any Person by the terms of any lease,
license, franchise, grant or permit held by the Borrower or any of its
Restricted Subsidiaries or by a statutory provision, to terminate any such
lease, license, franchise, grant or permit, or to require annual or periodic
payments as a condition to the continuance thereof;

(j) Liens (i) on cash or securities pledged to secure performance to the seller
of any Property to be acquired in an Investment pursuant to Section 9.05 to be
applied against the purchase price for such Investment and (ii) consisting of an
agreement to dispose of any Property in a Disposition permitted under
Section 9.08, in each case, solely to the extent such investment or disposition,
as the case may be, would have been permitted on the date of the creation of
such Lien;

(k) deposits and other Liens securing (or securing the bonds or similar
instruments securing) the performance of tenders, statutory obligations,
plugging and abandonment obligations, surety, stay, customs and appeal bonds,
completion and performance guarantees, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(including letters of credit issued in lieu of such bonds or to support the
issuance thereof) incurred in the ordinary course of business and not securing
Debt for borrowed money, including those incurred to secure health, safety and
environmental obligations in the ordinary course of business; and

 

16

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(l) security given to a public utility or any municipality or governmental
authority when required by such utility or authority in connection with the
operations of that Person in the ordinary course of business.

“Excluded Equity Interests” means:

(a) any Equity Interests with respect to which, in the reasonable judgment of
the Administrative Agent and the Borrower, as evidenced in a writing signed by
them, the cost or other consequences of pledging such Equity Interests in favor
of the Secured Parties under the Security Instruments shall be excessive in view
of the benefits to be obtained by the Secured Parties therefrom;

(b) solely in the case of any pledge of Equity Interests of any Foreign
Subsidiary or FSHCO (in each case, that is owned directly by the Borrower or a
Guarantor) to secure the Indebtedness, any Equity Interest that is Voting Stock
of such Foreign Subsidiary or FSHCO in excess of sixty-five percent (65%) of the
Voting Stock of such subsidiary;

(c) any Equity Interests to the extent the pledge thereof would be prohibited by
any Governmental Authority;

(d) in the case of (i) any Equity Interests of any Subsidiary to the extent the
pledge of such Equity Interests is prohibited by Contractual Requirements or
(ii) any Equity Interests of any Subsidiary that is not a Wholly-Owned
Subsidiary at the time such Subsidiary becomes a Subsidiary, any Equity
Interests of each such Subsidiary described in clause (i) or (ii) to the extent
(A) that a pledge thereof to secure the Indebtedness is prohibited by any
applicable Contractual Requirement (other than customary non-assignment
provisions which are ineffective under the Uniform Commercial Code or other
applicable Governmental Requirements) in existence on the Closing Date or at the
time such Person becomes a Subsidiary and not entered into in contemplation
thereof, (B) any Contractual Requirement prohibits such a pledge without the
consent of any other party; provided that this clause (B) shall not apply if
(1) such other party is a Loan Party or a Wholly-Owned Subsidiary or (2) consent
has been obtained to consummate such pledge (it being understood that the
foregoing shall not be deemed to obligate the Borrower or any Subsidiary to
obtain any such consent) and for so long as such Contractual Requirement or
replacement or renewal thereof is in effect, or (C) a pledge thereof to secure
the Indebtedness would give any other party (other than a Loan Party or a
Wholly-Owned Subsidiary) to any Contractual Requirement governing such Equity
Interests the right to terminate its obligations thereunder (other than
customary non-assignment provisions that are ineffective under the Uniform
Commercial Code or other applicable Governmental Authority);

(e) the Equity Interests of any Unrestricted Subsidiary;

(f) the Equity Interests of any Foreign Subsidiary of a Foreign Subsidiary; and

(g) any Equity Interests set forth on Schedule 1.01(b) which have been
identified on or prior to the Closing Date in writing to the Administrative
Agent by a Responsible Officer of the Borrower and agreed to by the
Administrative Agent;

provided that, notwithstanding the foregoing, no Equity Interests in any
Restricted Subsidiary that owns Oil and Gas Properties for which Borrowing Base
credit is, or is being, given, shall be an Excluded Equity Interest.

 

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“Excluded Subsidiary” means:

(a) each Immaterial Subsidiary, for so long as any such Subsidiary constitutes
an Immaterial Subsidiary pursuant to the terms hereof;

(b) each Domestic Subsidiary that is not a Wholly-Owned Subsidiary (for so long
as such Subsidiary remains a non-Wholly-Owned Subsidiary);

(c) each Domestic Subsidiary that is prohibited by any applicable Contractual
Requirement or Governmental Requirement from guaranteeing or granting Liens to
secure the Indebtedness at the time such Subsidiary becomes a Restricted
Subsidiary, including in connection with any Permitted Acquisition, (and for so
long as such restriction or any replacement or renewal thereof is in effect) or
that would require consent, approval, license or authorization of a Governmental
Authority to guarantee or grant Liens to secure the Indebtedness at the time
such Subsidiary becomes a Restricted Subsidiary (unless such consent, approval,
license or authorization has been received);

(d) any Foreign Subsidiary that is a CFC or any Foreign Subsidiary thereof;

(e) any Domestic Subsidiary that is a FSHCO;

(f) any other Domestic Subsidiary with respect to which, in the reasonable
judgment of the Administrative Agent and the Borrower, as evidenced in a writing
signed by them, the cost or other consequences of providing a guarantee of the
Indebtedness shall be excessive in view of the benefits to be obtained by the
Lenders therefrom;

(g) any captive insurance subsidiaries;

(h) any not-for-profit subsidiaries; and

(i) each Unrestricted Subsidiary;

provided that, in no event shall any Restricted Subsidiary that owns Oil and Gas
Properties for which Borrowing Base credit is, or is being, given, be an
Excluded Subsidiary.

“Excluded Swap Obligations” means any obligation of any Guarantor to pay or
perform under any Swap Agreement, if, and to the extent that, all or a portion
of the guarantee by such Guarantor of, or the grant by such Guarantor of a
security interest to secure, such Swap Agreement (or any guarantee thereof) is
or becomes illegal under the Commodity Exchange Act or any rule, regulation, or
order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) or any other applicable Governmental
Requirement.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
each 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) Taxes imposed on (or measured by) net income
(however denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such recipient being organized under the laws of, or
having its principal office (or in the case of a Lender, its applicable lending
office) located in, the jurisdiction imposing such Tax (or any political
subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of
a Lender (other than an assignee pursuant to a request by the Borrower under
Section 5.06), any U.S. federal withholding Tax that is imposed pursuant to a
law in effect on the date on which such Lender becomes a party to this Agreement
or designates a new lending office (other than pursuant to an assignment request
by the Borrower under Section 5.06), except to the extent that such Lender (or
its assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to

 

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receive additional amounts with respect to such withholding tax pursuant to
Section 5.03(a) or Section 5.03(b), (c) any withholding Tax that is attributable
to a Lender’s failure to comply with Section 5.03(e) and (d) U.S. federal
withholding Taxes imposed under FATCA.

“Existing Forest Credit Agreement” has the meaning set forth in the recitals
hereto.

“Existing Intercreditor Agreement” has the meaning set forth in the definition
of Intercreditor Agreement.

“Existing Notes” means (a) Forest’s existing seven and a half percent
(7.5%) Senior Notes due 2020, (b) Forest’s existing seven and a quarter percent
(7.25%) Senior Notes due 2019 and (c) Sabine’s nine and three quarters percent
(9.75%) Senior Notes due 2017.

“Existing Sabine Credit Agreement” has the meaning set forth in the recitals
hereto.

“Existing Second Lien Facility” means the facility evidenced by the Second Lien
Credit Agreement dated as of December 14, 2012 among Sabine Oil & Gas LLC, Bank
of America N.A., as administrative agent, and the lenders and other parties
party thereto from time to time and the associated Second Lien Documents.

“Existing Second Lien Incremental Amendment” means that certain Amendment No. 2
to the Existing Sabine Second Lien Facility among Sabine, certain lenders party
thereto, certain guarantors party thereto and Bank of America, N.A., as
administrative agent, pursuant to which Borrower will obtain (or have obtained),
among other things, new Second Lien Obligations in an aggregate principal amount
of $50,000,000.

“Facility” means this Agreement and the Commitments and the extensions of credit
made hereunder.

“Fair Market Value” means, with respect to any asset or group of assets on any
date of determination, the value of the consideration obtainable in a
Disposition of such asset at such date of determination assuming a Disposition
by a willing seller to a willing purchaser dealing at arm’s length and arranged
in an orderly manner over a reasonable period of time having regard to the
nature and characteristics of such asset, as determined by the Borrower in good
faith.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements
entered into in connection with the implementation of such Section of the Code
(or any such amended or successor version thereof).

“FCPA” has the meaning set forth in Section 7.07(e).

“Federal Funds Effective Rate” means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York;
provided that (a) if such day is not a Business Day, the Federal Funds Effective
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if such
rate is not so published for any day that is a Business Day, the average 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.

 

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“Financial Covenant Default” has the meaning set forth in Section 10.01(d).

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

“Financial Performance Covenant” means the covenant of the Borrower set forth in
Section 9.01(a).

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

“First Lien Secured Leverage Ratio” means, with respect to any Test Period, the
ratio of (a) Consolidated First Lien Secured Debt as of the last day of such
Test Period to (b) EBITDA for such Test Period; provided that EBITDA shall be
calculated in accordance with Section 9.01(b) for purposes of determining the
First Lien Secured Leverage Ratio for each of the first three full fiscal
quarters after the Closing Date.

“Flood Insurance Regulations” means (a) the National Flood Insurance Act of 1968
as now or hereafter in effect or any successor statute thereto, (b) the Flood
Disaster Protection Act of 1973 as now or hereafter in effect or any successor
statue thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42
USC 4001, et seq.), as the same may be amended or recodified from time to time,
(d) the Flood Insurance Reform Act of 2004 and any regulations promulgated
thereunder and (e) the Biggert-Waters Flood Insurance Reform Act of 2012 and the
regulations issued in connection therewith by the Office of the Comptroller of
the Currency, the Federal Reserve Board and other Governmental Authorities.

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

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

“Forest” has the meaning set forth in the recitals hereto.

“Forest Credit Agreement Refinancing” has the meaning set forth in the recitals
hereto.

“Forest Reserve Report” has the meaning assigned such term in Section 6.01(j).

“FR NFR” has the meaning set forth in the recitals hereto.

“FR NFR PI” has the meaning set forth in the recitals hereto.

“FRC” has the meaning set forth in the definition of Sponsor.

“Fronting Exposure” means, at any time there is a Defaulting Lender, with
respect to any Issuing Bank, such Defaulting Lender’s Pro Rata Share of the
outstanding LC Exposures other than LC Exposures as to which such Defaulting
Lender’s participation obligation has been reallocated to other Lenders or Cash
Collateralized in accordance with the terms hereof.

 

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“FSHCO” means any Domestic Subsidiary that owns (directly or through its
Subsidiaries) no material assets other than the Equity Interests or indebtedness
of one or more Foreign Subsidiaries that are CFCs.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time, as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), subject to the
terms and conditions set forth in Section 1.05; provided that the accounting for
operating leases and capital leases under GAAP as in effect on the date hereof
(including, without limitation, Accounting Standards Codification 840) shall
apply for the purposes of determining compliance with the provisions of this
Agreement (it being understood, for avoidance of doubt, that no operating
leases, or obligations in respect of operating leases, shall be treated as
Capital Leases or Capital Lease Obligations, respectively, hereunder).

“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 Subsidiary, any of their Properties, the Administrative Agent, any
Issuing Bank or any Lender.

“Governmental Requirement” means any applicable law, statute, code, ordinance,
order, rule regulation and any legally binding judgment, decree or injunction
and any applicable legally binding permit, license, authorization or other
directive or requirement, including, without limitation, Environmental Laws,
energy regulations and occupational, safety and health standards or controls of
any Governmental Authority.

“Guarantors” means, collectively, (a) the Subsidiaries of the Borrower (other
than any Excluded Subsidiary), which are listed on Schedule 1.01(a), (b) those
Restricted Subsidiaries that enter into the Guaranty and Pledge Agreement after
the Closing Date (i) pursuant to Section 8.13(b) or (ii) otherwise at the option
of the Borrower, and (c) Holdings, to the extent it becomes a party to the
Guaranty and Pledge Agreement after the Closing Date pursuant to
Section 9.07(b), in each case, until any such Person is released from its
obligations under the Guaranty and Pledge Agreement in accordance with its
terms.

“Guaranty and Pledge Agreement” means that certain Second Amended and Restated
Guaranty and Pledge Agreement executed by the Borrower and the Guarantors
substantially in the form of Exhibit K.

“Hazardous Material” means any substance regulated pursuant to Environmental Law
as to which liability would reasonably be expected to 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, natural gas, oil, oil and gas waste, crude oil, and any fractions
thereof; and (c) radioactive materials, asbestos containing materials,
polychlorinated biphenyls or radon.

 

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“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Debt 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.

“Holdings” means any Person that directly owns 100% of the issued and
outstanding Equity Interests in the Borrower.

“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 relating to oil, gas or other hydrocarbons, 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.

“Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.

“Impacted Loans” has the meaning set forth in Section 3.03.

“Increasing Lender” has the meaning set forth in Section 2.10(a).

“Incremental Agreement” has the meaning set forth in Section 2.10(c).

“Incremental Increase” has the meaning set forth in Section 2.10(a).

“Indebtedness” means (a) any and all advances to, and debts, liabilities,
covenants and obligations of, any Loan Party arising under any Loan Document
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising, and
including interest and fees that accrue after the commencement by any Loan Party
in any proceeding under any debtor relief laws naming any Loan Party as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding, (b) all Secured Cash Management Obligations,
(c) all Secured Swap Obligations and (d) all renewals, extensions and/or
rearrangements of the above. Without limiting the generality of the foregoing,
the Indebtedness of the Loan Parties under the Loan Documents include the
obligation to pay principal, interest, charges, expenses, fees, attorney costs,
indemnitees and other amounts to the extent required to be paid by any Loan
Party under any Loan Document.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Reserve Reports” has the meaning set forth in Section 6.01(j).

“Intercompany Note” means a promissory note substantially in the form of
Exhibit I.

“Intercreditor Agreement” means (a) the certain Intercreditor Agreement, dated
as of December 14, 2012, by and among the Borrower, the Guarantors, the
Administrative Agent and the administrative agent under the then existing second
lien term facility (the “Existing Intercreditor Agreement”), subject to
modifications (i) negotiated in good faith between the Borrower, the
Administrative Agent, the administrative agent under the then existing second
lien term facility or any other applicable agents or parties and (ii) to give
effect to the terms of the Facility or (b) any other Customary Intercreditor
Agreement contemplated by clauses (b) and (c) of the definition thereof.

 

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

“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense and letter of credit fees
and commissions of the Borrower and its Restricted Subsidiaries on a
consolidated basis for such period, including to the extent included in interest
expense under GAAP: (a) amortization of debt discount, (b) capitalized interest,
(c) the portion of any payments or accruals under Capital Leases allocable to
interest expense and (d) the amortization of all fees and charges (including
fees and charges with respect to Swap Agreements) payable in connection with the
incurrence of Debt to the extent included in interest expense under GAAP.

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

“Interest Period” means, as to each Eurodollar Borrowing, the period commencing
on the date such Borrowing is disbursed or converted to or continued as a
Eurodollar Borrowing and ending on the date (a) one, two, three or six months
thereafter, or (b) upon the consent of all Lenders, twelve months thereafter, in
any case as selected by the Borrower in its Borrowing Request or Interest
Election Request, as applicable; provided that: (i) any Interest Period that
would otherwise end on a day that is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Maturity Date.

“Interim Acquisition Redetermination” has the meaning set forth in Section 2.07.

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

“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 advance, loan or capital contribution to, the assumption of Debt
of, the purchase or other acquisition of any other Debt 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,
services or supplies sold by such Person in the ordinary course of business);
(c) the purchase or other acquisition (in one transaction or a series of
transactions) of all or substantially all of the property and assets or

 

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business of another Person or assets constituting a business unit, line of
business or division of such Person; 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, Debt or other liability of any other
Person and (without duplication) any amount committed to be advanced, lent or
extended to such Person. For purposes of covenant compliance, the amount of any
Investment at any time shall be (i) the amount actually invested (measured at
the time made), without adjustment for subsequent increases or decreases in the
value of such Investment minus (ii) the amount of dividends or distributions
received in connection with such Investment and any return of capital and any
payment of principal received in respect of such Investment that in each case is
received in cash, cash equivalents or short-term marketable debt securities by
the Person holding such Investment. For the purpose of clarity, a Swap Agreement
shall not be considered an Investment.

“Issuing Bank” means (a) Wells Fargo, in its capacity as an issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in
Section 2.09(j), (b) Barclays Bank PLC, in its capacity as an issuer of standby
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.09(j), and (c) if requested by the Borrower and reasonably acceptable
to the Administrative Agent, any other Person who is a Lender at the time of
such request and who accepts such appointment (it being understood that, if any
such Person ceases to be a Lender hereunder, such Person will remain an Issuing
Bank with respect to any Letter of Credit issued by such Person that remained
outstanding as of the date such Person ceased to be a Lender). Each 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. References herein and in the other Loan Documents to an Issuing Bank
shall be deemed to refer to such Issuing Bank in respect of the applicable
Letter of Credit or to all Issuing Banks, as the context requires. Any Lender
may, from time to time, become an Issuing Bank under this Agreement with the
protections and rights afforded to Issuing Banks hereunder by executing a
joinder, in a form reasonably satisfactory to (and acknowledged and accepted by)
the Administrative Agent and the Borrower, indicating such Lender’s “LC Issuance
Limit” and upon the execution and delivery of any such joinder, such Lender
shall be an Issuing Bank for all purposes hereof.

“Junior Liens” means Liens on the Collateral (other than Liens securing the
Indebtedness) that are subordinated to the Liens granted under the Loan
Documents pursuant to the Intercreditor Agreement or another Customary
Intercreditor Agreement (it being understood that Junior Liens are not required
to be pari passu with other Junior Liens, and that Indebtedness secured by
Junior Liens may have Liens that are senior in priority to, or pari passu with,
or junior in priority to, other Liens constituting Junior Liens).

“Last B/B Hedge Reduction” has the meaning set forth in Section 8.15.

“LC Borrowing” means an LC Disbursement which has not been reimbursed or
refinanced as a Borrowing.

“LC Commitment” means $100,000,000.

“LC Issuance Limit” means, with respect to (a) Wells Fargo, as Issuing Bank,
$50,000,000 (or such other amount as may be agreed to in writing by Wells Fargo
and the Borrower from time to time with prompt notice to the Administrative
Agent), (b) Barclays Bank PLC, as Issuing Bank, $50,000,000 (or such other
amount as may be agreed to in writing by Barclays Bank PLC and the Borrower from
time to time with prompt notice to the Administrative Agent) or (c) any other
Issuing Bank, such amount as may be agreed to by such Issuing Bank and the
Borrower in writing from time to time with prompt notice to the Administrative
Agent.

 

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

“LC Exposure” means, as at any date of determination, the sum of (a) the
aggregate amount available to be drawn under all outstanding Letters of Credit
plus (b) the aggregate of all L/C Borrowings. The LC Exposure of any Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.

“Lender Default” means (a) the refusal (which may be given verbally or in
writing and which has not been retracted) or failure of any Lender to make
available its portion of any incurrence of revolving loans or reimbursement
obligations required to be made by it, which refusal or failure is not cured
within two (2) Business Days after the date of such refusal or failure (unless
such Lender has notified the Administrative Agent in writing that such failure
is the result of such Lender’s reasonable determination that a condition
precedent to funding (specifically identified and including the particular
default, if any) has not been satisfied); (b) the failure of any Lender to pay
over to the Administrative Agent, any Issuing Bank or any other Lender any other
amount required to be paid by it hereunder within two (2) Business Days of the
date when due, unless subject to a good faith dispute; (c) a Lender has notified
the Borrower or the Administrative Agent that it does not intend to comply with
its funding obligations, or has made a public statement to that effect with
respect to its funding obligations, under the Facility or under other agreements
generally in which it commits to extend credit (unless such Lender has notified
the Administrative Agent in writing that such failure is the result of such
Lender’s reasonable determination that a condition precedent to funding
(specifically identified and including the particular default, if any) has not
been satisfied); (d) a Lender has failed, within three Business Days after
request by the Administrative Agent, to confirm that it will comply with its
prospective funding obligations under the Facility or (e) a Lender has admitted
in writing that it is insolvent or such Lender becomes subject to a
Lender-Related Distress Event.

“Lender-Related Distress Event” means, with respect to any Lender or any person
that directly or indirectly controls such Lender (each, a “Distressed Person”),
as the case may be, a voluntary or involuntary case with respect to such
Distressed Person under any debtor relief law, or a custodian, conservator,
receiver or similar official is appointed for such Distressed Person or any
substantial part of such Distressed Person’s assets, or such Distressed Person
or any person that directly or indirectly controls such Distressed Person is
subject to a forced liquidation, or such Distressed Person makes a general
assignment for the benefit of creditors or is otherwise adjudicated as, or
determined by any Governmental Authority having regulatory authority over such
Distressed Person or its assets to be, insolvent or bankrupt; provided that a
Lender-Related Distress Event shall not be deemed to have occurred solely by
virtue of the ownership or acquisition of any Equity Interests in any Lender or
any person that directly or indirectly Controls such Lender by a Governmental
Authority or an instrumentality thereof so long as such ownership interest does
not result in or provide such Lender with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority
or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or
agreements made with such Lender.

“Lenders” means the Persons listed on Annex I on the Closing Date and any Person
(including any Additional Lender) that becomes a lender hereto pursuant to the
terms hereof or an Assignment and Assumption, but excluding any such Person that
ceases to be a lender hereto pursuant to the terms hereof or an Assignment and
Assumption.

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

 

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“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 an Issuing Bank
relating to any applicable Letter of Credit.

“Letter of Credit Application” means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by an Issuing Bank appropriately completed and signed by a Responsible Officer
of the Borrower including agreed-upon draft language for such Letter of Credit
reasonably acceptable to the applicable Issuing Bank.

“Letter of Credit Expiration Date” has the meaning set forth in Section 2.09(c).

“LIBO Screen Rate” has the meaning set forth in the definition of Eurodollar
Rate.

“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 (a) the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement or financing
lease, consignment or bailment for security purposes or (b) production payments
and the like payable out of Oil and Gas Properties; provided that in no event
shall an operating lease be deemed to be a Lien.

“Liquidity” means, as of any date of determination, the sum of (a) the unused
Aggregate Commitments on such date plus (b) the aggregate amount of Unrestricted
Cash and Cash Equivalents of the Borrower and its Restricted Subsidiaries at
such date minus (c) the amount of any Borrowing Base Deficiency on such date.

“Liquidity Test” means, at any time of determination, with respect to any
applicable Restricted Payment or Redemption, the Borrower and its Restricted
Subsidiaries have Liquidity of not less than ten percent (10%) of the then
effective Borrowing Base.

“Loan Documents” means this Agreement (as amended and from time to time), the
Notes, the Letters of Credit, the Letter of Credit Agreements, the Fee Letter,
the Security Instruments, the Intercreditor Agreement and any Customary
Intercreditor Agreement, in each case as in effect.

“Loan Parties” means, collectively, the Borrower and each Guarantor.

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

“Majority Lenders” means, (a) at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50%) of the Adjusted
Aggregate Commitments and (b) at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50%) of (i) the
outstanding aggregate principal amount of the Loans and participation interests
in Letters of Credit minus the principal amounts of Loans and participation
interests in Letters of Credit of Defaulting Lenders (in each case, without
regard to any sale by a Lender of a participation in any Loan under
Section 12.04(c)) and (ii) the unused Adjusted Aggregate Commitments.

“Management Group” means the group consisting of the directors, executive
officers and other management personnel of the Borrower, any Restricted
Subsidiary or Holdings, as the case may be, on or promptly after the Closing
Date together with (a) any Continuing Directors and (b) executive officers and
other management personnel who are or become holders of Equity Interests of the
Borrower or any Restricted Subsidiary, as the case may be, hired at a time when
the Continuing Directors constituted a majority of the directors of the Borrower
or any Restricted Subsidiary, as the case may be.

 

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“Material Acquisition” means any Permitted Acquisition made by the Borrower or
its Restricted Subsidiaries of Property or series of related acquisitions of
Property having a PV-9 in excess of the greater of (x) $100,000,000 and (y) ten
percent (10%) of the effective Borrowing Base. It being understood that any
Permitted Acquisition that involves consideration in excess of the then
effective Borrowing Base shall be a “Material Acquisition”. It is further
understood that for purposes of the foregoing the designation of an Unrestricted
Subsidiary owning Oil and Gas Properties with Proved Reserves as a Restricted
Subsidiary shall be deemed to constitute an acquisition by the Borrower of Oil
and Gas Properties with Proved Reserves and such Proved Reserves shall be
counted towards the consideration threshold of a Material Acquisition.

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

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Restricted Subsidiaries in an aggregate principal amount
exceeding the greater of (a) $25,000,000 or (b) five percent (5%) of the then
effective Borrowing Base. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Borrower or any Restricted
Subsidiary in respect of any Swap Agreement at any time shall be the Swap
Termination Value.

“Material Subsidiary” means, at any date of determination, each Restricted
Subsidiary of the Borrower (a) whose Total Assets (when combined with the assets
of such Restricted Subsidiary’s Restricted Subsidiaries, after eliminating
intercompany obligations) at the last day of the most recent fiscal quarter of
the Borrower for which financial statements were required to be delivered
pursuant to Section 8.01 were equal to or greater than five percent (5.0%) of
the Consolidated Total Assets of the Borrower and the Restricted Subsidiaries at
such date or (b) whose revenues (when combined with the revenues of such
Restricted Subsidiary’s Restricted Subsidiaries, after eliminating intercompany
obligations) during the applicable Test Period were equal to or greater than
five percent (5.0%) of the consolidated revenues of the Borrower and the
Restricted Subsidiaries for such Test Period, in each case determined in
accordance with GAAP; provided that if, at any time and from time to time after
the Closing Date, Restricted Subsidiaries that are not Material Subsidiaries
have, in the aggregate, (i) Total Assets (when combined with the assets of such
Restricted Subsidiary’s Restricted Subsidiaries, after eliminating intercompany
obligations) as of the last day of such fiscal quarter that equal, or exceed,
ten percent (10.0%) of the Consolidated Total Assets of the Borrower and the
Restricted Subsidiaries as of such date or (ii) revenues (when combined with the
revenues of such Restricted Subsidiary’s Restricted Subsidiaries, after
eliminating intercompany obligations) during such Test Period that equal or
exceed ten percent (10.0%) of the consolidated revenues of the Borrower and the
Restricted Subsidiaries for such Test Period, in each case, determined in
accordance with GAAP, then the Borrower shall, on the next date on which
financial statements are required to be delivered pursuant to Section 8.01,
designate in writing to the Administrative Agent one or more of such Restricted
Subsidiaries as Material Subsidiaries in the Compliance Certificate required to
be delivered in connection with such financial statements (or in a subsequent
writing delivered to the Administrative Agent, which changes the designations
set forth in such Compliance Certificate), so that the remaining non-Material
Subsidiaries no longer satisfy such condition; provided further that,
notwithstanding the foregoing, each Restricted Subsidiary that owns Oil and Gas
Properties for which Borrowing Base credit is, or is being, given, shall be a
Material Subsidiary.

 

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“Maturity Date” means the earlier of (a) the date that is the fifth anniversary
of the Closing Date and (b) the date that is ninety-one (91) days prior to the
maturity date of the Existing Second Lien Credit Agreement, if it is in
existence at such time.

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b), (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(b) or (c) otherwise modified pursuant to the terms of
this Agreement (including Section 2.10).

“Merger” has the meaning set forth in the recitals hereto.

“Merger Agreement” has the meaning set forth in the recitals hereto.

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

“Mortgage” means a mortgage, deed of trust or similar security document entered
into by any Loan Party and the Administrative Agent for the benefit of the
Secured Parties in respect of Mortgaged Property owned by such Loan Party, that
is substantially in the form of Exhibit J, subject to any modifications that may
be required based on the State in which the Mortgaged Property is located or as
may otherwise be agreed by the Borrower and the Administrative Agent (it is
understood that each mortgage and deed of trust shall be governed by the law of
the state in which the properties that are the subject of the applicable
mortgage or deed of trust are located). The term “Mortgage” as a verb has a
corresponding meaning.

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments; provided that in no event does any “Building” (as defined
in the applicable Flood Insurance Regulations) or “Manufactured (Mobile) Home”
(as defined in the applicable Flood Insurance Regulations) constitute Mortgaged
Property.

“Multiemployer Plan” means a multiemployer plan as defined in section 3(37) or
4001 (a)(3) of ERISA, to which the Borrower, any Restricted Subsidiary or any
ERISA Affiliate makes or is obligated to make contributions, or during the
preceding six plan years, has made or been obligated to make contributions.

“Net Income” means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends.

“New Borrowing Base Notice” has the meaning assigned such term in
Section 2.07(d).

“New Debt” has the meaning set forth in the definition of Permitted Refinancing
Debt.

“New Forest” has the meaning set forth in the recitals hereto.

“New Sabine Holdings” has the meaning set forth in the recitals hereto.

“Non-Consenting Lender” has the meaning set forth in Section 5.06.

 

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

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

“OFAC” has the meaning set forth in Section 7.07(d).

“OID” means original issue discount.

“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 all units created under orders,
regulations and rules of any Governmental Authority) which may affect all or any
portion of the Hydrocarbon Interests, (d) all operating agreements, contracts
and other agreements, including production sharing contracts and agreements,
which relate to any of the Hydrocarbon Interests or the production, sale,
purchase, exchange or processing of Hydrocarbons from or attributable to such
Hydrocarbon Interests, (e) all Hydrocarbons in and under and which may be
produced and saved or attributable to the Hydrocarbon Interests, including all
oil in tanks, and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests, (f) all
tenements, hereditaments, appurtenances and properties in any manner
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and
(g) all properties, rights, titles, interests and estates described or referred
to above, including any and all property, real or personal, now owned or
hereafter 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, 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.

“Ongoing Swaps” has the meaning set forth in Section 9.13(a).

“Operating Agreement” means that certain Amended and Restated Operating
Agreement of the Borrower dated as of May 11, 2007.

“Other Connection Taxes” means, with respect to the Administrative Agent or any
Lender, Taxes imposed as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction imposing such Tax
(other than connections arising from the Administrative Agent’s or such Lender’s
having executed, delivered, become a party to, performed its obligations under,
received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to, or enforced in, any Loan Document,
or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means any and all present or future stamp, court, or documentary,
intangible, recording, filing or similar Taxes or any other excise or Property
Taxes, charges or similar levies arising from any payment made hereunder or from
the execution, delivery, performance, registration, or enforcement of, from the
receipt or perfection of a security interest under, or otherwise with respect
to, this Agreement and any other Loan Document, except any such Taxes that are
Other Connection Taxes imposed with respect to an assignment (other than an
assignment made pursuant to Section 5.06.

 

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

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

“PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as the same
may be amended, supplemented, modified, replaced or otherwise in effect from
time to time.

“Payment in Full” means, the time at which (a) no Lender or Issuing Bank shall
have (i) any Commitments, Loan or other amounts payable under the Loan Documents
unpaid, unsatisfied or outstanding (other than in respect of contingent
obligations, indemnities and expenses related thereto that are not then payable
or in existence) and (ii) any Letters of Credit outstanding that (A) have not
been Cash Collateralized in a manner reasonably satisfactory or (B) have not had
other arrangements made with respect to them that are reasonably satisfactory,
in each case, to the applicable Issuing Bank, (b) for purposes of
Section 12.16(a), all Secured Swap Agreements have been terminated or paid in
full or the Borrower or any Restricted Subsidiary has Cash Collateralized or
made other arrangements with respect to such Secured Swap Agreements that are
mutually satisfactory to the applicable Secured Swap Party and the Borrower or
Restricted Subsidiary (it is understood that the Administrative Agent shall be
(i) permitted to rely on a certificate of a Responsible Officer of the Borrower
to establish the foregoing and (ii) entitled to deem that the foregoing has
occurred with respect to any Secured Swap Provider, if it does not respond to
written request from the Administrative Agent or the Borrower to confirm that
the foregoing has occurred within two (2) Business Days of such request) and
(c) the Commitments and the LC Commitments have been terminated.

“Payment or Bankruptcy Event of Default” means an Event of Default under
Sections 10.01(a), 10.01(b), 10.01(h), 10.01(i) or 10.01(j).

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

“Permitted Acquisition” means any acquisition, merger or similar transaction
permitted as an Investment under Section 9.05.

“Permitted Extension Amendments” means an extension of the maturity date of any
Loan and/or any Commitments by the Accepting Lenders and, in connection
therewith, (a) any change in the Applicable Margin with respect to the
applicable Loans and/or Commitments of the Accepting Lenders and/or the payment
of additional fees (including rate floor, OID, upfront fees or other fees) to
the Accepting Lenders (such change and/or payments to be in the form of cash,
Equity Interests or other property as agreed by the Borrower and the Accepting
Lenders to the extent not prohibited by this Agreement, excluding Section 4.01),
(b) the repayment in full on the maturity date of the non-extended Loans and
other amounts owing to each of the Lenders who are not Accepting Lenders,
(c) with respect to each prepayment of the Loans under Section 3.04 (other than
the payment in full of the Facility or any new facility in respect of the
extended Loans and Commitments), the Borrower repay Borrowings to the Lenders
and Accepting Lenders on a pro rata basis and (d) any other change in terms from
the terms hereunder so long as (i) they apply after the non-extended maturity
date or (ii) the non-Accepting Lenders receive the benefit of any such terms
that are more restrictive to Holdings, the Borrower and its Restricted
Subsidiaries (it being understood that the benefit of such more restrictive
terms may be provided to the non-Accepting Lenders without their consent) as
certified by a Responsible Officer of the Borrower in good faith.

 

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“Permitted Holders” means (a) the Co-Investors and (b) any Related Co-Investor
Party.

“Permitted Note Documents” means any indenture, credit agreement or other
agreement among the Borrower or any Guarantor, as issuer, the guarantors party
thereto and others either as agent, trustee or holders, governing any Permitted
Notes and the indentures, supplemental indentures or other agreements under or
pursuant to which any other Permitted Notes are issued, in each case, as further
amended, modified, waived or otherwise changed, consented to or agreed, in each
case, to the extent permitted under Section 9.04(c).

“Permitted Notes” means (a) any unsecured senior, senior subordinated or
subordinated notes or other unsecured Debt (including bridge loans) issued after
the Closing Date by the Borrower or any Guarantor under Section 9.02(k), (b) the
Existing Notes and (c) any Permitted Refinancing Debt in respect of the
foregoing (and any subsequent Permitted Refinancing Debt of Permitted
Refinancing Debt) issued under Section 9.02(l) or Section 9.02(m) (other than
Capital Debt) that constitutes unsecured senior, senior subordinated or
subordinated notes or other unsecured Debt (including bridge loans).

“Permitted Refinancing Increase” means, with respect to the Refinancing of any
Debt, an amount equal to (a) any premium or other reasonable amount paid, and
fees and expenses reasonably incurred, in connection with such Refinancing,
(b) any unpaid accrued interest on the Debt being Refinanced and (c) any
existing commitments unutilized and letters of credit undrawn under the Debt
being Refinanced.

“Permitted Refinancing Debt” means, with respect to any Debt (the “Refinanced
Debt”), any Debt issued or incurred in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace or refund (collectively to
“Refinance” or a “Refinancing” or “Refinanced”), such Refinanced Debt (or
previous refinancing thereof constituting Permitted Refinancing Debt); provided
that (a) the principal amount (or accreted value, if applicable) of any such
Permitted Refinancing Debt does not exceed the principal amount (or accreted
value, if applicable) of the Refinanced Debt outstanding immediately prior to
such Refinancing plus any Permitted Refinancing Increase, (b) the direct and
contingent obligors with respect to such Permitted Refinancing Debt immediately
prior to such Refinancing are not changed as a result of such Refinancing
(provided that, if such Debt was incurred or guaranteed by a Loan Party, the
Borrower and/or any Guarantor (or Subsidiary who becomes Guarantor) may be added
as an additional obligor or guarantor and, if such Debt was not incurred or
guaranteed by a Loan Party, any Subsidiary who is not a Guarantor may be added
as an additional obligor or guarantor), (c) other than with respect to
Refinanced Debt incurred under Section 9.02(c), such Permitted Refinancing Debt
shall have a stated maturity date equal to or later than the stated maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Refinanced Debt, (d) if the
Refinanced Debt is subordinated in right of payment, such Permitted Refinancing
Debt is subordinated in right of payment on (i) terms no less favorable to the
Lenders or (ii) terms reasonably satisfactory to the Administrative Agent,
(e) the Liens, if any, that secure such Permitted Refinancing Debt are
subordinated to the Liens securing the Indebtedness (i) to at least the same
extent as the Liens securing the Second Lien Obligations under the Existing
Second Lien Facility or (ii) on terms reasonably satisfactory to the
Administrative Agent and (f) terms and conditions of any such Permitted
Refinancing Debt (i) taken as a whole, are not materially less favorable to the
Borrower or any Restricted Subsidiary than the terms and conditions of the
Refinanced Debt being Refinanced (excluding, collateral priority, subordination,
interest rates, fees, floors, funding discounts and redemption or prepayment
premiums) or (ii) are reasonably satisfactory to the Administrative Agent or
(iii) would have been permitted hereunder in respect of the Refinanced Debt so
Refinanced if such Refinanced Debt was incurred on the date of such Refinancing;
provided further that a certificate of a Responsible Officer of

 

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the Borrower delivered to the Administrative Agent at least three Business Days
(or such shorter time as the Administrative Agent may agree) prior to the
incurrence or issuance of such Debt, together with a reasonably detailed
description of the material terms and conditions of such Debt or drafts of the
documentation relating thereto, stating that the Borrower has determined in good
faith that such terms and conditions satisfy the foregoing requirement shall be
conclusive evidence that such terms and conditions satisfy the foregoing
requirement.

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

“Petroleum Industry Standards” means the Definitions for Oil and Gas Reserves
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA other than a Multiemployer Plan, that is subject to Title IV of ERISA and
(a) is sponsored, maintained or contributed to by the Borrower, a Restricted
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 Restricted Subsidiary or an ERISA Affiliate
and with respect to which the Borrower or a Restricted Subsidiary or an ERISA
Affiliate may have any liability, contingent or otherwise.

“Present Value” means, at any time, the calculation of the present value of
future cash flows based upon the then-effective Reserve Report for Proved
Reserves from Oil and Gas Properties, utilizing the customary discount rates and
price deck of the Administrative Agent.

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

“Pro Forma Basis” means, as of any day of determination and for any test based
on satisfying a financial ratio or metric, that for purposes of any calculation
to determine compliance with such test, that such calculation will give pro
forma effect to the below events occurring through such date of determination as
if such events occurred on the first day of the most recently ended four
consecutive fiscal quarter period ending with the most recently ended fiscal
quarter for which financial statements were required to have been delivered
pursuant to Section 8.01, subject to Section 1.06(b)(ii): (a) any permitted
Disposition and any Permitted Acquisition (or any similar transaction or
transactions that require a waiver or consent of the Majority Lenders pursuant
to Section 9.05 or 9.08) and any discontinued operations (as determined in
accordance with GAAP), (b) any designation of any Restricted Subsidiary as an
Unrestricted Subsidiary and any Subsidiary Redesignation and (c) any assumption,
incurrence or Redemption of Debt associated with the events set forth in clause
(a) above; provided that the Interest Expense of the Borrower and its Restricted
Subsidiaries attributable to interest on any Debt, for which pro forma effect is
being given, bearing floating interest rates shall be computed on a pro forma
basis as if the rates that would have been in effect during the period for which
pro forma effect is being given had been actually in effect during such periods.

 

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“Pro Forma Compliance” means, as of any date of determination, that the Borrower
and the Restricted Subsidiaries would be in compliance with the Financial
Performance Covenant as at the last day of the most recently ended fiscal
quarter of the Borrower and the Restricted Subsidiaries for which the financial
statements were required to have been delivered pursuant to Section 8.01(a) or
Section 8.01(b), when such Financial Performance Covenant is recomputed on a Pro
Forma Basis on such date of determination.

“Pro Rata Share” means, with respect to each Lender, at any time a fraction
(expressed as a percentage, carried out to the ninth decimal place), the
numerator of which is the amount of the Commitments such Lender at such time and
the denominator of which is the amount of the Aggregate Commitments at such
time; provided that, if such Commitments have been terminated, then the Pro Rata
Share of each Lender shall be determined based on the Pro Rata Share of such
Lender immediately prior to such termination and after giving effect to any
subsequent assignments made pursuant to the terms hereof.

“Production Forecast Update” has the meaning set forth in Section 9.13(a).

“Prohibited Lender” means GoldenTree Asset Management, LP or any of its
Affiliates.

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

“Proposed Acquisition” has the meaning set forth in Section 9.13(b).

“Proposed Borrowing Base” has the meaning set forth in Section 2.07(c)(i).

“Proposed Borrowing Base Notice” has the meaning set forth in
Section 2.07(c)(ii).

“Proved Developed Reserves” means oil and gas mineral interests that, in
accordance with Petroleum Industry Standards, are classified as both “Proved
Reserves” and one of the following: (a) “Developed Producing Reserves” or
(b) “Proved Non-Producing Reserves.”

“Proved Reserves” means oil and gas mineral interests that, in accordance with
Petroleum Industry Standards, are classified as both “Proved Reserves” and one
of the following: (a) “Developed Producing Reserves”, (b) “Developed
Non-Producing Reserves” or (c) “Undeveloped Reserves”.

“PV-9” means, with respect to any Proved Reserves expected to be produced from
any Borrowing Base Properties, the net present value, discounted at nine percent
(9%) per annum, of the future net revenues expected to accrue to the Borrower’s
and the Restricted Subsidiaries’ collective interests in such reserves during
the remaining expected economic lives of such reserves, calculated in accordance
with the most recent Bank Price Deck provided to the Borrower by the
Administrative Agent pursuant to Section 2.07(f) or, in connection with a
Permitted Acquisition, another price deck or baseline reasonably acceptable to
the Administrative Agent.

“Qualified Equity Interests” means any Equity Interests of any Person other than
Disqualified Capital Stock.

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

 

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

“Refinance” has the meaning set forth in the definition of Permitted Refinancing
Debt.

“Refinanced Debt” has the meaning set forth in the definition of Permitted
Refinancing Debt.

“Register” has the meaning set forth in Section 12.04(b)(iv).

“Related Co-Investor Party” means:

(a) any controlling stockholder, partner, member, fifty percent (50%) (or more)
owned Subsidiary, or immediate family member (in the case of an individual) of
any Co-Investor; or

(b) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a fifty percent
(50%) or more controlling interest of which consist of any one or more
Co-Investors and/or such other Persons referred to in the immediately preceding
clause.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees and agents 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 set forth in Section 8.09.

“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 Adjusted Aggregate 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 (i) the outstanding aggregate principal amount of the Loans
and participation interests in Letters of Credit minus the principal amounts of
Loans and participation interests in Letters of Credit of Defaulting Lenders (in
each case, without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)) and (ii) the unused Adjusted Aggregate Commitments.

“Reserve Report” means the Initial Reserve Reports and any other subsequent
report, in form and substance reasonably satisfactory to the Administrative
Agent, together with other information provided by the Borrower reasonably
acceptable to the Administrative Agent, setting forth, as of each January 1st or
July 1st (or such other specified “as of” date contemplated hereunder, including
for Interim Redeterminations) the Proved Reserves and the Proved Developed
Reserves attributable to the Borrowing Base Properties (or, expected Borrowing
Base Properties) of the Borrower and the Restricted Subsidiaries, together with
a projection of the rate of production and future net income, taxes, operating
expenses and capital expenditures with respect thereto as of such date, based
upon the most recent Bank Price Deck provided to the Borrower by the
Administrative Agent pursuant to Section 2.07(f); provided that in connection
with an Interim Acquisition Redetermination, the Borrower shall be permitted,
for purposes of updating the Reserve Report, to set forth only such additional
Proved Reserves and related information as are the subject of such acquisition;
provided further that the Borrower shall not be required to update the Reserve
Report with respect to any deemed acquisition of Oil and Gas Properties
resulting from a Subsidiary Redesignation and may instead provide the most
recent Reserve Report if it evaluates the Proved Reserves of the Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary.

 

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“Reserve Report Certificate” has the meaning set forth in Section 8.11(c).

“Resignation Closing Date” has the meaning set forth in Section 11.06(a).

“Responsible Officer” means, as to any Person, (a) any chief executive officer,
president, vice president, general counsel, chief operating officer, chief
financial officer or treasurer or other similar officer of a Loan Party, (b) any
manager, managing member or general partner, in each case, of such Person,
(c) any other similar officer designated as such in writing to the
Administrative Agent by such Person and (d) as to any corporate document, any
secretary or assistant secretary of such Loan Party. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party. Unless otherwise specified, all references to a Responsible
Officer herein shall mean a Responsible Officer of the Borrower.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Restricted 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 (a) any such Equity Interests in the Borrower or any of its
Restricted Subsidiaries or (b) any option, warrant or other right to acquire any
such Equity Interests in the Borrower or any of its Restricted Subsidiaries.

“Restricted Subsidiary” means any Subsidiary of the Borrower other than an
Unrestricted Subsidiary.

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

“Sabine” has the meaning set forth in the recitals hereto.

“Sabine Credit Agreement Refinancing” has the meaning set forth in the recitals
hereto.

“Sabine Holdings” has the meaning set forth in the recitals hereto.

“Sabine Reserve Report” has the meaning set forth in Section 6.01(k).

“Scheduled Redetermination” has the meaning set forth in Section 2.07(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 2.07(d).

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

“Second Lien Documents” means any credit agreement, any indenture or similar,
associated or related documents among the Borrower and/or its Restricted
Subsidiaries, as borrower or issuer, the guarantors party thereto, if any, and
the other parties party thereto (including agents, trustees, lenders or
holders), governing any Second Lien Facility of the Borrower and its Restricted
Subsidiaries, as amended, restated, modified, renewed, refunded, replaced
(whether upon or after termination or otherwise) or refinanced in whole or in
part from time to time, subject to Section 9.04(c).

 

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“Second Lien Facility” means, in respect of Second Lien Obligations, one or more
debt facilities (including the Existing Second Lien Facility), indentures or
commercial paper facilities, in each case with banks or other institutional
lenders or investors providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables), or letters of credit or other indebtedness, in each case, as
amended, restated, modified, renewed, refunded, replaced (whether upon or after
termination or otherwise) or refinanced (including by means of sales of debt
securities to institutional investors) in whole or in part from time to time,
including any agreement or indenture extending the maturity thereof or otherwise
restructuring all or any portion of the indebtedness thereunder or increasing
the amount loaned or issued thereunder or altering the maturity thereof.

“Second Lien Obligations” means any Debt of the Borrower and/or its Restricted
Subsidiaries, which is intended to be secured by any Collateral securing the
Indebtedness on a junior basis.

“Secured Cash Management Agreement” means any agreement related to Cash
Management Services by and between the Borrower or any of its Restricted
Subsidiaries and any Cash Management Bank.

“Secured Cash Management Obligations” means any Cash Management Obligations
owing to any Cash Management Bank under a Secured Cash Management Agreement.

“Secured Parties” means, collectively, the Administrative Agent, each Issuing
Bank, each Lender, each Secured Swap Party that is party to any Secured Swap
Agreement, each Cash Management Bank that is a party to any Secured Cash
Management Agreement, Indemnitees, and each sub-agent appointed by the
Administrative Agent pursuant to Section 11.05.

“Secured Swap Agreement” means any (a) Swap Agreement between the Borrower or
any Restricted Subsidiary and any Person that is entered into prior to the time,
or during the time, that such Person was a Lender or an Affiliate of a Lender
(including any such Swap Agreement in existence prior to the date hereof), even
if such Person ceases to be a Lender or an Affiliate of a Lender for any reason
or (b) Swap Agreement in effect as of the Closing Date between the Borrower or
any Restricted Subsidiary and any Person who was a lender (or an Affiliate
thereof) under the Existing Sabine Credit Agreement or Existing Forest Credit
Agreement, in either case, immediately prior to the Closing Date, that is set
forth on Schedule 1.01(d) (any such Person who is a counterparty to the Borrower
or any Restricted Subsidiary referenced in clause (a) and clause (b), a “Secured
Swap Party”); provided that, for the avoidance of doubt, the term “Secured Swap
Agreement” shall not include any transactions entered into after the time that
such Secured Swap Party ceases to be a Lender or an Affiliate of a Lender.

“Secured Swap Obligations” means all amounts and other obligations owing to any
Secured Swap Party under any Secured Swap Agreement (other than Excluded Swap
Obligations).

“Secured Swap Party” has the meaning set forth in the definition of Secured Swap
Agreement.

“Security Instruments” means the Guaranty and Pledge Agreement, each Mortgage
and other agreements, instruments or certificates described or referred to in
Exhibit E, and any and all other agreements, instruments, certificates or
consents now or hereafter executed and delivered by the Borrower or any Loan
Party (other than Swap Agreements with the Lenders or any Affiliate of a Lender
or participation or similar agreements between any Lender and any other lender
or creditor with respect to any Indebtedness pursuant to this Agreement) as
security for the payment or performance of the Indebtedness.

 

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“Solvency Certificate” means the Solvency Certificate substantially in the form
of Exhibit H.

“Specified Merger Agreement Representations” means the representations and
warranties relating to Forest that are set forth in the Merger Agreement, that
are material to the interests of the Lenders, but only to the extent that Sabine
and its affiliates have the right to terminate their obligations under the
Merger Agreement or a right to not consummate the Merger as a result of a breach
of such representations and warranties in the Merger Agreement and, for the
avoidance of doubt, the representation and warranty contained in Section 3.8(b)
of the Merger Agreement.

“Specified Representations” means the representations and warranties with
respect to the Borrower set forth in Sections 7.01(a)(i), 7.02, 7.03(b)
(provided that the term “Material Adverse Effect” as used to qualify
Section 7.03(b) will have the meaning ascribed to the term “Forest Material
Adverse Effect” by the Merger Agreement and Section 7.03(b) shall be deemed to
apply to the Consolidation and Merger), 7.03(c) (provided that Section 7.03(c)
shall be deemed to apply to the Consolidation and Merger), 7.07(b), 7.07(c),
7.08, 7.19 (with respect to the last two sentences of Section 7.19 only) and
7.20 of this Agreement and in Section 4.03 of the Guaranty and Pledge Agreement
(as it relates to the validity and perfection of the security interests in the
Collateral).

“Specified Restricted Payment Test” means, at any time of determination, with
respect to any Restricted Payment or Redemption (a) no Default or Event of
Default has occurred and is continuing or would immediately result from such
Restricted Payment or Redemption and (b) at such time after giving effect to
such Restricted Payment or Redemption, the Liquidity Test shall be satisfied.

“Sponsor” means FRC Founders Corporation and each of its Affiliates but
excluding, however, any operating portfolio companies of any of the foregoing
(collectively, “FRC”) but excluding, however, any operating portfolio companies
of any of the foregoing.

“Sponsor Fund Affiliate” means (a) each Affiliate of a Sponsor, but excluding,
however, any operating portfolio companies of the Sponsor, and (b) each general
partner or managing member of a Sponsor or any such Affiliate.

“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.

“Subsidiary” means, with respect to any Person: (a) any corporation, association
or other business entity of which more than fifty percent (50%) of the total
ordinary voting power of Equity Interests entitled (without regard to the
occurrence of any contingency and after giving effect to any voting agreement or
stockholders’ agreement that effectively transfers voting power) to vote in the
election of directors, managers or trustees of the corporation, association or
other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (b) any partnership (i) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (ii) the only general partners of which are that Person or one
or more Subsidiaries of that Person (or any combination thereof). Unless
otherwise indicated herein, each reference to the term “Subsidiary” means a
Subsidiary of the Borrower.

“Subsidiary Guarantor” means each Restricted Subsidiary that is a Guarantor.

“Subsidiary Redesignation” has the meaning set forth in Section 8.16(a).

 

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“Successor Borrower” has the meaning set forth in Section 9.07(b).

“Super-Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least eighty percent (80%) (or such greater
percentage as the Borrower may elect) of the Adjusted Aggregate Commitments; and
at any time while any Loans or LC Exposure is outstanding, Lenders holding at
least eighty percent (80%) (or such greater percentage as the Borrower may
elect) of (i) the outstanding aggregate principal amount of the Loans and
participation interests in Letters of Credit minus the principal amounts of
Loans and participation interests in Letters of Credit of Defaulting Lenders (in
each case, without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)) and (ii) the unused Adjusted Aggregate Commitments.

“Swap 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 interest rates, currencies, commodities, equity or debt instruments
or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any
combination of these transactions; provided that (a) 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
Restricted Subsidiaries shall be a Swap Agreement and (b) any right of a Person
to ‘put’ an asset to another Person that arises in connection with any
acquisition agreement or disposition agreement shall not be a Swap Agreement.

“Swap Obligations” means, with respect to the Borrower or any Restricted
Subsidiary, all debt, liabilities and obligations of such Person under Swap
Agreements to the counterparties under such Swap Agreements.

“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap 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 Swap Agreements, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Agreements (which may include a Lender or any
Affiliate of a Lender).

“Syndication Agent” means the syndication agent identified on the cover page of
this Agreement.

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, eighty percent
(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, assessments, fees or other charges, or withholdings (including
backup withholdings) imposed by any Governmental Authority, including any
interest, additions to tax or penalties applicable thereto.

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

 

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“Test Period” means, at any date of determination, the most recently completed
four consecutive fiscal quarters of the Borrower ending with the most recently
ended fiscal quarter for which financial statements were required to have been
delivered pursuant to Section 8.01.

“Title Information Grace Period” has the meaning set forth in Section 8.12(a).

“Total Assets” means, as of any date of determination with respect to any
Person, the amount that would, in conformity with GAAP, be set forth opposite
the caption “total assets” (or any like caption) on a balance sheet of such
Person at such date, without giving effect to any amortization of the amount of
intangible assets since December 31, 2013.

“Transaction Expenses” means any fees or expenses incurred or paid by the
Borrower or any of its Subsidiaries or any of their Affiliates or Co-Investors
in connection with the Transactions and the transactions contemplated thereby.

“Transactions” means, (a) with respect to 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 Mortgaged Properties and other collateral pursuant to the Security
Instruments, (b) with respect to each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document to which it is a party, the
guaranteeing of the Indebtedness and the other obligations under the Guaranty
and Pledge Agreement by such Guarantor and such Guarantor’s grant of the Liens
and provision of collateral under the Security Instruments, and the grant of
Liens by such Guarantor on Mortgaged Properties and other collateral pursuant to
the Security Instruments and (c) the Closing Date Refinancing, (d) the
Contribution and Merger and any transactions contemplated thereby, (e) the
Existing Second Lien Incremental Amendment and (f) the payment of Transaction
Expenses.

“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 Eurodollar Rate.

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as the same
may from time to time be in effect in the State of New York or the Uniform
Commercial Code (or similar code or statute) of another jurisdiction, to the
extent it may be required to apply to any item or items of Collateral.

“Unrestricted Cash” means cash and Cash Equivalents of the Borrower or any of
its Restricted Subsidiaries that would not appear as “restricted” on a
consolidated balance sheet of the Borrower or any of its Restricted
Subsidiaries.

“Unrestricted Subsidiary” means (a) any Restricted Subsidiary of the Borrower
that becomes an Unrestricted Subsidiary in accordance with Section 8.16
subsequent to the Closing Date, (b) any Subsidiary of the Borrower set forth on
Schedule 1.01(c), in each case, until any such Subsidiary is re-designated as a
Restricted Subsidiary in accordance with Section 8.16 and (c) any Subsidiary of
an Unrestricted Subsidiary, in each case, until any such Unrestricted Subsidiary
is (and its Subsidiaries are) re-designated as a Restricted Subsidiary in
accordance with Section 8.16.

“Volumetric Production Payments” means production payment obligations recorded
as deferred revenue in accordance with GAAP, together with all undertakings and
obligations in connection therewith.

 

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“Voting Stock” means, with respect to any Person, such Person’s Equity Interests
having the right to vote for the election of directors of such Person under
ordinary circumstances.

“Weighted Average Life to Maturity” means, when applied to any Debt at any date,
the number of years obtained by dividing (a) the sum of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment by (b) the then outstanding principal amount of such Debt.

“Wells Fargo” has the meaning set forth in the preamble hereto.

“Wholly-Owned Subsidiary” means any 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.

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

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and
effect as the word “shall”. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument, certificate,
organization document or other document herein shall be construed as referring
to such agreement, instrument, certificate 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 Governmental Requirement shall be construed as
referring to such Governmental Requirement 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” and “until” means “to but excluding” and the word “through” means
“to and including” and (f) any reference herein to Articles, Sections, Annexes,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Annexes, Exhibits and Schedules to, this Agreement. No provision of this
Agreement or any other Loan Document shall be interpreted or construed against
any Person solely because such Person or its legal representative drafted such
provision.

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and 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 the Borrower’s independent
certified public accountants concur and which are disclosed to the
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

 

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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.

Section 1.06 Pro Forma Basis Calculation.

(a) Notwithstanding anything herein to the contrary, the parties hereto
acknowledge and agree that all calculations of (i) Pro Forma Compliance with the
Financial Performance Covenant, (ii) Total Assets in the definition of Material
Subsidiary, (iii) Consolidated Total Assets in the definition of Material
Subsidiary, (iv) Consolidated Net Tangible Assets in Sections 9.02(n), 9.03(f)
and 9.05(d) and (v) any other test hereunder that is based on satisfying a
financial ratio or metric shall be performed on a Pro Forma Basis for any fiscal
period ending on or prior to the first anniversary of a Permitted Acquisition,
permitted Disposition (or any similar transaction or transactions that require a
waiver or consent of the Majority Lenders pursuant to Section 9.05 or 9.08),
discontinued operations or designation of a Subsidiary as being a Restricted
Subsidiary or an Unrestricted Subsidiary, as the case may be; provided that
(A) in the event that (1) the aggregate consideration for any Permitted
Acquisition or the net cash proceeds from any permitted Disposition (or
aggregate consideration for, or net cash proceeds from, any similar transaction
or transactions that require a waiver or consent of the Majority Lenders
pursuant to Section 9.05 or 9.08) or effect of any discontinued operations, when
combined with the aggregate consideration and net cash proceeds for all other
transactions occurring from the beginning of the applicable Test Period through
the date of determination whose effect is not calculated on a Pro Forma Basis by
virtue of this proviso, is less than five percent (5.0%) of EBITDA as of the
then most recently ended Test Period or (2) the relevant Restricted Subsidiary
that is designated as an Unrestricted Subsidiary or redesignated as a Restricted
Subsidiary through a Subsidiary Redesignation is an Immaterial Subsidiary, the
Borrower may elect not to treat such events on a Pro Forma Basis; and

(b) Pro forma calculations made on a Pro Forma Basis or pro forma basis shall be
determined in good faith by a Responsible Officer of the Borrower and (i) may
give pro forma effect to any such event on an annualized basis for any quarter
ending on or prior to such anniversary and (ii) may include adjustments to
reflect operating expense reductions and other operating improvements or
synergies reasonably expected to result from any such Permitted Acquisition,
permitted Disposition or other similar transaction or discontinued operations,
to the extent that the Borrower delivers to the Administrative Agent (A) a
certificate of a Responsible Officer of the Borrower setting forth such
operating expense reductions and other operating improvements or synergies and
(B) information and calculations supporting in reasonable detail such estimated
operating expense reductions and other operating improvements or synergies.

Section 1.07 Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Central time (daylight or standard, as
applicable).

Section 1.08 Timing of Payment or Performance. When the payment of any
obligation or the performance of any covenant, duty or obligation is stated to
be due or performance required on a day which is not a Business Day, the date of
such payment (other than as described in the definition of Interest Period) or
performance shall extend to the immediately succeeding Business Day.

Section 1.09 Negative Covenant Compliance. For purposes of determining whether
the Borrower and its Restricted Subsidiaries comply with any exception to
Article IX (other than the Financial Performance Covenant) where compliance with
any such exception is based on a financial ratio or metric being satisfied as of
a particular point in time, it is understood that (a) compliance shall be
measured at the time when the relevant event is undertaken, as such financial
ratios and metrics are intended to be “incurrence” tests and not “maintenance”
tests and (b) correspondingly, any such ratio and

 

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metric shall only prohibit the Borrower and its Restricted Subsidiaries from
creating, incurring, assuming, suffering to exist or making, as the case may be,
any new, for example, Liens, Debt or Investments, but shall not result in any
previously permitted, for example, Liens, Debt or Investments ceasing to be
permitted hereunder. For avoidance of doubt, with respect to determining whether
the Borrower and its Restricted Subsidiaries comply with any negative covenant
in Article IX (other than the Financial Performance Covenant), to the extent
that any obligation or transaction could be attributable to more than one
exception to any such negative covenant, the Borrower may elect to categorize
all or any portion of such obligation or transaction to any one or more
exceptions to such negative covenant that permit such obligation or transaction.

ARTICLE II

THE CREDITS

Section 2.01 Commitments.

(a) Subject to the terms and conditions set forth herein, each Lender agrees to
make Loans to the Borrower from time to time on any Business Day during the
Availability Period in an aggregate principal amount that will not result in
(i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment
or (ii) the aggregate Revolving Credit Exposures of the Lenders exceeding the
Aggregate Commitments of the Lenders. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, repay and
reborrow the Loans.

Section 2.02 Loans and Borrowings.

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

(b) Types of Loans. Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that (i) any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan and (ii) in exercising such
option, such Lender shall use its reasonable efforts to minimize any cost to the
Borrower resulting therefrom that would arise under Article V (so long as, in
the reasonable judgment of such Lender, such efforts would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender).

(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 $500,000 and not less
than $500,000; 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.

 

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(d) Notes. If requested by a Lender, the Loans made by such Lender shall be
evidenced by a Note, dated, in the case of (i) any Lender party hereto as of the
Closing Date, as of the Closing Date or (ii) any Lender that becomes a party
hereto pursuant to an Assignment and Assumption, as of the effective date of the
Assignment and Assumption, payable to the order of such Lender in a principal
amount equal to its Maximum Credit Amount as in effect on such date, and
otherwise duly completed. Upon reasonable request from a Lender, in the event
that any Lender’s Maximum Credit Amount increases or decreases for any reason
(whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the Borrower
shall deliver or cause to be delivered a new Note payable to the order of such
Lender in a principal amount equal to its Maximum Credit Amount after giving
effect to such increase or decrease, and otherwise duly completed, and, upon
receipt by such Lender of such new Note, the existing Note of the Lender shall
be deemed cancelled and the Lender shall promptly return its prior Note to the
Borrower upon the request of the Borrower. 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.

Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall
notify the Administrative Agent of such request by email or telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., Houston time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., Houston time, on the date of the
proposed Borrowing; provided that no such notice shall be required for any
deemed request of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as provided in Section 2.09(e). Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery,
email or fax to the Administrative Agent of a written Borrowing Request signed
by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information:

(i) the aggregate amount of the requested Borrowing;

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

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

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

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

(vi) the location and number of the Borrower’s account to which funds are to be
disbursed.

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

 

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

Section 2.04 Interest Elections.

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

(b) Interest Election Requests. To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone 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 fax to the Administrative Agent of a
written Interest Election Request 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 2.04(c)(ii) and (iii) 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 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.
Without in any way limiting the obligation of the Borrower to confirm in writing
any notice it may give hereunder by telephone, the Administrative Agent may act
prior to receipt of written confirmation without liability upon the basis of
such telephonic notice believed by the Administrative Agent in good faith to be
from a Responsible Officer of the Borrower.

 

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(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. If an Event of Default has occurred and is
continuing on the date when an Interest Period continuation or conversion from
an ABR Borrowing to a Eurodollar Borrowing is to take place and the
Administrative Agent has or the Majority Lenders have determined in its or their
sole discretion not to permit such continuation or conversion, (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing
(and any Interest Election Request that requests the conversion of any Borrowing
to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., Houston time, to the account of the Administrative Agent
most recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
designated by the Borrower in the applicable Borrowing Request; provided that
ABR Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.09(e) shall be remitted by the Administrative Agent to the applicable
Issuing Bank.

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

Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.

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

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

(i) The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amounts; provided that (A) each reduction of the
Aggregate Maximum Credit Amounts shall be in an amount that is an integral
multiple of $1,000,000 and not less than

 

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$5,000,000 and (B) the Borrower shall not terminate or reduce the Aggregate
Maximum Credit Amounts if, after giving effect to any concurrent prepayment of
the Loans in accordance with Section 3.04(c), the total Revolving Credit
Exposures would exceed the Aggregate Commitments.

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amounts under
Section 2.06(b)(i) at least three (3) Business Days (or such shorter time as the
Administrative Agent may agree) 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. Any election by the Borrower to terminate or
reduce the Maximum Credit Amounts pursuant to a notice delivered by the Borrower
pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that such
notice may be made to be contingent upon the consummation of a refinancing or
other event and such notice may otherwise be extended or revoked, in each case,
with the requirements of Section 5.02 to apply to any failure of the contingency
to occur and any such extension or revocation. Any termination or reduction of
the Aggregate Maximum Credit Amounts shall be permanent and may not be
reinstated. Each reduction of the Aggregate Maximum Credit Amounts shall be made
ratably among the Lenders in accordance with each Lender’s Applicable
Percentage.

Section 2.07 Borrowing Base.

(a) Initial Borrowing Base. For the period from and including the Closing Date
to but excluding the next Scheduled Redetermination Date, the amount of the
Borrowing Base shall be equal to $1,000,000,000, subject to the right of the
Borrower to request an Interim Redetermination and the right of the Required
Lenders to request an adjustment in accordance with Paragraph 3 of Schedule
8.18, subject to further adjustments pursuant to the Borrowing Base Adjustment
Provisions.

(b) Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Administrative
Agent, the Issuing Banks and the Lenders on April 1st and October 1st of each
year, commencing April 1, 2015, or such later time as the Borrower may agree
upon request of the Administrative Agent or the Majority Lenders may agree upon
the request of the Borrower. In addition, 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, two times during any
12-month period (occurring after the first Scheduled Redetermination in the case
of the Administrative Agent), each elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations (together with any Interim
Acquisition Redetermination, an “Interim Redetermination”) in accordance with
this Section 2.07 (it is understood, for avoidance of doubt, that any adjustment
to the Borrowing Base by the Required Lenders in accordance with Paragraph 3 of
Schedule 8.18 shall not constitute an Interim Redetermination); provided that,
in connection with an Interim Acquisition Redetermination, the Borrower, may, as
set forth in the definition of Reserve Report, elect only to provide a Reserve
Report in respect of the acquired properties (in which case the most recent
Reserve Report shall be used for the existing Borrowing Base Properties).

In addition to, and not including and/or limited by the two Interim
Redeterminations allowed above, the Borrower may, by notifying the
Administrative Agent thereof, two times during any 12-month period, request
additional Interim Redeterminations of the Borrowing Base in the event that it
consummates a Material Acquisition (an “Interim Acquisition Redetermination”).

 

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(c) Scheduled and Interim Redetermination Procedure.

(i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: upon receipt by the Administrative Agent of (A) the
Reserve Report and the Reserve Report Certificate, and (B) such other reports,
data and supplemental information, including the information provided pursuant
to Section 8.11(c), as may, from time to time, be reasonably requested by the
Administrative Agent (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 in accordance with its normal oil and gas
lending criteria as it exists at the particular time, propose a new Borrowing
Base (the “Proposed Borrowing Base”) based upon such information and any other
information as the Administrative Agent reasonably deems appropriate pursuant to
its normal oil and gas lending criteria as it exists at the particular time. In
no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit
Amounts.

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

(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 8.11(a) and 8.11(c) in a timely and complete
manner, then on or before March 15th and September 15th of such year following
the date of their delivery (or such later date, within 30 days thereof, to which
the Borrower and the Administrative Agent agree) or (2) if the Administrative
Agent shall not have received the Engineering Reports required to be delivered
by the Borrower pursuant to Section 8.11(a) and 8.11(c) in a timely and complete
manner, then promptly after the Administrative Agent has received such
Engineering Reports from the Borrower and has had a reasonable opportunity to
determine the Proposed Borrowing Base in accordance with Section 2.07(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 (unless otherwise agreed by the Borrower).

(iii) Any Proposed Borrowing Base that would (A) increase the Borrowing Base
then in effect must be approved by or deemed to have been approved by all of the
Lenders and (B) decrease or maintain the Borrowing Base then in effect must be
approved or be deemed to have been approved by the Required Lenders, in each
case, as provided in this Section 2.07(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 (it being understood that each Lender
shall assess the Proposed Borrowing Base in good faith in accordance with its
normal oil and gas lending criteria as it exists at the particular time). 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 (unless the
Administrative Agent and Borrower otherwise agree). 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 Borrowing Base,
effective on the date specified in Section 2.07(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 the Proposed Borrowing Base as
indicated above, then the Administrative Agent shall promptly thereafter poll
the Lenders to ascertain the highest Borrowing Base then acceptable to all of
the Lenders (in the case of any increase to the Borrowing Base) or a number of
Lenders sufficient to constitute the Required Lenders (in the case of any
decrease to the Borrowing Base) and such amount shall become the new Borrowing
Base, effective on the date specified in Section 2.07(d).

 

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(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 (and the Borrower in the case of a Borrowing Base increase, it being
understood that, subject to the Borrower’s rights under Section 2.07(e), the
Borrower shall be deemed to have approved any increase which has been
communicated to the Borrower by the Administrative Agent in writing three
(3) Business Days prior to delivery of such New Borrowing Base Notice, unless
the Administrative Agent shall have received a written notice from the Borrower
that it does not approve such increase prior to the delivery of the New
Borrowing Base Notice) or the Required Lenders, as applicable, pursuant to
Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the
Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing
Base Notice”), and such amount shall become the new Borrowing Base, effective
and applicable to the Borrower, the Administrative Agent, each Issuing Bank and
the Lenders:

(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 8.11(a) and 8.11(c) in a timely and complete
manner, then on April 1st or October 1st (or such later time as the Borrower may
agree upon request of the Administrative Agent or the Majority Lenders may agree
upon the request of the Borrower), 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 8.11(a) and 8.11(c)
in a timely and complete manner, then on the Business Day next succeeding
delivery of such New Borrowing Base Notice; and

(ii) in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such New Borrowing Base 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 pursuant to the Borrowing Base Adjustment
Provisions, whichever occurs first. Notwithstanding the foregoing, no Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.

(e) Borrower’s Right to Elect Reduced Borrowing Base. Within three (3) Business
Days of its receipt of a New Borrowing Base Notice or other notice which makes
effective a new Borrowing Base, the Borrower may provide written notice to the
Administrative Agent and the Lenders that specifies for the period from the
effective date of the New Borrowing Base Notice or such other notice until the
next succeeding Redetermination Date, the Borrowing Base will be a lesser amount
than the amount set forth in such New Borrowing Base Notice or such other
notice, whereupon such specified lesser amount will become the new Borrowing
Base. The Borrower’s notice under this Section 2.07(e) shall be irrevocable, but
without prejudice to its rights to initiate Interim Redeterminations, and may be
made to be contingent upon the consummation of a refinancing or other event.

(f) Administrative Agent Data. The Administrative Agent hereby agrees to
provide, promptly, and in any event within three (3) Business Days, following
its receipt of a request by the Borrower, an updated Bank Price Deck. In
addition, the Administrative Agent and each Lender agrees, upon request, with
reasonable advance notice, to meet with the Borrower to discuss its or their
evaluation of the reservoir engineering of the Oil and Gas Properties included
in the Reserve Report and their respective methodologies for valuing such
properties and the other factors considered in calculating the Borrowing Base;
provided that neither the Administrative Agent nor any Lender shall be obligated
to disclose any information to the extent that doing so would violate any
Governmental Requirement or Contractual Requirement that is binding on it.

 

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Section 2.08 Borrowing Base Adjustment Provisions.

(a) Reduction of Borrowing Base Upon Issuance of Permitted Notes and Incurrence
of Additional Second Lien Obligations. Upon the issuance of any Permitted Notes
or incurrence of any Second Lien Obligations after the Closing Date in reliance
on Section 9.02(k) (for avoidance of doubt, excluding any Permitted Refinancing
Increase and Permitted Refinancing Debt in respect thereof), the Borrowing Base
then in effect shall be reduced by an amount equal to the product of 0.25
multiplied by the stated principal amount of such Permitted Notes or Second Lien
Obligations (without regard to any initial issue discount), and the Borrowing
Base as so reduced shall become the new Borrowing Base on such date.

(b) Reduction of Borrowing Base Upon Asset Dispositions. If (i) the Borrower or
one of the other Loan Parties Disposes of Borrowing Base Properties or Disposes
of any Equity Interests in any Person owning Borrowing Base Properties, in each
case, to a Person other than the Borrower or a Subsidiary Guarantor and (ii) the
aggregate Borrowing Base Value of all such Borrowing Base Properties Disposed of
since the later of (A) the last Scheduled Redetermination Date and (B) the last
adjustment of the Borrowing Base made pursuant to this Section 2.08(b) exceeds
five percent (5.0%) of the then-effective Borrowing Base, then no later than two
(2) Business Days’ after the consummation of any such Disposition, the Borrowing
Base shall be reduced by an amount equal to the Borrowing Base Value
attributable to such Disposed of Borrowing Base Properties in the calculation of
the then-effective Borrowing Base, and the Administrative Agent shall promptly
notify the Borrower in writing of the Borrowing Base Value attributable to such
Disposed of Borrowing Base Properties in the calculation of the then-effective
Borrowing Base and upon receipt of such notice, the Borrowing Base shall be
simultaneously reduced by such amount. For the purposes of this Section 2.08(b),
a Disposition of Borrowing Base Properties shall be deemed to include the
designation of a Restricted Subsidiary owning Borrowing Base Properties as an
Unrestricted Subsidiary or Excluded Subsidiary and the Disposition of Equity
Interests in any Person owning Borrowing Base Properties to an Unrestricted
Subsidiary or Excluded Subsidiary.

(c) Reduction of Borrowing Base Upon Termination of Hedge Positions. If, since
the Last B/B Hedge Reduction, the Borrower or any Restricted Subsidiary changes
the material terms of any commodity-price Swap Agreement, terminates any such
Swap Agreement or creates any off-setting positions in respect of any hedge
positions under any such Swap Agreement (whether evidenced by a floor, put or
Swap Agreement) upon which (i) the Lenders relied on in determining the
Borrowing Base and (ii) the Borrowing Base Value of such terms to the extent
changed and such terminated and/or offsetting positions (after taking into
account any other Swap Agreement executed since the Last B/B Hedge Reduction,
including those executed substantially concurrently with the taking of any such
action) exceeds in the aggregate five percent (5.0%) of the then effective
Borrowing Base, then, the Borrowing Base shall be reduced by an amount equal to
the Borrowing Base Value (after taking into account any other Swap Agreement
executed since the Last B/B Hedge Reduction, including those executed
substantially concurrently with the taking of any such action) attributable to
such terms to the extent changed and such terminated or off-setting hedge
positions in the calculation of the then-effective Borrowing Base. The
Administrative Agent shall promptly notify the Borrower in writing of the
Borrowing Base Value attributable to such hedge positions in the calculation of
the then-effective Borrowing Base (after taking into account any other Swap
Agreement executed since the Last B/B Hedge Reduction, including those executed
substantially concurrently with the taking of any such action) and, upon receipt
of such notice, the Borrowing Base shall be simultaneously reduced by such
amount.

 

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(d) Reduction of Borrowing Base Related to Title. After the expiration of the
time period set forth in Paragraph 2 of Schedule 8.18, if the Administrative
Agent has delivered a notice pursuant to Section 8.12(c) indicating that the
Borrower has not provided reasonably satisfactory title information and the
Required Lenders have agreed to adjust the Borrowing Base, so that, after giving
effect to such reduction, the Borrower will have provided reasonably
satisfactory title information in respect of the required percentage of the
value of the Borrowing Base Properties, the Administrative Agent shall promptly
notify the Borrower in writing and, upon receipt of such notice, the new
Borrowing Base will simultaneously become effective.

Section 2.09 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower
may request any Issuing Bank to issue Dollar denominated Letters of Credit for
the account of the Borrower or for the account of any Loan Party and 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; provided that the Borrower may not request the
issuance, amendment, renewal or extension of Letters of Credit hereunder if,
immediately after giving effect to the requested issuance, amendment, renewal or
extension, as applicable, (i) the LC Exposure would exceed the LC Commitment,
(ii) the total Revolving Credit Exposures would exceed the Aggregate Commitments
of the Lenders or (iii) the sum of (A) the aggregate undrawn amount of all
outstanding Letters of Credit issued by any Issuing Bank plus (B) the aggregate
amount of all LC Disbursements made by such Issuing Bank that have not yet been
reimbursed by or on behalf of the Borrower would exceed such Issuing Bank’s LC
Issuance Limit. No Issuing Bank shall be under any obligation to issue any
Letter of Credit if any Lender is at that time a Defaulting Lender, unless such
Issuing Bank has entered into arrangements reasonably satisfactory to such
Issuing Bank with the Borrower or such Lender to eliminate or Cash Collateralize
such Issuing Bank’s actual or potential Fronting Exposure (after giving effect
to Section 4.04(a)(iv)) with respect to the Defaulting Lender arising from
either the Letter of Credit then proposed to be issued or any LC Exposure as to
which such Issuing Bank has actual or potential Fronting Exposure. 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 fax (or transmit by electronic communication, if arrangements for doing so
have been approved by the applicable Issuing Bank) to such Issuing Bank and the
Administrative Agent (not less than three (3) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:

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

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

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

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

(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

 

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

Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment, (ii) the total Revolving Credit
Exposures shall not exceed the Aggregate Commitments and (iii) the sum of
(A) the aggregate undrawn amount of all outstanding Letters of Credit issued by
such Issuing Bank plus (B) the aggregate amount of all LC Disbursements made by
such Issuing Bank that have not yet been reimbursed by or on behalf of the
Borrower shall not exceed such Issuing Bank’s LC Issuance Limit.

If requested by the applicable 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.

No Issuing Bank shall be under any obligation to issue any Letter of Credit if
any order, judgment or decree of any Governmental Authority shall by its terms
to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or
any law applicable to such Issuing Bank or any request or directive (whether or
not having the force of law) from any Governmental Authority with jurisdiction
over such Issuing Bank shall prohibit such Issuing Bank from the issuance of
letters of credit generally or such Letter of Credit in particular and which
such Issuing Bank in good faith deems material to it. No Issuing Bank shall be
under any obligation to amend or extend any Letter of Credit if the beneficiary
of such Letter of Credit does not accept the proposed amendment thereto.

(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 (or eighteen (18) months
with respect to Letters of Credit issued for the benefit of the Texas Railroad
Commission or such longer period as the Issuing Bank may agree in its sole
discretion) after the date of the issuance of such Letter of Credit (or, in the
case of any renewal or extension thereof, one (1) year (or eighteen (18) months
with respect to Letters of Credit issued for the benefit of the Texas Railroad
Commission or such longer period as the Issuing Bank may agree in its sole
discretion) after such renewal or extension) and (ii) the date that is five
(5) Business Days prior to the Maturity Date (such dates, the “Letter of Credit
Expiration Date”) unless such Letter of Credit has been Cash Collateralized in a
manner reasonably satisfactory or has had other arrangements made with respect
to it that is reasonably satisfactory, in each case, to such Issuing Bank.

(d) [Reserved]

(e) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the applicable Issuing Bank or the Lenders, such 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 such Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the
date due as provided in Section 2.09(f), 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(e) in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment,

 

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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.

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

(g) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.09(f) shall be absolute, unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under any and all circumstances whatsoever and irrespective of (i) any
lack of validity or enforceability of any Letter of Credit, any Letter of Credit
Agreement or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
strictly 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(g), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder. Neither the
Administrative Agent, the Lenders nor 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 the
applicable Issuing Bank; provided that the foregoing shall not be construed to
excuse the applicable 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

 

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permitted by applicable law) suffered by the Borrower that are caused by the
applicable Issuing Bank’s failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the applicable Issuing Bank (as
finally determined by a court of competent jurisdiction), the applicable Issuing
Bank shall be deemed to have exercised all requisite care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the applicable 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.

(h) 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. The applicable Issuing Bank shall
promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by electronic transmission) of such demand for payment and whether
the applicable Issuing Bank has made or will make an LC Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the applicable Issuing Bank
and the Lenders with respect to any such LC Disbursement.

(i) Interim Interest. If the applicable Issuing Bank shall make any LC
Disbursement, then until the Borrower shall have reimbursed the applicable
Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing
under Section 2.09(f)), 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(i) shall be for the account of the applicable Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to
Section 2.09(f) to reimburse the applicable Issuing Bank shall be for the
account of such Lender to the extent of such payment.

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

(k) 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(k), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment

 

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pursuant to Section 3.04(c), then the Borrower shall Cash Collateralize, 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 Subsidiary described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j). At any time that there
shall exist a Defaulting Lender, within one (1) Business Day of a request of the
Administrative Agent or the applicable Issuing Bank, the Borrower shall deliver
to the Administrative Agent cash collateral in an amount sufficient to cover the
remaining Fronting Exposure of the Defaulting Lender (after giving effect to
Section 4.04(a)(iv) and any cash collateral provided by the Defaulting Lender)
for so long as such Fronting Exposure exists (it being understood that if such
Fronting Exposure is reduced and both the Defaulting Lender and the Borrower
have provided cash collateral, the Borrower will receive its cash collateral
back first). The Borrower hereby grants to the Administrative Agent, for the
benefit of the applicable Issuing Bank and the Secured Parties, a 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(k) shall be absolute and unconditional, without regard to
whether any beneficiary of any such Letter of Credit has attempted to draw down
all or a portion of such amount under the terms of a Letter of Credit, and, to
the fullest extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or recoupment which
the Borrower or any of its Subsidiaries may now or hereafter have against any
such beneficiary, the applicable Issuing Bank, the Administrative Agent, the
Lenders or any other Person for any reason whatsoever (other than payment). Such
deposit shall be held as collateral securing the payment and performance of the
Borrower’s and the Guarantors’ obligations to reimburse Letters of Credit and
any other 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. In addition to 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 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 applicable
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated, be applied to satisfy other
obligations of the Borrower and the Guarantors under this Agreement or the other
Loan Documents. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, and
the Borrower is not otherwise required to pay to the Administrative Agent the
excess attributable to an LC Exposure in connection with any prepayment pursuant
to Section 3.04(c), then such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

(l) Issuing Bank Reports to the Administrative Agent. Unless otherwise agreed by
the Administrative Agent, each Issuing Bank shall, in addition to its
notification obligations set forth elsewhere in this Section, report in writing
to the Administrative Agent (i) periodic activity (for such period or recurrent
periods as shall be requested by the Administrative Agent) in respect of Letters
of Credit issued by such Issuing Bank, including issuances, extensions,
amendments and renewals, expirations and cancelations and disbursements and
reimbursements, (ii) at least one Business Day prior

 

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to the time that such Issuing Bank issues, amends, renews or extends a Letter of
Credit, the date of such issuance, amendment, renewal or extension and the
stated amount of the applicable Letters of Credit after giving effect to such
issuance, amendment, renewal or extension (and whether the amounts thereof shall
have changed), (iii) on each Business Day on which such Issuing Bank makes a
payment pursuant to a Letter of Credit, the date and amount of such payment,
(iv) on any Business Day on which the Borrower fails to reimburse a payment made
pursuant to a Letter of Credit required to be reimbursed to such Issuing Bank on
such day, the date of such failure and the amount of such payment and (v) on any
other Business Day, such other information as the Administrative Agent shall
reasonably request as to the Letters of Credit issued by such Issuing Bank.

Section 2.10 Increase of Aggregate Maximum Credit Amounts.

(a) Subject to the conditions set forth in Section 2.10(b), the Borrower may
increase the Aggregate Maximum Credit Amounts then in effect (any such increase
an “Incremental Increase”) by increasing the Maximum Credit Amount of a Lender
(an “Increasing Lender”) or by causing a Person that at such time is not a
Lender to become a Lender and extend a Maximum Credit Amount (an “Additional
Lender”).

(b) Any increase in the Aggregate Maximum Credit Amount shall be subject to the
following additional conditions:

(i) such increase shall not be less than $10,000,000 (and increments of
$1,000,000 above that minimum) unless the Administrative Agent otherwise
consents;

(ii) as of the effective date of such Incremental Increase, (A) no Default or
Event of Default shall have occurred and be continuing immediately after giving
effect to such increase and 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
effective date, 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 increase such representations and warranties shall be true and correct in
all material respects as of such specified earlier date or (B) if any
Incremental Increase is being requested in connection with a Permitted
Acquisition, no Payment or Bankruptcy Event of Default shall have occurred and
be continuing immediately after giving effect to such increase and the Specified
Representations shall be true and correct in all material respects;

(iii) no Lender’s Maximum Credit Amount may be increased without the consent of
such Lender;

(iv) the Administrative Agent and each Issuing Bank must consent to the addition
of any Additional Lender, who is not an Affiliate of an existing Lender or who
is an Affiliate of a Defaulting Lender, in each case, such consent not to be
unreasonably withheld or delayed;

(v) the maturity date of such increase shall be the same as the Maturity Date;

(vi) the increase shall be on the exact same terms and pursuant to the exact
same documentation applicable to the Facility (other than with respect to any
arrangement, structuring, upfront or other fees or discounts payable in
connection with such Incremental Increase) (provided that the Applicable Margin
of the Facility may be increased in connection with such Incremental Increase at
the election of the Borrower);

 

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(vii) to the extent reasonably requested by the Administrative Agent, receipt by
the Administrative Agent of (A) board resolution and officers’ certificates
consistent with those delivered on the Closing Date and (B) reaffirmation
agreements and/or such amendments, if applicable, to the Security Instruments as
may be reasonably requested by the Administrative Agent in order to ensure that
such Incremental Increase is provided with the benefit of the applicable Loan
Documents;

(viii) the Borrower may seek commitments in respect of an Incremental Increase,
in its sole discretion, from either existing Lenders (each of which shall be
entitled to agree or decline to participate in its sole discretion) or from
additional banks, financial institutions or other institutional lenders or
investors who will become Lenders hereunder; and

For the avoidance of doubt, extensions of credit made hereunder, after giving
effect to any Incremental Increase, shall be subject to the Borrowing Base.

(c) With the consent of the Lenders providing an Incremental Increase, the
Borrower and the Administrative Agent (and without the consent of any other
Lenders), this Agreement shall be amended in a writing (which may be executed
and delivered by the Borrower and the Administrative Agent) to reflect any
changes necessary to give effect to such Incremental Increase and make any
Additional Lender a party to this Agreement (any such writing, an “Incremental
Agreement”).

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 outstanding principal amount of the Loans comprising each ABR
Borrowing shall bear interest at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful
Rate.

(b) Eurodollar Loans. The outstanding principal amount of the Loans comprising
each Eurodollar Borrowing shall bear interest at a rate per annum equal to the
Eurodollar Rate for the Interest Period in effect for such Borrowing plus the
Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(c) Post-Default Rate and Borrowing Base Deficiency Rate. 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, and including any
payments of principal in respect of a Borrowing Base Deficiency not paid when
due under Section 3.04(c), then such overdue amount shall bear interest, after
as well as before judgment, from the date of such non-payment to the date on
which such amount is paid in full at a rate per annum, not to exceed the Highest
Lawful Rate, equal to two percent (2%) plus (i) in the case of overdue
principal, the rate that would otherwise be applicable thereto and (ii) in the
case of overdue interest or other overdue amount, the rate applicable to ABR
Loans as provided in Section 3.02(a); provided that no such interest shall
accrue or be payable to a Defaulting Lender so long as such Lender shall be a
Defaulting Lender.

 

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

(e) Interest Rate Computations. All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate or Eurodollar 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 Inability to Determine Rates. If in connection with any request for
a Eurodollar Loan or a conversion to or continuation thereof, (a) the
Administrative Agent reasonably determines that (i) Dollar deposits are not
being offered to banks in the London interbank market for the applicable amount
and Interest Period of such Eurodollar Loan, or (ii) adequate and reasonable
means do not exist for determining the Eurodollar Rate for any requested
Interest Period with respect to a proposed Eurodollar Loan or in connection with
an existing or proposed ABR Loan (in each case with respect to clause (a) above,
“Impacted Loans”), or (b) the Majority Lenders reasonably determine that for any
reason the Eurodollar Rate for any requested Interest Period with respect to a
proposed Eurodollar Loan does not adequately and fairly reflect the cost to such
Lenders of funding such Eurodollar Loan, the Administrative Agent will promptly
so notify the Borrower and each Lender. Thereafter, (i) the obligation of the
Lenders to make or maintain Eurodollar Loans shall be suspended (to the extent
of the affected Eurodollar Loans or Interest Periods) and (ii) in the event of a
determination described in the preceding sentence is made with respect to the
Eurodollar Rate component of the Alternate Base Rate, the utilization of the
Eurodollar Rate component in determining the Alternate Base Rate shall be
suspended, in each case until the Administrative Agent revokes such notice (upon
the instruction of the Majority Lenders, in the case of clause (b) above, who
agree to so instruct the Administrative Agent once the relevant circumstances
giving rise to such notice no longer exist). Upon receipt of such notice, the
Borrower may revoke any pending request for a Borrowing of, conversion to or
continuation of Eurodollar Loans (to the extent of the affected Eurodollar Loans
or Interest Periods) and may revise such request to be a Borrowing of,
conversion to, or continuation of Eurodollar Loans of a non-affected Interest
Period in the event that the circumstances set forth in clause (b) apply or,
failing that, will be deemed to have converted such request into a request for a
ABR Loans in the amount specified therein.

Notwithstanding the foregoing, if the Administrative Agent has made the
determination described in Section 3.03(a), the Administrative Agent with the
consent of the Borrower and in consultation with the affected Lenders, may
establish an alternative interest rate for the Impacted Loans, in which case,
such alternative rate of interest shall apply with respect to the Impacted Loans
until (1) the Administrative Agent revokes the notice delivered with respect to
the Impacted Loans which it agrees to do once the relevant circumstances giving
rise to such notice no longer exist, or (2) the Majority Lenders notify the
Administrative Agent and the Borrower that such alternative interest rate does
not adequately and fairly reflect the cost to such Lenders of funding the
Impacted Loans; provided that if any Lender reasonably determines that any
Governmental Requirement has made it unlawful, or that any Governmental

 

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Authority has asserted that it is unlawful, for such Lender or its applicable
lending office to make, maintain or fund Loans whose interest is determined by
reference to such alternative rate of interest or to determine or charge
interest rates based upon such rate or any Governmental Authority has imposed
material restrictions on the authority of such Lender to do any of the foregoing
and provides the Administrative Agent and the Borrower written notice thereof
then the provisions of Section 5.07 shall apply to such Lender as if such
Impacted Loans of such Lender were Eurodollar Loans.

Section 3.04 Prepayments.

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

(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by fax or other method acceptable
to the Administrative Agent) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing (or such shorter time as the Administrative
Agent may agree), not later than 11:00 a.m., Houston time, three (3) Business
Days before the date of prepayment, or (ii) in the case of prepayment of an ABR
Borrowing, not later than 11:00 a.m., Houston time, on the date of prepayment.
Each such notice shall specify the prepayment date and the principal amount of
such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Loans
are to be prepaid, the Interest Period(s) of such Loans. 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. Any election by the Borrower to voluntarily
prepay any Borrowing pursuant to a notice delivered by the Borrower pursuant to
this Section 3.04(b) may be made to be contingent upon the consummation of a
refinancing or other event and such notice may otherwise be extended or revoked,
in each case, with the requirements of Section 5.02 to apply to any failure of
the contingency to occur and any such extension or revocation.

(c) Mandatory Prepayments.

(i) Upon Optional Terminations and Reductions. If, after giving effect to any
termination or reduction of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b), the total Revolving Credit Exposures exceeds the total
Commitments, then the Borrower shall (A) prepay the Borrowings on the date of
such termination or reduction in an aggregate principal amount equal to such
excess, and (B) if any excess remains after prepaying all of the Borrowings as a
result of LC Exposure, Cash Collateralize such remaining excess as provided in
Section 2.09(k). The Borrower shall be obligated to make such prepayment and/or
deposit of cash collateral on the date of such termination or reduction.

(ii) Upon Issuances of Certain Debt, Dispositions and Hedge Unwinds. Upon any
adjustment to the amount of the Borrowing Base in accordance with
Section 2.08(a), Section 2.08(b), Section 2.08(c) or Paragraph 3 of Schedule
8.18, if there is a Borrowing Base Deficiency, then the Borrower shall
(A) prepay the Borrowings in an aggregate principal amount equal to such excess,
and (B) if any Borrowing Base Deficiency remains after prepaying all of the
Borrowings as a result of LC Exposure, Cash Collateralize such remaining
deficiency as provided in Section 2.09(k). The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral no later than three
(3) Business Days after its receipt of a New Borrowing Base Notice or
effectiveness of the new Borrowing Base, as the case may be, in accordance with
Section 2.08(a), Section 2.08(b), Section 2.08(c) or Paragraph 3 of Schedule
8.18.

 

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(iii) Upon Redeterminations, Title Related Adjustments, Etc. Upon any
redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07(b), Section 2.08(d) or pursuant to any event other
than an event addressed by Section 3.04(c)(i) and Section 3.04(c)(ii), if there
is a Borrowing Base Deficiency, then the Borrower shall within ten (10) Business
Days after its receipt of a New Borrowing Base Notice or effectiveness of the
new Borrowing Base, as the case may be, and notice from the Administrative Agent
that there is a Borrowing Base Deficiency (the date of receipt of both notices,
the “Deficiency Notice Date”), inform the Administrative Agent that it elects to
take one or more of the following actions: (A) within thirty (30) days following
such election, prepay the Loans in an aggregate principal amount equal to such
Borrowing Base Deficiency, (B) prepay the Loans in six equal monthly
installments, commencing on the 30th day following the Deficiency Notice Date
with each payment being equal to l/6th of the aggregate principal amount of such
deficiency which the Borrower elects to pay pursuant to this clause (B),
(C) within thirty (30) days of such election, (1) provide additional information
(e.g., title information) concerning the existing Borrowing Base Properties
reasonably acceptable to the Administrative Agent to cure any Borrowing Base
Deficiency resulting from the application of Section 2.08(d) or (2) provide
additional Mortgaged Property in the form of additional Oil and Gas Properties
not evaluated in the most recently delivered Reserve Report pursuant to Security
Instruments, with an aggregate Borrowing Base Value (as proposed by the
Administrative Agent and approved by the Required Lenders in good faith in
accordance with their respective usual and customary oil and gas lending
criteria as they exist at the particular time), after giving effect to any other
actions taken pursuant to this Section 3.04(c)(iii), to eliminate any such
deficiency; provided that if any deficiency remains after prepaying all of the
Loans as a result of LC Exposure, the Borrower shall Cash Collateralize such
remaining deficiency as provided in Section 2.09(k); and provided further that
all payments required to be made pursuant to clauses (A) or (B) above must be
made on or prior to the Termination Date.

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

(v) Interest to be Paid with Prepayments. 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 a rate per
annum equal to the applicable Commitment Fee Rate on the average daily amount of
the unused amount of the Commitments of such Lender during the period from the
date of this Agreement to the Termination Date. 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 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).

 

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(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 the date
of this Agreement to 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 one eighth of one percent (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 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
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the date of this Agreement; provided that all
such fees shall be payable on the Termination Date and any such fees accruing
after the Termination Date shall be payable on demand. Any other fees payable to
the applicable Issuing Bank pursuant to this Section 3.05(b) shall be payable
within 30 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 in writing 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 1:00 p.m., Houston time, on the date when
due, in immediately available funds. 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. Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances.

 

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

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

Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders
and/or any applicable 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 and/or any 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 and/or any 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 and/or any applicable Issuing
Bank with interest thereon, for each day from the date such amount is
distributed to it to 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 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
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attributable thereto which may be produced from or allocated to the Mortgaged
Property. The Security Instruments further provide in general for the
application of such proceeds to the satisfaction of the Indebtedness and other
obligations described therein and secured thereby. Notwithstanding the
assignment contained in such Security Instruments, until the occurrence of an
Event of Default, (a) the Administrative Agent and the Lenders agree that they
will neither notify the purchaser or purchasers of such production nor take any
other action to cause such proceeds to be remitted to the Administrative Agent
or the Lenders, but the Lenders will instead permit such proceeds to be paid to
the Borrower and its Subsidiaries and (b) the Lenders hereby authorize the
Administrative Agent to take such actions as may be necessary to cause such
proceeds to be paid to the Borrower and/or such Restricted Subsidiaries.

Section 4.04 Defaulting Lenders.

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

(i) Waivers, Amendments and Borrowing Base Redeterminations and Adjustments. A
Defaulting Lender’s right to approve or disapprove any amendment, waiver or
consent with respect to this Agreement (including Borrowing Base
redeterminations and adjustments) shall be restricted as set forth in
Section 12.02(f).

(ii) Reallocation of Payments. Any payment of principal, interest, fees or other
amounts received by the Administrative Agent for the account of that Defaulting
Lender (whether voluntary or mandatory, at maturity, pursuant to Article X or
otherwise), shall be applied at such time or times as may be determined by the
Administrative Agent as follows:

(A) first, to the payment of any amounts owing by that Defaulting Lender to the
Administrative Agent hereunder;

(B) second, to the payment on a pro rata basis of any amounts owing by that
Defaulting Lender to any Issuing Bank hereunder;

(C) third, if so determined by the Administrative Agent or requested by any
Issuing Bank, to be held as Cash Collateral or deposit balances for future
funding obligations of that Defaulting Lender of any participation in any Letter
of Credit;

(D) fourth, as the Borrower may request (so long as no Default or Event of
Default has occurred and is continuing), to the funding of any Loan in respect
of which that Defaulting Lender has failed to fund its portion thereof as
required by this Agreement, as determined by the Administrative Agent;

(E) fifth, if so determined by the Administrative Agent and the Borrower, to be
held in a non-interest bearing deposit account and released in order to satisfy
obligations of that Defaulting Lender to fund Loans under this Agreement;

(F) sixth, to the payment of any amounts owing to the Lenders and Issuing Banks
as a result of any judgment of a court of competent jurisdiction obtained by any
Lender and/or Issuing Bank against that Defaulting Lender as a result of that
Defaulting Lender’s breach of its obligations under this Agreement;

 

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(G) seventh, so long as no Default or Event of Default has occurred and is
continuing, to the payment of any amounts owing to the Borrower as a result of
any judgment of a court of competent jurisdiction obtained by the Borrower
against that Defaulting Lender as a result of that Defaulting Lender’s breach of
its obligations under this Agreement; and

(H) eighth, to that Defaulting Lender or as otherwise directed by a court of
competent jurisdiction; provided that if (x) such payment is a payment of the
principal amount of any Loans or LC Borrowings in respect of which that
Defaulting Lender has not fully funded its appropriate share and (y) such Loans
or LC Borrowings were made at a time when the conditions set forth in
Section 6.02 were satisfied or waived, such payment shall be applied solely to
pay the Loans of, and LC Borrowings owed to, all Non-Defaulting Lenders on a pro
rata basis prior to being applied to the payment of any Loans of, or LC
Borrowings owed to, that Defaulting Lender. Any payments, prepayments or other
amounts paid or payable to a Defaulting Lender that are applied (or held) to pay
amounts owed by a Defaulting Lender or to post Cash Collateralized cash or
deposit account balances pursuant to this Section 4.04(a)(ii) shall be deemed
paid to and redirected by that Defaulting Lender, and each Lender irrevocably
consents hereto.

(iii) Certain Fees. A Defaulting Lender (A) shall not be entitled to receive any
commitment fee pursuant to Section 3.05(a) for any period during which that
Lender is a Defaulting Lender (and the Borrower shall not be required to pay any
such fee that otherwise would have been required to have been paid to that
Defaulting Lender) and (B) shall not be entitled to receive any Letter of Credit
participation fee pursuant to Section 3.05(b)(i) for any period during which
such Lender is a Defaulting Lender (and the Borrower shall not be required to
pay any such fee that otherwise would have been required to have been paid to
such Defaulting Lender); provided that the Borrower shall pay (1) to such
Defaulting Lender the portion of such fee which is proportionate to the portion
of the Defaulting Lender’s LC Exposure for which it has provided Cash Collateral
satisfactory to the applicable Issuing Bank pursuant to Section 2.09(a), (2) to
each Non-Defaulting Lender that portion of any such fee which is proportionate
to its Pro Rata Share of the Defaulting Lender’s LC Exposure which has been
allocated to it pursuant to Section 4.04(a)(iv) and (3) to pay to the Issuing
Bank the remaining portion of such fee (except to the extent that the Borrower
has Cash Collateralized the LC Exposure attributable thereto (it being
understood that the Borrower shall not be required to pay such fees on the
portion of the Defaulting Lender’s LC Exposure that it has Cash
Collateralized)).

(iv) Reallocation of Pro Rata Share to Reduce Fronting Exposure. During any
period in which there is a Defaulting Lender, for purposes of computing the
amount of the obligation of each Non-Defaulting Lender to acquire, refinance or
fund participations in Letters of Credit pursuant to Section 2.09, the “Pro Rata
Share” of each Non-Defaulting Lender’s Loans and LC Exposure shall be computed
without giving effect to the Commitment of that Defaulting Lender (except to the
extent that the Defaulting Lender has Cash Collateralized any LC Exposure
attributable to it); provided that (i) each such reallocation shall be given
effect only if, at the date the applicable Lender becomes a Defaulting Lender,
no Default or Event of Default has occurred and is continuing; and (ii) the
aggregate obligation of each Non-Defaulting Lender to acquire, refinance or fund
participations in Letters of Credit shall not exceed the positive difference, if
any, of (A) the Commitment of that Non-Defaulting Lender minus (B) the aggregate
Revolving Credit Exposure of the Loans of that Lender. No reallocation hereunder
shall constitute a waiver or release of any claim of any party hereunder against
a Defaulting Lender arising from that Lender having become a Defaulting Lender,
including any claim of a Non-Defaulting Lender as a result of such
Non-Defaulting Lender’s increased exposure following such reallocation.

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent and each
Issuing Bank agree in writing in their sole discretion that a Defaulting Lender
should no longer be

 

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deemed to be a Defaulting Lender, the Administrative Agent will so notify the
parties hereto, whereupon as of the effective date specified in such notice and
subject to any conditions set forth therein (which may include arrangements with
respect to any Cash Collateralized cash or deposit account balances), that
Lender will, to the extent applicable, purchase that portion of outstanding
Loans of the other Lenders or take such other actions as the Administrative
Agent may determine to be necessary to cause the Loans and funded and unfunded
participations in Letters of Credit to be held on a pro rata basis by the
Lenders in accordance with their Pro Rata Share (without giving effect to
Section 4.04(a)(iv)), whereupon that Lender will cease to be a Defaulting
Lender; provided that no adjustments will be made retroactively with respect to
fees accrued or payments made by or on behalf of the Borrower while that Lender
was a Defaulting Lender; and provided, further, that except to the extent
otherwise expressly agreed by the affected parties, no change hereunder from
Defaulting Lender to Lender will constitute a waiver or release of any claim of
any party hereunder arising from that Lender’s having been a Defaulting Lender.

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES

Section 5.01 Increased Costs.

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

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

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

(iii) subject any Lender to any Taxes (other than (A) Indemnified Taxes or Other
Taxes, (B) Taxes described in clauses (b) through (d) of the definition of
Excluded Taxes and (C) Connection Income Taxes) on its Loans, Loan principal,
Letters of Credit, Commitments, or other Indebtedness, or its deposits,
reserves, other liabilities or capital attributable thereto;

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),
excluding for purposes of this Section 5.01(a) any such increased costs or
reduction in amount resulting from capital requirements contemplated by
Section 5.01(b) or any amount owed under Section 5.01(f), then from time to time
upon written demand of such Lender setting forth in reasonable detail such
increased costs or reduction suffered, the Borrower shall pay to such Lender
such additional amounts as will compensate such Lender for such increased cost
or reduction.

(b) Capital Adequacy and Liquidity Requirements. If any Lender or Issuing Bank
reasonably determines that any Change in Law regarding capital adequacy or
liquidity requirements occurring after the Closing Date has 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 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 or liquidity), then from time to time,
upon receipt of a certificate of a Lender as required under Section

 

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5.01(c), the Borrower will pay to such Lender or such Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender and/or
Issuing Bank or such Lender’s and/or such Issuing Bank’s holding company for any
such reduction suffered.

(c) Certificates. A certificate of a Lender or Issuing Bank setting forth in
reasonable detail the calculation and 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 Section 5.01(b) shall be delivered to
the Borrower and the Administrative Agent 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 fifteen
(15) days after receipt thereof.

(d) Requests for Compensation. If any Lender requests compensation from the
Borrower under Section 5.01, the Borrower may, by notice to such Lender (with a
copy to the Administrative Agent), suspend the obligation of such Lender to make
or continue from one Interest Period to another applicable Eurodollar Loan, or,
if applicable, to convert ABR Loans into Eurodollar Loans, until the event or
condition giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.01(e) shall be applicable); provided that such
suspension shall not affect the right of such Lender to receive the compensation
so requested.

(e) Making, Continuing or Converting Loans. If the obligation of any Lender to
make or continue any Eurodollar Loan, or to convert ABR Loans into Eurodollar
Loans shall be suspended pursuant to Section 5.01(d) hereof, such Lender’s
applicable Eurodollar Loans shall be automatically converted into ABR Loans (or,
if such conversion is not possible, repaid) on the last day(s) of the then
current Interest Period(s) for such Eurodollar Loans and:

(i) to the extent that such Lender’s Eurodollar Loans have been so converted,
all payments and prepayments of principal that would otherwise be applied to
such Lender’s applicable Eurodollar Loans shall be applied instead to its ABR
Loans;

(ii) all Loans that would otherwise be made or continued from one Interest
Period to another by such Lender as Eurodollar Loans shall be made or continued
instead as ABR Loans (if possible), and all ABR Loans of such Lender that would
otherwise be converted into Eurodollar Loans shall remain as ABR Loans; and

(iii) if any Lender gives notice to the Borrower (with a copy to the
Administrative Agent) that the circumstances specified in Section 5.01 hereof
that gave rise to the conversion of any of such Lender’s Eurodollar Loans
pursuant to this Section 5.01(e)(iii) no longer exist (which such Lender agrees
to do promptly upon such circumstances ceasing to exist) at a time when
Eurodollar Loans made by other Lenders hereunder are outstanding, if applicable,
such Lender’s ABR Loans shall be automatically converted, on the first day(s) of
the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to
the extent necessary so that, after giving effect thereto, all Loans held by the
Lenders holding Eurodollar Loans hereunder and by such Lender are held pro rata
(as to principal amounts, interest rate basis, and Interest Periods) in
accordance with their respective Commitments.

(f) Eurocurrency Liabilities. The Borrower shall pay to each Lender, as long as
such Lender shall be required to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency funds or deposits in respect
of Eurodollar Loans, additional interest on the unpaid principal amount of each
Eurodollar Loan equal to the actual cost of such reserves allocated to such Loan
by such Lender (as reasonably determined by each such Lender in good faith),
which shall be due and payable on each date on which interest is payable on such
Loan; provided that the Borrower shall have received a 10

 

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days’ prior written notice (with a copy to the Administrative Agent) of such
additional interest from such Lender. If a Lender fails to give notice 10 days
prior to the relevant Interest Payment Date, such additional interest shall be
due and payable 10 days from receipt of such notice.

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 by the
Borrower (for reasons other than the failure of a Lender to make a Loan) 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 5.06, then, upon written
demand of any Lender (with a copy to the Administrative Agent), the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event (exclusive of lost profits or opportunity costs).

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 fifteen
(15) days after receipt thereof.

Section 5.03 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all such required
deductions or withholdings of Indemnified Taxes or Other Taxes (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 or
withholdings been made, (ii) the Borrower or such Guarantor shall make such
deductions or withholdings and (iii) the Borrower or such Guarantor shall pay
the full amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable law.

(b) Payment of Other Taxes by the Borrower. The Borrower shall timely pay, or at
the option of the Administrative Agent timely reimburse it for the payment of
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within thirty (30) days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,
as the case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section 5.03) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate of the Administrative Agent, a Lender or
the Issuing Bank as to the amount and reasonable detail as to basis and
calculation of such payment or liability under this Section 5.03 shall be
delivered to the Borrower and shall be conclusive absent manifest error.

 

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(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 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) Withholding Documentation. Any 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 Loan Document shall deliver to
the Borrower (with a copy to the Administrative Agent), at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation prescribed by applicable law or reasonably
requested by the Borrower as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, any Lender, if
requested by the Borrower or the Administrative Agent, shall deliver such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting requirements. Each
Lender shall promptly notify the Borrower and the Administrative Agent of any
change in circumstances which would modify or render invalid any such claimed
exemption or reduction, or notify the Borrower and Administrative Agent in
writing of its legal inability to do so.

Without limiting the generality of the foregoing,

(i) any Lender that is a U.S. Person shall deliver to the Borrower and the
Administrative Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

(ii) any Foreign Lender, to the extent it is legally entitled to do so, shall
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of the Borrower or the Administrative Agent,
whichever of the following is applicable:

(A) duly completed originals of Internal Revenue Service Form W 8BEN or Internal
Revenue Service Form W-8BEN-E, as applicable;

(B) duly completed originals of Internal Revenue Service Form W 8ECI;

(C) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, such Foreign Lender shall
deliver to Borrower and the Administrative Agent a certificate to the effect
that such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10-percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”);

(D) to the extent a Foreign Lender is not the beneficial owner, executed
originals of Internal Revenue Service Form W-8IMY, accompanied by Internal
Revenue

 

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Service Form W-8ECI, Internal Revenue Service Form W-8BEN, Internal Revenue
Service Form W-8BEN-E, a U.S. Tax Compliance Certificate, Internal Revenue
Service Form W-9, and/or other certification documents from each beneficial
owner, as applicable; and/or

(E) any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower or Administrative Agent to determine the
withholding or deduction required to be made(however, the completion, execution
and submission of documentation pursuant to this Section 5.03(e) shall not be
required if in the Lender’s reasonable judgment such completion, execution or
submission would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender).

(f) Tax Refunds. If the Administrative Agent or a Lender determines, in its
reasonable discretion, that it has received a refund of any 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 giving rise to such refund), net of all out-of-pocket expenses
(including Taxes) 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. Notwithstanding anything to the contrary
in this clause (f), in no event will the Administrative Agent or any Lender be
required to pay any amount to the Borrower pursuant to this clause (f) the
payment of which would place the Administrative Agent or Lender in a less
favorable net after-Tax position than the Administrative Agent or Lender would
have been in if the Tax subject to indemnification and giving rise to such
refund had not been deducted, withheld or otherwise imposed and the
indemnification payments or additional amounts with respect to such Tax had
never been paid. This Section 5.03 shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.

(g) If a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA, to determine whether such
Lender has complied with such Lender’s obligations under FATCA, or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
Section 5.03(g), “FATCA” shall include any amendments made to FATCA after the
date of this Agreement. Each Lender shall promptly notify the Borrower and the
Administrative Agent of any change in circumstances which would modify or render
invalid any such previously delivered documentation, and shall update such
documentation or promptly notify the Borrower and the Administrative Agent in
writing of its legal inability to do so.

 

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(h) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes or Other Taxes attributable to such Lender (but only to the
extent that the Borrower or any Guarantor has not already indemnified the
Administrative Agent for such Indemnified Taxes or Other Taxes and without
limiting the obligation of the Borrower and Guarantors to do so), (ii) any Taxes
attributable to such Lender’s failure to comply with the provisions of
Section 12.04 relating to the maintenance of a Participant Register and
(iii) any Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any Loan
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to setoff and apply any and all amounts at any time owing
to such Lender under any Loan Document or otherwise payable by the
Administrative Agent to the Lender from any other source against any amount due
to the Administrative Agent under this clause (h).

Section 5.04 Matters Applicable to All Requests for Compensation.

(a) The Administrative Agent or any Lender claiming compensation under
Section 5.01 and Section 5.03 shall deliver a certificate to the Borrower
setting forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, the Administrative Agent or such Lender may use any reasonable averaging
and attribution methods.

(b) With respect to any Lender’s claim for compensation under Section 5.01 or
Section 5.03, the Borrower shall not be required to compensate such Lender for
any amount incurred more than one hundred and eighty (180) days prior to the
date that such Lender notifies the Borrower of the event that gives rise to such
claim; provided that, if the circumstance giving rise to such claim is
retroactive, then such 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.

Section 5.05 Mitigation Obligations- Designation of Different Lending Office. If
any Lender requests compensation under Section 5.01, 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 or if any Lender provides notice
pursuant to Section 5.07, 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 reasonable judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03 or eliminate the need to give a notice pursuant
to Section 5.07, 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.

Section 5.06 Replacement of Lenders. If (a) any Lender requests compensation
under Section 5.01, (b) 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, (c) any Lender gives a notice pursuant to Section 5.07 or the
proviso in the second paragraph of Section 3.03, (d) any Lender becomes a
Defaulting Lender, (e) any Lender has not approved a proposed consent, waiver,
amendment, supplement or other modification that requires the consent of all
Lenders, all non-Defaulting Lenders or all Lenders affected thereby, but which
has been approved by the Majority Lenders, (f) any Lender has not approved a
Borrowing Base increase that has been approved by the Super-Majority Lenders
(any such Lender, a “Non-Consenting Lender”), or (g) a Lender is a Prohibited
Lender or enters into a participation

 

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with a Participant who is a Prohibited Lender, then the Borrower may at its cost
(with respect to amounts owing under Section 5.02) and expense, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 12.04(b)), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that
(i) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (ii)(A) in the case of any such assignment resulting from a claim for
compensation under Section 5.01 or payments required to be made pursuant to
Section 5.03, such assignment will result in a reduction in such compensation or
payments or (B) in the case of any such assignment resulting from a notice
delivered pursuant to Section 5.07, such assignment will eliminate the need for
such notice. Any Lender being replaced pursuant to the preceding sentence shall
(i) execute and deliver an Assignment and Assumption with respect to such
Lender’s applicable outstanding Loans and (ii) deliver any Notes evidencing such
Loans to the Borrower or Administrative Agent. Pursuant to such Assignment and
Assumption, (A) the assignee Lender shall acquire all or a portion, as the case
may be, of the assigning Lender’s outstanding Loans, (B) all obligations of the
Borrower owing to the assigning Lender relating to the Loans so assigned shall
be paid in full by the assignee Lender to such assigning Lender concurrently
with such Assignment and Assumption and (C) upon such payment and, if so
requested by the assignee Lender, delivery to the assignee Lender of the
appropriate Note or Notes executed by the Borrower, the assignee Lender shall
become a Lender hereunder and the assigning Lender shall cease to constitute a
Lender hereunder with respect to such assigned Loans, except with respect to
indemnification provisions under this Agreement, which shall survive as to such
assigning Lender. In connection with any such replacement, if any such
Non-Consenting Lender does not execute and deliver to the Administrative Agent a
duly executed Assignment and Assumption reflecting such replacement within five
(5) Business Days of the date on which the assignee Lender executes and delivers
such Assignment and Assumption to such Non-Consenting Lender, then such
Non-Consenting Lender shall be deemed to have executed and delivered such
Assignment and Assumption without any action on the part of the Non-Consenting
Lender.

Section 5.07 Illegality. If any Lender reasonably determines that as a result of
any Change in Law it has become unlawful, or that any Governmental Authority has
asserted that it is unlawful, for any Lender or its lending office to make,
maintain or fund Eurodollar Loans, or to determine or charge interest rates
based upon the Eurodollar Rate, or any Governmental Authority has imposed
material restrictions on the authority of such Lender to purchase or sell, or to
take deposits of, dollars in the London interbank market, then, on notice
thereof by such Lender to the Borrower through the Administrative Agent, (a) any
obligation of such Lender to make or continue Eurodollar Loans or to convert ABR
Loans to Eurodollar Loans shall be suspended and (b) if such notice asserts the
illegality of such Lender making or maintaining ABR Loans the interest rate on
which is determined by reference to the Eurodollar Rate component of ABR, the
interest rate on which ABR Loans of such Lender shall, if necessary to avoid
such illegality, be determined by the Administrative Agent without reference to
the Eurodollar Rate component of ABR, in each case until such Lender notifies
the Administrative Agent and the Borrower that the circumstances giving rise to
such determination no longer exist (it being understood that such Lender agrees
to so advise the Administrative Agent once the relevant circumstances giving
rise to such determination no longer exists). Upon receipt of such notice,
(i) the Borrower shall, upon demand from such Lender (with a copy to the
Administrative Agent), prepay or, if applicable, convert all Eurodollar Loans of
such Lender to ABR Loans (the interest rate on which ABR Loans of such Lender
shall, if necessary to avoid such illegality, be determined by the
Administrative Agent without reference to the Eurodollar Rate component of ABR),
either on the last day of the Interest Period therefor, if such Lender may
lawfully continue to maintain such Eurodollar Loans to such day, or promptly, if
such Lender

 

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may not lawfully continue to maintain such Eurodollar Loans and (ii) if such
notice asserts the illegality of such Lender determining or charging interest
rates based upon the Eurodollar Rate, the Administrative Agent shall during the
period of such suspension compute ABR applicable to such Lender without
reference to the Eurodollar Rate component thereof until the Administrative
Agent is advised in writing by such Lender that it is no longer illegal for such
Lender to determine or charge interest rates based upon the Eurodollar Rate (it
being understood that such Lender agrees to so advise the Administrative Agent
once such illegality no longer exists). Upon any such prepayment or conversion,
the Borrower shall also pay accrued interest on the amount so prepaid or
converted.

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01 Closing Date. The obligation of each Lender to make Loans and of
any Issuing Bank to issue Letters of Credit, in each case, on the Closing Date
is subject to the satisfaction (or waiver in accordance with Section 12.02) of
the following conditions:

(a) The Administrative Agent, the Arrangers and the Lenders shall have received
all fees due on the Closing Date and, to the extent invoiced at least three
(3) Business Days prior to the Closing Date (except as otherwise reasonably
agreed by the Borrower), expenses due and payable on or prior to the Closing
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.

(b) The Administrative Agent shall have received a certificate of a Responsible
Officer of the Loan Parties setting forth (i) resolutions of the board of
directors or other appropriate governing body with respect to the authorization
of each of the Loan Parties 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 each 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 articles or certificate of incorporation and by-laws or other
applicable organizational documents of the Loan Parties, certified as being true
and complete. The Administrative Agent and the Lenders may conclusively rely on
such certificate until the Administrative Agent receives notice in writing from
the Borrower to the contrary.

(c) The Administrative Agent shall have received certificates of good standing
(to the extent such concept exists) from the applicable Secretary of State (or
equivalent) of the State of organization of each Loan Party as of a recent date
prior to the Closing Date.

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

(e) The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be reasonably requested by the
Administrative Agent) of the Guaranty and Pledge Agreement.

(f) The Administrative Agent shall have received (i) an opinion of Simpson
Thacher & Bartlett LLP, counsel to the Borrower, substantially in the form of
Exhibit N-1 and (ii) an opinion from Hall, Estill, Hardwick, Gable, Golden &
Nelson, P.C., local counsel to the Borrower in the State of Oklahoma,
substantially in the form of Exhibit N-2.

 

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(g) The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower and its Restricted
Subsidiaries, if any, are carrying insurance in accordance with Section 8.06.

(h) The Administrative Agent shall have received copies of a recent UCC Lien,
tax and judgment searches in each jurisdiction reasonably requested by the
Administrative Agent with respect to the Loan Parties.

(i) The Contribution and Merger shall have been consummated or shall be
consummated substantially simultaneously with the Closing Date (with respect to
each of the Contribution and Merger, in accordance with the Merger Agreement).

(j) The Administrative Agent shall have received a certificate from a
Responsible Officer of the Borrower (a) certifying that the Contribution and
Merger shall have been consummated or shall be consummated substantially
simultaneously with the Closing Date (with respect to each of the Contribution
and Merger, in accordance with the Merger Agreement) and as to the matters set
forth in Section 6.01(i), and Section 6.01(l)(ii) and (b) attaching a true and
complete copy of the Merger Agreement and the certificate delivered by Forest
pursuant to Section 7.2(c) of the Merger Agreement.

(k) The Borrower shall have delivered (or shall have caused to be delivered) to
the Administrative Agent (i) a January 1, 2014 reserve report evaluating the Oil
and Gas Properties of Sabine and its Subsidiaries, prepared by Ryder Scott
Company (the “Sabine Reserve Report”) and (ii) a January 1, 2014 reserve report
evaluating the Oil and Gas Properties of Forest and its Subsidiaries prepared by
DeGolyer & MacNaughton (the “Forest Reserve Report” and, together with the
Sabine Reserve Report, the “Initial Reserve Reports”).

(l) On the Closing Date, (i) the Specified Merger Agreement Representations and
(ii) the Specified Representations shall be true and correct in all material
respects (other than the representation and warranty contained in Section 3.8(b)
of the Merger Agreement, which shall be true and correct in all respects).

(m) The Administrative Agent shall have received a Solvency Certificate from a
Responsible Officer of the Borrower.

(n) The Administrative Agent shall have received the stock certificates and
notes representing the Equity Interests and notes constituting Collateral set
forth on Exhibit E, if any, accompanied by undated stock and note powers
executed in blank (or confirmation in lieu thereof that such certificates, notes
and powers and instruments have been sent for overnight delivery to the
Administrative Agent or its counsel), if any.

(o) Each of the Borrower and the Guarantors shall have authorized the
Administrative Agent (and hereby does authorize the Administrative Agent) to
file a UCC-1 financing statement in its jurisdiction of organization with the
applicable central filing office (such as the Secretary of State) in respect of
its assets constituting Collateral (as defined in the Guaranty and Pledge
Agreement) to the extent that any security interest in such Collateral may be
perfected by filing any such UCC-1 financing statement under the Uniform
Commercial Code in a central filing office (such as the office of a Secretary of
State).

(p) The Administrative Agent shall have received prior to the Closing Date all
documentation and other information required by regulatory authorities with
respect to the Borrower and the Guarantors under applicable “know your customer”
and anti-money laundering rules and regulations, including, without limitation,
the PATRIOT Act, that has been reasonably requested by the Administrative Agent
at least ten (10) days in advance of the Closing Date.

 

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(q)(i) The Forest Credit Agreement Refinancing shall have been consummated or
(ii) on the Closing Date and substantially concurrently with the Loans advanced
under the Facility on the Closing Date, the Forest Credit Agreement Refinancing
shall be consummated and all commitments in respect thereof terminated, and all
security interests and guaranties in respect thereof discharged and released.

(r) The Administrative Agent shall have received (i) audited consolidated
balance sheets and related statements of income, stockholders’ equity and cash
flows of each of Sabine and Forest for the 2011, 2012, 2013 fiscal years, which
financial statements shall be audited in accordance with GAAP (it being
understood that the Administrative Agent has received such financial statements)
and (ii) unaudited consolidated balance sheets and related statements of income,
stockholders’ equity and cash flows of each of Sabine and Forest for the fiscal
quarters ending March 31, 2014, June 30, 2014 and September 30, 2014, which
unaudited financial statements shall be prepared in accordance with GAAP (it
being understood that the Administrative Agent has received such financial
statements).

(s) The Administrative Agent shall have received a financial model provided by
the Sponsor that is reasonably satisfactory to the Administrative Agent that
sets forth the pro forma combined balance sheets of Sabine and Forest and income
statements of Sabine and Forest (it being understood that the financial model
provided to the Lead Arrangers on April 21, 2014 is satisfactory to the
Administrative Agent).

The Administrative Agent shall notify the Borrower and the Lenders of the
Closing Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 12.02)
at or prior to 5:00 p.m., Houston time, on December 31, 2014 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).

Section 6.02 Each Subsequent Credit Event. The obligation of each Lender to make
Loans in respect of a Borrowing and of any Issuing Bank to issue, amend, renew
or extend any Letters of Credit, in each case, after the Closing Date, is
subject to the satisfaction (or waiver in accordance with Section 12.02) 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 or Event of Default shall have occurred and be
continuing.

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

 

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(c) The receipt by the Administrative Agent of a Borrowing Request in accordance
with Section 2.03 or a request for a Letter of Credit in accordance with
Section 2.09(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) and (b).

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

Section 7.01 Organization; Powers. Each of the Borrower and the Restricted
Subsidiaries (a) is (i) duly organized and validly existing and (ii) in good
standing under the laws of the jurisdiction of its organization, (b) 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 (c) 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 execution, delivery and performance
by the Borrower and each Guarantor of the Loan Documents are within the
Borrower’s and each Guarantor’s corporate, limited liability company or
partnership powers, as applicable, and have been duly authorized by all
necessary organizational and, if required, action by any holders of its Equity
Interests. Each Loan Document to which the Borrower and each Guarantor is a
party has been duly executed and delivered by the Borrower and such Guarantor
and constitutes a legal, valid and binding obligation of the Borrower and such
Guarantor, as applicable, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights or enforceability thereof 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 execution, delivery and performance by
the Loan Parties of the Loan Documents (a) do not require any consent or
approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than the recording and filing of the Security Instruments
to effect and maintain perfection of Liens granted by this Agreement, (b) will
not violate any Governmental Requirements (including the PATRIOT Act and OFAC)
applicable to any Loan Party, (c) will not violate the charter, by-laws or other
organizational documents of any Loan Party, (d) will not violate or result in a
default under any indenture, agreement or other instrument binding upon any Loan
Party, or give rise to a right thereunder to require any payment to be made by
any such Loan Party and (e) will not result in the creation or imposition of any
Lien on any Property of any Loan Party (other than the Liens created by the Loan
Documents), except in each case referred to in clauses (a), (b), (d) or (e) to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.

Section 7.04 Financial Condition; No Material Adverse Change.

(a) The Borrower has heretofore furnished to the Administrative Agent (i) the
consolidated balance sheet and statements of income, members’ equity and cash
flows of Forest as of and

 

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for the fiscal year ended December 31, 2013, reported on by Ernst & Young LLP,
independent public accountants and (ii) the consolidated balance sheet and
statements of income, members’ equity and cash flows of Sabine as of and for the
fiscal year ended December 31, 2013, reported on by PricewaterhouseCoopers LLP,
independent public accountants. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the applicable entities as of such date and for such period in
accordance with GAAP.

(b) Since December 31, 2013, there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.

(c) Other than this Agreement, the Existing Second Lien Facility and the
Permitted Notes, neither the Borrower nor any Restricted Subsidiary has on the
Closing Date, after giving effect to the Transactions, 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 or as disclosed on Schedule 7.04.

Section 7.05 Litigation.

(a) Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Restricted Subsidiary (a) after giving
effect to insurance as to which there is a reasonable possibility of an adverse
determination that, if adversely determined, would reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or
(b) that, as of the Closing Date, question the validity or enforceability of any
of the Loan Documents.

Section 7.06 Environmental Matters. Except as set forth on Schedule 7.06 or as
could not be reasonably expected to have a Material Adverse Effect:

(a) neither any Property of the Borrower or of any Subsidiary nor the operations
conducted thereon violate any Environmental Laws;

(b) no Property of the Borrower or any Restricted Subsidiary, nor the operations
currently conducted thereon, are subject to any existing or, to the knowledge of
the Borrower, threatened, administrative enforcement action, lawsuit, or
proceeding by or before any court or Governmental Authority under Environmental
Law or to any order or judgment imposing remedial obligations under
Environmental Laws;

(c) all permits, licenses, exemptions, approvals or similar authorizations, if
any, required under applicable Environmental Law to be obtained or filed in
connection with the current operation or use of any and all Property of the
Borrower and each Restricted Subsidiary, including without limitation, with
respect to the treatment, storage or Release into the environment of a Hazardous
Material, have been duly obtained or filed, and the Borrower and each Restricted
Subsidiary are in compliance with the terms and conditions of all such permits,
licenses and similar authorizations;

(d) all Hazardous Materials, if any, generated at any and all Property of the
Borrower or any Subsidiary are currently being transported, treated, and
disposed of in accordance with Environmental Laws and there has been no Release
or threatened Release by the Borrower or any of its Restricted Subsidiaries of
Hazardous Materials at, on, under or from any of the Borrower’s or its
Restricted Subsidiaries’ Properties that currently requires investigation,
remediation, abatement, removal or monitoring of Hazardous Materials under
applicable Environmental Laws; and

 

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(e) neither the Borrower nor its Restricted Subsidiaries 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 a Release of Hazardous Materials at, under, or from any
real properties offsite of the Borrower’s or its Restricted Subsidiaries’
Properties.

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

(a) 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, 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) The use of proceeds of the Loans will not violate the PATRIOT Act in any
material respect.

(c) The use of proceeds of the Loans will not violate OFAC in any material
respect.

(d) To the extent applicable, its Restricted Subsidiaries is in compliance, in
all material respects, with the Trading with the Enemy Act, as amended, and each
of the foreign assets control regulations of the United States Treasury
Department (31 CFR Subtitle B, Chapter V, as amended) (“OFAC”).

(e) In all material respects, no part of the proceeds of any Loan will be used,
directly or, to the knowledge of the Borrower or its Restricted Subsidiaries,
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended (“FCPA”).

(f) No Default has occurred and is continuing.

Section 7.08 Investment Company Act. No Loan Party is required to be registered
as an “investment company” under the Investment Company Act of 1940.

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

 

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Section 7.10 ERISA.

(a) Except as could not reasonably be expected to result in a Material Adverse
Effect, each Plan is, and has been, maintained in substantial compliance with
ERISA and, where applicable, the Code. Except as could not reasonably be
expected to result in a Material Adverse Effect, there has been no non-exempt
prohibited transaction under ERISA section 406 or Code section 4975 with respect
to any Plan which could reasonably be expected to result in liability to any
Borrower, Restricted Subsidiary or ERISA Affiliate.

(b) No ERISA Event has occurred which could reasonably be expected to result in
a Material Adverse Effect.

(c) As of the Closing Date, the excess of the present value of all benefit
liabilities under the Plan of the Borrower, and each Restricted Subsidiary and
each ERISA Affiliate (based on those assumptions used to fund such Plan), as of
the last annual valuation date applicable thereto for which a valuation is
available, over the value of the assets of such Plan could not reasonably be
expected to have a Material Adverse Effect, and the excess of the present value
of all benefit liabilities of all underfunded Plans (based on those assumptions
used to fund each such Plan) as of the last annual valuation dates applicable
thereto for which valuations are available, over the value of the assets of all
such underfunded Plans could not reasonably be expected to have a Material
Adverse Effect.

Section 7.11 Disclosure; No Material Misstatements. No report, financial
statement, certificate or other written information furnished by or on behalf of
the Borrower or any Restricted Subsidiary (other than projected financial
information, pro forma financial information, Reserve Reports and information of
a general economic or industry nature) to the Administrative Agent, any Arranger
or any Lender in connection with the transactions contemplated hereby and 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), when taken as a whole, contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein (when taken as a whole), in the light of the circumstances
under which they were made, not materially misleading. With respect to projected
financial information, pro forma financial information and Reserve Reports, the
Borrower represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time of preparation and when
delivered to the Administrative Agent, any Arranger or the Lenders; it being
understood that such projections may vary from actual results and that such
variances may be material and that, with respect to Reserve Reports, projections
concerning volumes attributable to the Oil and Gas Properties and production and
cost estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that the Borrower and the
Subsidiaries do not warrant that such opinions, estimates and projections will
ultimately prove to be accurate.

Section 7.12 Subsidiaries; Insurance. The Borrower has, and has caused all of
its Restricted Subsidiaries to maintain insurance policies sufficient to comply
with Section 8.06. As of the Closing Date, the Borrower has no Subsidiaries or
Foreign Subsidiaries other than those set forth on Schedule 7.12. Each
Subsidiary Guarantor, Material Subsidiary and Unrestricted Subsidiary as of the
Closing Date (after giving effect to the Transactions) has been so designated on
Schedule 7.12.

Section 7.13 Location of Business and Offices. The Borrower’s jurisdiction of
organization is the State of New York; the name of the Borrower as listed in the
public records of its jurisdiction of organization is Forest Oil Corporation;
and the organizational identification number of the Borrower in its jurisdiction
of organization is 19493 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(k)). The Borrower’s
principal place of business and chief executive office is located at the address
specified in Section 12.01(a) (or as set forth in any notice delivered pursuant
to Section 8.01(k) or Section 12.01(c)).

 

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Section 7.14 Properties; Titles, Etc. Except as could not have a Material
Adverse Effect:

(a) After giving full effect to the Liens permitted by Section 9.03, the
Borrower or its Restricted Subsidiary specified as the owner owns the net
interests in production attributable to the Hydrocarbon Interests as reflected
in the most recently delivered Reserve Report, and the ownership of the
Borrowing Base Properties shall not in any material respect obligate the
Borrower or any such Restricted Subsidiary to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount materially in excess of the working interest of each Property set
forth in the most recently delivered Reserve Report that is not offset by a
corresponding proportionate increase in the Borrower’s or such Restricted
Subsidiary’s net revenue interest in such Property.

(b) All material leases and agreements necessary for the conduct of the business
of the Borrower and its 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.

(c) The rights and Properties presently owned, leased or licensed by the
Borrower and its Restricted Subsidiaries including all easements and rights of
way, include all rights and Properties necessary to permit the Borrower and its
Restricted Subsidiaries to conduct their business in all material respects in
the same manner as its business has been conducted prior to the date hereof
(subject to any changes to the business resulting from transactions permitted
hereunder).

(d) All of the Properties of the Borrower and its 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 and in compliance with Section 8.05.

(e) The Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower or any Restricted
Subsidiary does not infringe upon the rights of any other Person. 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.

Section 7.15 Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to have a Material Adverse Effect, the Oil
and Gas Properties (and Properties unitized therewith) of the Borrower and its
Restricted Subsidiaries have been maintained, operated and developed in a good
and workmanlike manner and in conformity with all applicable 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 as could not be reasonably expected to have a Material Adverse
Effect, no Oil and Gas Property of the Borrower or any 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). Except as could not be
reasonably expected to have a Material Adverse Effect, all pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Borrower or any of its Restricted
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to
such of the foregoing which are operated by the Borrower or any of its
Restricted Subsidiaries, in a manner consistent with the Borrower’s or its
Restricted Subsidiaries’ past practices.

 

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Section 7.16 Gas Imbalances, Prepayments. Except (a) as set forth on
Schedule 7.16 or (b) thereafter as either disclosed in writing to the
Administrative Agent or included in the most recently delivered Reserve Report
Certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments which would require the Borrower or any of its Restricted
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor
exceeding two percent (2.0%) of the aggregate volumes of Hydrocarbons (on an Mcf
equivalent basis) listed in the most recent Reserve Report.

Section 7.17 Marketing of Production. Except (a) for contracts listed and in
effect on the date hereof on Schedule 7.17 or (b) thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Restricted Subsidiaries are receiving a price for all production
sold thereunder which is computed substantially in accordance with the terms of
the relevant contract and are not having deliveries curtailed substantially
below the subject Property’s delivery capacity), no material agreements exist
which are not cancelable on 60 days’ notice or less without penalty or detriment
for the sale of production from the Borrower’s or its Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.

Section 7.18 Swap Agreements. Schedule 7.18, as of the date hereof, and after
the date hereof, each report required to be delivered by the Borrower pursuant
to Section 8.01(d), sets forth, as of the date of such schedule or report, a
true and complete list of all material Swap Agreements of the Borrower and each
Restricted Subsidiary, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net
mark-to-market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.

Section 7.19 Use of Loans and Letters of Credit. The proceeds of the Loans and
the Letters of Credit shall be used (a) to acquire Oil and Gas Properties or
interests therein (including pursuant to the Merger or any other Permitted
Acquisition), (b) to pay certain transaction expenses incurred in connection
therewith (including the Transaction Expenses), (c) to provide working capital,
including for exploration and production operations, and (d) to provide funding
for general corporate purposes of the Borrower and its Subsidiaries. The
Borrower and its Restricted Subsidiaries are not engaged principally, or as one
of its or their important activities, in the business of extending credit for
the purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation T, U or X of the Board). No part
of the proceeds of any Loan or Letter of Credit will be used for any purpose
which violates the provisions of Regulations T, U or X of the Board.

Section 7.20 Solvency. After giving effect to the transactions contemplated
hereby, (a) the property, at a fair valuation, of the Borrower and its
Restricted Subsidiaries, taken as a whole, will exceed the aggregate Debt of the
Borrower and its Restricted Subsidiaries on a consolidated basis, as the Debt
becomes absolute and matures, (b) the Borrower and its Restricted Subsidiaries,
taken as a whole, will not have incurred or intended to incur, and will not
believe that it will incur, Debt beyond their ability to pay such Debt (after
taking into account the timing and amounts of cash to be received by each of the
Borrower and its Restricted Subsidiaries and the amounts to be payable on or in
respect of their liabilities) as such Debt becomes absolute and matures and
(c) the Borrower and its Restricted Subsidiaries, taken as a whole, will not
have (and will have no reason to believe that it will have thereafter)
unreasonably small capital for the conduct of its business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.

 

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ARTICLE VIII

AFFIRMATIVE COVENANTS

Until Payment in Full, the Borrower covenants and agrees with the Lenders that:

Section 8.01 Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent for distribution to each Lender:

(a) Annual Financial Statements. As soon as available, but in any event not
later than 90 days after the end of each fiscal year of the Borrower, the
audited consolidated balance sheet of the Borrower and its Restricted
Subsidiaries and related consolidated statements of operations, member’s equity
and cash flows as of the end of and for such year, setting forth, commencing
with the year ending December 31, 2014, in each case in comparative form the
figures for the previous fiscal year starting with the fiscal year ending
December 31, 2015, all reported on by an independent public accounting firm 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 other than a going concern exception or explanatory note with respect to,
or resulting from, (x) the occurrence of an upcoming maturity date of Debt or
(y) any potential inability to satisfy a financial maintenance covenant,
including the Financial Performance Covenant, on a future date or in a future
period) 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 Restricted Subsidiaries on a consolidated basis in
accordance with GAAP.

(b) Quarterly Financial Statements. As soon as available, but in any event not
later than 45 days after the end of each of the first three fiscal quarters of
each fiscal year of the Borrower, the consolidated balance sheet of the Borrower
and its Restricted Subsidiaries and related consolidated statements of
operations, member’s 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,
commencing with the quarter ending March 31, 2015, 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 commencing with
the fiscal quarter ending March 31, 2016, 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 Restricted Subsidiaries on a
consolidated basis in accordance with GAAP, subject to changes resulting from
normal year-end audit adjustments and the absence of footnotes.

(c) Certificate of Financial Officer – Compliance. Concurrently with the
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
Compliance Certificate (i) certifying, to the best of the certifying Responsible
Officer’s knowledge, as to whether a Default has occurred and is continuing and,
if a Default has occurred and is continuing, specifying the details thereof and
any action taken or proposed to be taken with respect thereto, (ii) setting
forth a reasonably detailed calculation of the Financial Performance Covenant
and (iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 7.04(a), which has not been previously disclosed pursuant to this
Section 8.01(c), 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 – Swap Agreements. Concurrently with the
delivery of financial statements under Section 8.01(a) and Section 8.01(b), a
certificate of a Financial Officer, in form and substance satisfactory to the
Administrative Agent, setting forth as of the last Business Day of the most
recently ended fiscal quarter or fiscal year, a true and complete list of all

 

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material Swap Agreements of the Borrower and each Restricted Subsidiary, the
counterparty, type of Swap Agreement, trade date, effective date, termination
date, notional amounts or volumes, the remaining notional amounts or volumes,
the net mark-to-market value of each such Swap Agreement for which a
mark-to-market value is reasonably available as of such day, the strike or fixed
rate payor price and any new credit support agreements relating thereto not
listed on Schedule 7.18 or previously disclosed to the Administrative Agent, any
margin required or supplied under any credit support document and any other
material terms reasonably requested to be set forth therein by the
Administrative Agent in advance of delivery.

(e) Certificate of Insurer — Insurance Coverage. Concurrently with any delivery
of financial statements under Section 8.01(a), a certificate of insurance
coverage from each insurer with respect to the insurance required by
Section 8.06, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

(f) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, copies of all periodic and other material reports,
proxy statements and other material communication or document filed by the
Borrower or any Subsidiary with the SEC, or with any national securities
exchange, or distributed by the Borrower to its shareholders generally, as the
case may be.

(g) Notices Under Material Indebtedness. Promptly after the furnishing thereof,
copies of any material financial statement, report or notice furnished to or by
any Person pursuant to the terms of any Material Indebtedness, other than this
Agreement and not otherwise required to be furnished to the Administrative
Agent.

(h) Lists of Purchasers. Concurrently with the delivery of any Reserve Report to
the Administrative Agent pursuant to Section 8.11 in connection with a Scheduled
Redetermination, a list of all Persons purchasing Hydrocarbons from the Borrower
and its Restricted Subsidiaries who collectively account for at least eighty
five percent (85%) of the revenues resulting from the sale of all Hydrocarbons
by the Borrower and its Restricted Subsidiaries during the then most recently
completed fiscal quarter.

(i) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any
Restricted Subsidiary intends to Dispose of any Borrowing Base Properties having
a Fair Market Value in excess of $5,000,000 or Equity Interests of any Person
owning Borrowing Base Properties having a Fair Market Value is in excess of
$5,000,000, prior notice of such Disposition, the price thereof and the
anticipated date of closing and any other details thereof reasonably requested
by the Administrative Agent.

(j) Notice of Casualty Events. Prompt written notice of the occurrence of any
Casualty Event with respect to any Borrowing Base Property.

(k) Information Regarding Borrower and Guarantors. Promptly (and in any event at
least five (5) Business Days after such event (or such later time as the
Administrative Agent may agree in its sole discretion) of the following),
written notice of any change in (i) the Borrower or any Guarantor’s corporate
name or in any trade name used to identify such Person in the conduct of its
business or in the ownership of its Properties, (ii) the location of the
Borrower or any Guarantor’s chief executive office or principal place of
business, (iii) the Borrower or any Guarantor’s identity or corporate form and
(iv) the Borrower or any Guarantor’s jurisdiction of organization or such
Person’s organizational identification number in such jurisdiction of
organization.

 

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(l) Production Report and Lease Operating Statements. Within 60 days after the
end of each fiscal quarter, a report setting forth, for each calendar month
during the then current fiscal year to date, the volume of sold production and
sales attributable to production (and the prices at which such sales were made
and the revenues derived from such sales) for each such calendar month from the
Borrowing Base Properties, and setting forth the related ad valorem, severance
and production taxes and lease operating expenses attributable thereto and
incurred for each such calendar month.

(m) Annual Budget and Projections. As soon as available, an annual business plan
and budget of the Borrower and its Restricted Subsidiaries on a consolidated
basis, including forecasts prepared by management of the Borrower.

(n) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any Restricted Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA), or compliance with the terms of this
Agreement or any other Loan Document, as the Administrative Agent may reasonably
request in writing from time to time; provided that notwithstanding anything to
the contrary in this Section 8.01(n), the obligations of the Borrower and its
Restricted Subsidiaries hereunder shall be subject to the Disclosure
Restrictions.

(o) Monthly Production Report. Promptly after preparation but no later than
thirty (30) days after the end of each calendar month, a report from the
Borrower in a form reasonably acceptable to the Administrative Agent setting
forth (i) the previous month’s production of each of crude oil and natural gas
and (ii) forecasted production of each of crude oil and natural gas for the
period ending no sooner than the latest month for which volumes are hedged under
Swap Agreements.

Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender promptly, after a Responsible Officer of
the Borrower or any of the Restricted Subsidiaries obtains actual knowledge,
notice of the following:

(a) Defaults. The occurrence of any Default or Event of Default, which notice
shall specify the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto;

(b) Governmental Matters. 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 (including under Environmental
Law) against or affecting the Borrower or any Restricted Subsidiary not
previously disclosed in writing to the Lenders or any material adverse
development in any such action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lenders) that, in either case, if
adversely determined, would reasonably be expected to result in a Material
Adverse Effect;

(c) ERISA Events. The occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred after the date of this Agreement,
would reasonably be expected to result in a Material Adverse Effect; and

(d) Events Resulting in MAEs or Certain Borrowing Base Adjustments. Any other
development that results in, or would reasonably be expected to result, either
(i) in a Material Adverse Effect or (ii) an adjustment to the Borrowing Base
pursuant to Section 2.08(b) or Section 2.08(c).

 

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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 take
all commercially reasonable actions to maintain the rights, licenses, permits,
privileges and franchises material to the conduct of its business and maintain,
if necessary, its qualification to do business in each other jurisdiction in
which its Oil and Gas Properties is located or the ownership of its Properties
requires such qualification, except where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect; provided that the
foregoing shall not prohibit any transaction permitted under Section 9.07.

Section 8.04 Payment of Tax Obligations. The Borrower will, and will cause each
Restricted Subsidiary to pay its obligations in respect of all Tax liabilities
of the Borrower and its Restricted Subsidiaries before the same shall become due
and payable, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings and the Borrower or applicable
Restricted Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP (or in the case of a Foreign Subsidiary, the
comparable accounting principles in the relevant jurisdiction) or (b) the
failure to make payment could not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.

Section 8.05 Operation and Maintenance of Properties. The Borrower, will, and
will cause each Subsidiary to, except in each case, where the failure to so
comply could not reasonably be expected to result in a Material Adverse Effect
(it being understood that this Section 8.05 shall not restrict any transaction
otherwise permitted by Article IX):

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

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

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

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

(e) operate its Oil and Gas Properties or cause or make reasonable and
commercially reasonable efforts to cause such Oil and Gas Properties and other
material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all applicable Governmental
Requirements.

 

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(f) to the extent the Borrower is not the operator of any Property, the Borrower
shall use commercially reasonable efforts to cause the operator to comply with
this Section 8.05.

Section 8.06 Insurance. The Borrower will, and will cause each Restricted
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance (subject to customary deductibles and retentions) in such
amounts and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations. The loss payable clauses or provisions in said insurance policy or
policies insuring any of the Collateral for the Loans shall be endorsed in favor
of and made payable to the Administrative Agent as its interests may appear (it
being understood that, unless there is an Event of Default and the Majority
Lenders instruct the Administrative Agent otherwise, the proceeds of any
property insurance shall go to the Borrower) and such policies shall name the
Administrative Agent and the Lenders as “additional insureds” and provide, to
the extent the insurer will do so based on the commercially reasonable efforts
of the Borrower, that the insurer will endeavor to give at least 30 days prior
notice of any cancellation to the Administrative Agent.

Section 8.07 Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, maintain financial records in accordance
with GAAP. The Borrower will, and will cause each Restricted Subsidiary to,
permit any representatives designated by the Administrative Agent or any Lender
(who shall be accompanied by the Administrative Agent), upon reasonable prior
notice to the Borrower, to visit and inspect its Properties, to examine and make
extracts from its books and records, and to discuss its affairs, finances and
condition with its officers and independent accountants, all at such reasonable
times during normal business hours as often as reasonably requested; provided,
that, excluding any such visits and inspections during the continuation of an
Event of Default, only the Administrative Agent on behalf of the Lenders may
exercise rights under this Section 8.07 and the Administrative Agent shall not
exercise such rights more often than two times during any calendar year absent
the existence of a continuing Event of Default and only one such visit per
fiscal year shall be at the Borrower’s expense; provided, further that, when an
Event of Default exists, the Administrative Agent, any Lender or any respective
representatives or independent contractors of the Administrative Agent or any
Lender may do any of the foregoing at any time during normal business hours upon
reasonable advance notice. The Administrative Agent and the Majority Lenders
shall give the Borrower the opportunity to participate in any discussions with
the Borrower’s independent public accountants. Notwithstanding anything to the
contrary in this Section 8.07, neither the Borrower nor any Restricted
Subsidiary will be required to disclose, permit the inspection, examination or
making copies or abstracts of, or discussion of, any document, information or
other matter (i) that constitutes non-financial trade secrets or non-financial
proprietary information, (ii) in respect of which disclosure to the
Administrative Agent or any Lender (or their respective representatives or
contractors) is prohibited by any Governmental Requirement or any binding
agreement or (iii) that is subject to attorney-client or similar privilege or
constitutes attorney work product (collectively, the “Disclosure Restrictions”).

Section 8.08 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, would not reasonably be
expected to result in a Material Adverse Effect.

Section 8.09 Environmental Matters. Except where the failure to do so,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect, the Borrower will: (i) comply, and will cause its
Properties and operations and each Restricted Subsidiary and each Restricted
Subsidiary’s Properties and operations to comply, with all applicable
Environmental Laws; (ii) not

 

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dispose of or otherwise Release, and shall cause each Subsidiary not to dispose
of or otherwise Release, any Hazardous Materials 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; (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 any applicable Environmental Law to be obtained or filed in
connection with the operation or use of the Borrower’s or any of its
Subsidiaries’ Properties; (iv) promptly conduct, and shall cause each Restricted
Subsidiary to promptly conduct, 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 under applicable Environmental Laws in connection with
any actual or suspected Release of any Hazardous Material on, under, about or
from any of the Borrower’s or its Subsidiaries’ Properties to the extent caused
by the acts or omissions of the Borrower or any of its Subsidiaries or,
otherwise, to the extent the Borrower or any of its Subsidiaries is obligated to
pursue Remedial Work under any applicable Environmental Law.

Section 8.10 Further Assurances.

(a) The Borrower will, and will cause each Restricted Subsidiary, to promptly
execute and deliver to the Administrative Agent all such other documents,
agreements and instruments necessary or proper 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 or file any notices and
financing statements in connection therewith.

(b) The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Borrower or any other
Guarantor where permitted by law; which financing statements may contain a
description of collateral that describes such property in any manner as the
Administrative Agent may reasonably determine is necessary or advisable to
ensure the perfection of the security interest in the Collateral, including
describing such property as “all assets” or “all property” or words of similar
effect.

(c) Notwithstanding anything in the Loan Document to the contrary, no actions in
any jurisdiction outside of the United States or that are necessary to comply
with any Governmental Requirement of any jurisdiction outside of the United
States shall be required in order to create any security interest in assets
located, titled, registered or filed outside of the United States or to perfect
such security interests (it being understood that there shall be no collateral
or pledge agreements or similar agreements governed under the laws of any
jurisdiction outside of the United States).

Section 8.11 Reserve Reports.

(a) On or before March 1st and September 1st of each year, commencing March 1,
2015 in connection with the April 1, 2015 Scheduled Redetermination, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Properties constituting Proved Reserves of the
Borrower and its Restricted Subsidiaries as of the immediately preceding
January 1 or July 1, as applicable. The Reserve Report as of January 1 of each
year shall be prepared (i) internally by the Borrower and audited by an Approved
Petroleum Engineer (each a “January Internal Report”) or (ii) by one or more
Approved Petroleum Engineers, and the July 1 Reserve Report of each year and
each January Internal Report shall be prepared by or under the supervision of
the chief engineer of the Borrower who shall certify such Reserve Report to be
true and accurate in all material respects (it being understood that projections
concerning volumes attributable to the Oil and Gas

 

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Properties and production and cost estimates contained in such Reserve Report
are necessarily based upon professional opinions, estimates and projections and
that the Borrower and the Subsidiaries do not warrant that such opinions,
estimates and projections will ultimately prove to be accurate) and to have been
prepared substantially in accordance with the procedures used in the immediately
preceding January 1 Reserve Report (or, in the case of the first January 1
Reserve Report, the Reserve Report as of January 1, 2014 delivered under the
Existing Sabine Credit Agreement).

(b) In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report (or one or more
Reserve Reports to the extent that each Reserve Report covers different
properties), prepared (i) by or under the supervision of the chief engineer of
the Borrower who shall certify such Reserve Report to be true and accurate in
all material respects (it being understood that projections concerning volumes
attributable to the Oil and Gas Properties and production and cost estimates
contained in such Reserve Report are necessarily based upon professional
opinions, estimates and projections and that the Borrower and the Subsidiaries
do not warrant that such opinions, estimates and projections will ultimately
prove to be accurate) and to have been prepared substantially in accordance with
the procedures used in the immediately preceding January 1 Reserve Report (or,
prior to the first January 1 Reserve Report hereunder, the Reserve Report as of
January 1, 2014 delivered under the Existing Sabine Credit Agreement), (ii) by
an Approved Petroleum Engineer or (iii) by another third party reasonably
acceptable to the Administrative Agent (it being understood that a Reserve
Report prepared by the chief engineer of Forest of Oil and Gas Properties and
audited by an Approved Petroleum Engineer shall be reasonably acceptable). For
any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve
Report with an “as of” date as reasonably required by the Administrative Agent
as soon as possible, but in any event no later than thirty (30) days (or such
longer period to which the Administrative Agent shall agree) following the
receipt of such request.

(c) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent a certificate from a Responsible Officer, in substantially
the form of Exhibit G hereto (certifying that in all material respects: (i) the
information contained in the Reserve Report is true and correct (it being
understood that projections concerning volumes attributable to the Oil and Gas
Properties and production and cost estimates contained in such Reserve Report
are necessarily based upon professional opinions, estimates and projections and
that the Borrower and the Subsidiaries do not warrant that such opinions,
estimates and projections will ultimately prove to be accurate), (ii) the
Borrower or its Restricted Subsidiaries has, or in respect of to-be-acquired
assets in connection with a Permitted Acquisition, will have, prior to the
effectiveness of the Interim Redetermination, good and defensible title to the
Borrowing Base Properties evaluated in such Reserve Report (other than those
Properties (A) Disposed of in compliance with Section 9.08, (B) that constitute
leases that have expired in accordance with their terms or (C) that have title
defects disclosed in writing to the Administrative Agent (including through the
provision of title information pursuant to Section 8.11(a)) 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 or previously delivered to the
Administrative Agent, on a net basis there are no gas imbalances, take or pay or
other prepayments in excess of the volume specified in Section 7.16 with respect
to its Oil and Gas Properties evaluated in such Reserve Report which would
require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons
produced from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor, (iv) none of the Borrowing Base
Properties have been sold since the date of the last Borrowing Base
determination except as previously disclosed to the Administrative Agent or as
set forth on an exhibit to the certificate, which certificate shall list all of
such sold Borrowing Base Properties, (v) attached to the certificate is a list
of all marketing agreements entered into subsequent to the later of the Closing
Date or the most recently delivered Reserve Report which the Borrower could
reasonably be expected to have been obligated to list on Schedule 7.17 had such
agreement been in effect on the Closing Date and (vi) attached thereto is a
schedule of the Oil and

 

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Gas Properties evaluated by such Reserve Report that are Mortgaged Properties
and demonstrating compliance with Section 8.12(a)) or such other form as to
which the Administrative Agent may agree (the “Reserve Report Certificate”).

Section 8.12 Title Information.

(a) On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.11(a), the Borrower will deliver title
information in form and substance reasonably acceptable to the Administrative
Agent covering enough of the Borrowing Base Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, reasonably
satisfactory title information on at least eighty percent (80%) of the PV-9 of
the Borrowing Base Properties evaluated by such Reserve Report; provided that
(i) if the Administrative Agent and the Borrower reasonably determine that the
cost of (A) the Borrower delivering such title information and (B) the
Administrative Agent determining whether it is reasonably satisfactory is
excessive in relation to the benefits afforded to the Lenders thereby, then the
Administrative Agent may postpone the requirement to deliver title information
at its discretion (it being understood that the Administrative Agent or the
Required Lenders may curtail such postponement at any time and, at such time,
the Borrower shall promptly deliver the title information required above) or
(ii) if the Borrower is undertaking a Permitted Acquisition of Borrowing Base
Properties, (A) the Borrower shall have sixty (60) days after the consummation
of such Permitted Acquisition (subject to extension at the discretion of the
Administrative Agent) to provide the title information required above, so that,
subject to clause (i), after such grace period, the Borrower will comply with
the eighty percent (80%) (or lower percentage permitted pursuant to clause (i))
requirement and (B) such new Borrowing Base Properties will be disregarded for
purposes of calculating compliance with the eighty percent (80%) requirement
during the grace period (it being understood, subject to clause (i) above, that
the Borrower will be required to have provided the title information required
above on at least eighty percent (80%) of the PV-9 of the other Borrowing Base
Properties) (each, a “Title Information Grace Period”).

(b) If the Borrower has provided title information for additional Properties
under Section 8.12(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that title defects or exceptions exist with respect to such
additional Properties which materially impair the quantity of working interests
or net reserve interests of such Property attributable to the Borrower or its
Restricted Subsidiaries in the most recently delivered Reserve Report, 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 having an
equivalent value with no title defects or exceptions except for Liens permitted
by Section 9.03 or (iii) deliver title information in form and substance
reasonably acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, reasonably satisfactory title information on at
least eighty percent (80%) (or a lower percentage permitted during a Title
Information Grace Period) of the PV-9 of the Borrowing Base Properties evaluated
by such Reserve Report.

(c) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period set
forth in Section 8.12(b) or the Borrower does not comply with the requirements
to provide acceptable title information so the Administrative Agent has received
reasonably satisfactory title information covering eighty percent (80%) (or a
lower percentage permitted during a Title Information Grace Period) of the PV-9
of the Borrowing Base Properties evaluated in the most recent Reserve Report,
such default shall not be a Default, but instead the Administrative Agent and/or
the Required Lenders shall have the right to exercise the following remedy in
their sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not

 

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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 Required Lenders
are not reasonably satisfied with title to any Mortgaged Property after the
60-day period has elapsed, such unacceptable Mortgaged Property shall not count
towards the eighty percent (80%) (or a lower percentage permitted during a Title
Information Grace Period) 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 reasonably
acceptable title information on eighty percent (80%) (or a lower percentage
permitted during a Title Information Grace Period) of the PV-9 of the Borrowing
Base Properties.

Section 8.13 Additional Collateral; Additional Guarantors.

(a) In connection with each redetermination of the Borrowing Base (including any
Interim Redetermination), the Borrower shall review the Reserve Report and the
list of current Mortgaged Properties to ascertain whether the Mortgaged
Properties represent at least eighty percent (80%) of the PV-9 of the Borrowing
Base Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production; provided that, if the Borrower is undertaking a
Permitted Acquisition of Borrowing Base Properties, (A) the Borrower shall have
sixty (60) days after the consummation of such Permitted Acquisition (subject to
extension at the discretion of the Administrative Agent) to Mortgage such
Borrowing Base Properties, so that, after such grace period, the Borrower will
comply with the eighty percent (80%) requirement and (B) such new Borrowing Base
Properties will be disregarded for purposes of calculating compliance with the
eighty percent (80%) requirement during the grace period (it being understood
that the Borrower will be required to Mortgage at least eighty percent (80%) of
the PV-9 of the other Borrowing Base Properties). In the event that the
Mortgaged Properties do not represent at least eighty percent (80%) of such PV-9
value, then the Borrower shall, and shall cause its Restricted Subsidiaries to,
grant, within sixty (60) days of delivery of the certificate required under
Section 8.11(c), to the Administrative Agent as security for the Indebtedness a
first-priority Lien interest (subject to Liens permitted under Section 9.03) on
additional Oil and Gas Properties not already subject to a Lien of the Security
Instruments such that after giving effect thereto, the Mortgaged Properties will
represent at least eighty percent (80%) of such PV-9 value. All such Liens will
be created and perfected by supplementing existing Mortgages or entering into
new Mortgages substantially in form and substance of then existing Mortgages and
related Security Instruments, which the Administrative Agent may reasonably
require. If, in order to comply with the foregoing, 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 8.13(b).

(b) The Borrower shall promptly cause each Material Subsidiary (excluding any
Excluded Subsidiary) to guarantee and secure the Indebtedness pursuant to the
Guaranty and Pledge Agreement by (i) executing and delivering a supplement to
the Guaranty and Pledge Agreement to become a Guarantor and grant a security
interest in all of its assets required to be granted thereby and, if applicable,
deliver any original certificates evidencing any Equity Interests required to be
pledged thereby, together with an appropriate undated stock powers for each
certificate duly executed in blank by such Material Subsidiary, if applicable
and (ii) executing and delivering such other additional documents and
certificates as shall reasonably be requested by the Administrative Agent in
connection therewith to vest in the Administrative Agent (or any representative
on its behalf) valid and perfected first priority Liens to the extent required
hereunder or pursuant to the other Loan Documents. In addition, the Borrower
shall promptly, or shall promptly cause the direct parent of such Material
Subsidiary (unless the Equity Interests of such Material Subsidiary are Excluded
Equity Interests), to execute and deliver a supplement to the Guaranty and
Pledge Agreement to pledge the Equity Interests of such Material Subsidiary and,
if applicable, deliver any original certificates evidencing such Equity
Interests, together with an appropriate undated stock powers for each
certificate duly executed in blank by the registered owner thereof).

 

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(c) The Borrower agrees that it will not, and will not permit any Restricted
Subsidiary, to guarantee the Second Lien Obligations without first guaranteeing
the Indebtedness pursuant to a Security Instrument or to grant a Lien on any
Property to secure Second Lien Obligations, without first (i) ensuring that a
Customary Intercreditor Agreement which addresses the intercreditor relationship
between the Secured Parties and the secured parties in respect of Second Lien
Obligations exists and (ii) granting to the Administrative Agent to secure the
Indebtedness a prior Lien on such Property pursuant to Security Instruments to
the extent a prior Lien on such Property has not already been granted to the
Administrative Agent.

Section 8.14 ERISA Compliance. The Borrower will promptly furnish and will cause
the Restricted Subsidiaries to promptly furnish to the Administrative Agent
(i) promptly after a reasonable request therefor by the Administrative Agent, a
copy of each annual and other report with respect to each Plan or any trust
created thereunder most recently filed with the United States Secretary of
Labor, the Internal Revenue Service or the PBGC and (ii) promptly upon receipt
thereof, copies of any notice of the PBGC’s intention to terminate or to have a
trustee appointed to administer any Plan.

Section 8.15 Swap Agreements. To the extent the Borrower or a Restricted
Subsidiary changes the material terms of any commodity-price Swap Agreement to
which it is a party, terminates any such Swap Agreement or enters into a new
Swap Agreement which has the effect of creating an off-setting position under
any such Swap Agreement since the later of (A) the last Scheduled
Redetermination Date and (B) the last adjustment of the Borrowing Base made
pursuant to Section 2.08(c) (the later of (A) and (B), the “Last B/B Hedge
Reduction”) and the Borrowing Base Value of such terms to the extent changed and
such terminated and/or offsetting positions (after taking into account any other
Swap Agreement executed since the Last B/B Hedge Reduction, including those
executed substantially concurrently with the taking of any such action) exceeds
in the aggregate five percent (5.0%) of the then effective Borrowing Base, the
Borrower will give the Lenders prompt written notice of such event and,
concurrently with such notice, the Required Lenders shall have the right to
adjust the Borrowing Base in accordance with Section 2.08(c).

Section 8.16 Unrestricted Subsidiaries; Designation and Redesignation.

(a) The Borrower may designate any Restricted Subsidiary as an Unrestricted
Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary (a
“Subsidiary Redesignation”) upon delivery to the Administrative Agent of written
notice from the Borrower; provided that immediately before and after such
designation, (i) no Default or Event of Default shall have occurred and be
continuing, (ii) immediately after giving effect to such designation, the
Borrower shall be in Pro Forma Compliance with the Financial Performance
Covenant and (iii) no Borrowing Base Deficiency shall result therefrom.

(b) The designation of any Restricted Subsidiary as an Unrestricted Subsidiary
shall constitute (i) an Investment under Section 9.05 by the Borrower therein at
the date of designation in an amount equal to the Fair Market Value of the
Borrower’s investment therein and (ii) a Disposition, with respect to the
Borrowing Base Properties of such Restricted Subsidiary, for purposes of the
provisions of Section 2.08(b).

(c) The Borrower may designate any Unrestricted Subsidiary as a Restricted
Subsidiary upon delivery of written notice to the Administrative Agent; provided
that such designation shall constitute (i) the incurrence at the time of
designation of any Debt and Liens of such Restricted

 

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Subsidiary existing at such time, (ii) a reduction in any Investment under
Section 9.05 to the extent that such Investment was attributable to such
Restricted Subsidiary being an Unrestricted Subsidiary at the date of
designation in an amount equal to the Fair Market Value of the Borrower’s
investment therein and (iii) a Permitted Acquisition of Oil and Gas Properties
for purposes of Section 2.07(b).

(d) Any designation of a Restricted Subsidiary of the Borrower as an
Unrestricted Subsidiary and any designation of a Unrestricted Subsidiary as a
Restricted Subsidiary will be evidenced to the Administrative Agent by filing
with the Administrative Agent a certificate signed by a Responsible Officer
certifying that such designation complied with the preceding conditions in
Section 8.16(b) or Section 8.16(c), as applicable.

Section 8.17 Marketing Activities. Except to the extent that it could not
reasonably be expected to have a Material Adverse Effect, the Borrower will not,
and will not permit any of its Restricted Subsidiaries to, engage in marketing
activities for any Hydrocarbons or enter into any marketing contracts related
thereto other than (i) contracts for the sale of Hydrocarbons scheduled or
reasonably estimated to be produced from their proved Oil and Gas Properties
during the period of such contract, (ii) contracts for the sale of Hydrocarbons
scheduled or reasonably estimated to be produced from proved Oil and Gas
Properties of third parties during the period of such contract associated with
the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries that
the Borrower or one of its Restricted Subsidiaries has the right to market
pursuant to joint operating agreements, unitization agreements or other similar
contracts that are usual and customary in the oil and gas business and
(iii) other contracts for the purchase and/or sale of Hydrocarbons of third
parties (A) which have generally offsetting provisions (i.e., corresponding
pricing mechanics, delivery dates and points and volumes) such that no
“position” is taken and (B) for which appropriate credit support has been taken
to alleviate the material credit risks of the counterparty thereto.

Section 8.18 Post-Closing Obligations. As promptly as practicable, and in any
event within the time periods after the Closing Date specified in Schedule 8.18
(or such later date as the Administrative Agent may agree to, including to
accommodate circumstances unforeseen on the Closing Date), the Borrower and each
other Loan Party shall deliver the documents or take the actions specified on
Schedule 8.18, in each case, except to the extent otherwise agreed by the
Administrative Agent.

ARTICLE IX

NEGATIVE COVENANTS

Until Payment in Full, the Borrower covenants and agrees with the Lenders that:

Section 9.01 Financial Covenant.

(a) The Borrower will not permit the First Lien Secured Leverage Ratio as of the
last day of a Test Period (commencing with the Test Period ending March 31,
2015) to exceed 3.0 to 1.0.

(b) For the purposes of calculating the First Lien Secured Leverage Ratio for
the Test Periods ending on the last day of the first, second and third full
fiscal quarters of the Borrower ending after the Closing Date, the First Lien
Secured Leverage Ratio shall be calculated on a pro forma combined basis for
Forest, Sabine and their respective Restricted Subsidiaries for each quarter
occurring prior to the first full fiscal quarter of the Borrower ending after
the Closing Date.

 

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

(a) (i) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents and (ii) Debt outstanding on the date hereof
(provided that any Debt that is in excess of $1,000,000 individually or
$5,000,000 in the aggregate shall only be permitted under this clause (ii) to
the extent such Debt is listed on Schedule 9.02(a));

(b) 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 overdue for a period
of more than ninety (90) days or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP;

(c) Debt under Capital Leases and purchase money Debt in an aggregate amount not
to exceed two percent (2%) of the then effective Borrowing Base (as measured at
the time any such Debt is incurred);

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

(e) intercompany Debt incurred by (a) a Loan Party owing to Holdings, the
Borrower or any Subsidiaries; provided that any such Debt owed by a Loan Party
to a Subsidiary that is not a Guarantor shall (A) be evidenced by the
Intercompany Note or (B) otherwise be subject to subordination terms
substantially identical to the subordination terms in the form of Intercompany
Note set forth in Exhibit I or (b) any Restricted Subsidiary that is not a
Guarantor owing to the Borrower or any Subsidiary to the extent permitted by
Section 9.05;

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

(g) Debt of the Borrower owing to any Equity Interest holder of the Borrower
that is a Permitted Holder (“Capital Debt”) that (a) is unsecured, (b) is fully
subordinated in right of payment and liquidation to the Indebtedness on written
terms reasonably acceptable to the Administrative Agent, (c) has a scheduled
maturity date that is no earlier than one year after the Maturity Date in effect
at the time of such issuance, (d) does not provide for scheduled or mandatory
prepayments, redemptions, repayments, or defeasance of principal for any
consideration on any date prior to one year after the Maturity Date in effect at
the time of such issuance, (e) does not provide for any payments of interest
(other payments made with common Equity Interests of the Borrower and payments
made in kind by adding to the principal thereof) on any date prior to one year
after the Maturity Date in effect at the time of such issuance, (f) does not
(A) have any financial covenants or any other affirmative or negative covenants
that are more restrictive than under this Agreement or (B) contain cross
defaults to or for any other Debt, (g) does not have any restriction on the
ability of the Borrower or any of its Restricted Subsidiaries to amend, modify
or otherwise supplement this Agreement or the other Loan Documents, (h) does not
have any restrictions on the ability of the Borrower or any of its Restricted
Subsidiaries to guarantee the Indebtedness or pledge assets as collateral
security for the Indebtedness, (i) is not guaranteed by any Restricted
Subsidiary of the Borrower and (j) is not assignable or transferable to any
Person who is not a Permitted Holder;

(h) Guarantees of the Borrower and its Restricted Subsidiaries in respect of
Debt of the Borrower or such Restricted Subsidiary otherwise permitted
hereunder; provided that (i) if the Debt being guaranteed under this
Section 9.02(h) is subordinated to the Indebtedness, such guarantee shall be
subordinated to the guarantee of the Indebtedness under the Guaranty and Pledge
Agreement on terms at

 

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least as favorable to the Lenders as those contained in the subordination of
such Debt and (ii) no guarantee by any Restricted Subsidiary of any Permitted
Notes or Second Lien Obligations shall be permitted unless such Restricted
Subsidiary shall have also provided a guarantee of the Indebtedness pursuant to
the Guaranty and Pledge Agreement;

(i) Debt (other than Debt for borrowed money) secured by Liens permitted under
clauses (c) and (d) of the definition of Excepted Liens;

(j) Debt in respect of netting services, overdraft protections and similar
arrangements in each case in connection with deposit accounts;

(k) any Permitted Notes or Second Lien Obligations issued or incurred by the
Borrower or any Guarantor and any guarantees of such Debt by any Guarantor,
provided that (i) at the time of incurring such Debt (A) no Default or Event of
Default has occurred and is then continuing or would immediately result from the
incurrence thereof (after giving any concurrent repayment of any other Debt with
the proceeds of such Debt) or (B) if the proceeds of such Debt are being used to
finance a Permitted Acquisition, no Payment or Bankruptcy Event of Default has
occurred and is then continuing or would immediately result therefrom (after
giving any concurrent repayment of Debt with the proceeds of such Debt),
(ii) such Debt does not provide for any scheduled repayment (including
amortization) or mandatory redemption prior to ninety-one days after the
Maturity Date as in effect on the date of incurrence thereof (other than
customary amortization of 1.0% per annum and customary offers to purchase upon a
change of control, AHYDO payments, customary asset sale or casualty or
condemnation events and customary acceleration rights after an event of default
or terms not materially more restrictive on the Borrower and its Restricted
Subsidiaries than the Existing Second Lien Facility), (iii) such Debt does not
have a stated maturity date prior to ninety-one (91) days after the Maturity
Date, (iv) if such Debt is in respect of Second Lien Obligations, it shall at
all times be subject to a Customary Intercreditor Agreement and (v) the
financial and negative covenants and events of default of such Debt are
(A) taken as a whole, not materially less favorable to the Borrower and its
Restricted Subsidiaries than such terms in this Agreement (provided that a
certificate of an Responsible Officer of the Borrower delivered to the
Administrative Agent at least three Business Days (or such shorter time as the
Administrative Agent may agree) prior to the incurrence or issuance of such
Debt, together with a reasonably detailed description of such terms of such Debt
or drafts of the documentation relating thereto, stating that the Borrower has
determined in good faith that such terms and conditions satisfy the foregoing
requirement shall be conclusive evidence that such terms and conditions satisfy
the foregoing requirement), (B) are reasonably satisfactory to the
Administrative Agent or (C) incorporated into this Agreement;

(l) Second Lien Obligations existing or committed as of the Closing Date in
respect of the Existing Second Lien Facility, the Existing Notes and any
Permitted Refinancing Debt in respect of the foregoing (and any such Permitted
Refinancing Debt) in an aggregate principal amount outstanding not to exceed
$1,850,000,000 plus any Permitted Refinancing Increase in respect of the
foregoing Debt; provided that, in the case of any Second Lien Obligations
(including any Permitted Refinancing Debt constituting Second Lien Obligations),
such Second Lien Obligations are at all times subject to a Customary
Intercreditor Agreement;

(m) (i) Permitted Refinancing Debt in respect of any Debt permitted under
Sections 9.02(a)(ii), 9.02(c), 9.02(g) and 9.02(k) and (ii) any subsequent
Permitted Refinancing Debt which relates to the Permitted Refinancing Debt
otherwise permitted by this subsection; provided that, for both clauses (i) and
(ii), any such Permitted Refinancing Debt in respect of Capital Debt, complies
with the requirements of Section 9.02(g) or is on terms reasonably satisfactory
to the Administrative Agent and (B) any such Permitted Refinancing Debt
constituting Second Lien Obligations is subject to a Customary Intercreditor
Agreement; and

 

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(n) other additional Debt and any Permitted Refinancing Debt in respect thereof,
provided that no additional Debt may be incurred under this Section 9.02(n) if,
at the time of incurrence, the sum of (i) the principal amount of any Debt to be
incurred plus (ii) the aggregate principal amount of Debt incurred pursuant to
this Section 9.02(n) outstanding at the time of such new incurrence exceeds
(after giving effect to the use of proceeds thereof) the greater of $50,000,000
and seven percent (7.0%) of Consolidated Net Tangible Assets (measured, subject
to Section 1.06, as of the last day of most recently ended fiscal quarter for
which financial statements have been delivered pursuant to Section 8.01) plus
any Permitted Refinancing Increase in respect of the foregoing Debt.

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) (i) Liens securing the payment of any Indebtedness or pursuant to any Loan
Document and (ii) Liens existing on the date hereof (provided that any such Lien
securing obligations in excess of $1,000,000 individually or $5,000,000 in the
aggregate shall only be permitted under this clause (ii) to the extent such Lien
is listed on Schedule 9.03(a));

(b) Excepted Liens;

(c) Liens securing Capital Leases and purchase money Debt permitted by
Section 9.02(c) but only on the Property subject to lease or being acquired
(except for accessions and additions to such assets, replacements and products
thereof and customary security deposits); provided that in each case individual
financings provided by one lender may be cross collateralized to other
financings provided by such lender (and its Affiliates); provided further that
such Liens attach concurrently with or within 270 days after the acquisition,
lease, replacement, construction, expansion or improvement (as applicable)
financed thereby;

(d) Liens on Property securing Second Lien Obligations and any guaranties
thereof; provided that both immediately before and after giving effect to the
incurrence of any such Lien, the Borrower is in compliance with Section 8.13(c);

(e) (i) Liens securing any Permitted Refinancing Debt in respect of any Debt
secured by any Lien permitted by this Section 9.03 and (ii) any subsequent
Permitted Refinancing Debt of such Permitted Refinancing Debt; provided that, in
each case, such new Lien shall be on the same type of Property that secured the
original Lien, except for accessions and additions to such assets, replacements
and products thereof and customary security deposits;

(f) additional Liens on property not constituting Borrowing Base Properties
and/or Junior Liens on Collateral; provided that no such additional Liens may be
granted under this Section 9.03(f) if, at the time of any such grant, the sum of
(i) the outstanding principal amount of the obligations secured thereby plus
(ii) the aggregate principal amount of other obligations secured by Liens
permitted under this Section 9.03(f) outstanding at the time of the grant of
such additional Lien exceeds (after giving effect to the use of proceeds
thereof) the greater of $25,000,000 and three and a half percent (3.5%) of
Consolidated Net Tangible Assets (measured, subject to Section 1.06, as of the
last day of most recently ended fiscal quarter for which financial statements
have been delivered pursuant to Section 8.01) plus any Permitted Refinancing
Increase in respect of Permitted Refinancing Debt relating to obligations that
were secured pursuant to this Section 9.03(f); and

(g) Liens securing any Debt permitted by Section 9.02(h) (solely to the same
extent that the Debt guaranteed by such Guarantees are permitted to be subject
to a Lien hereunder).

 

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Section 9.04 Dividends, Distributions and Redemptions.

(a) 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 to its Equity Interest holders, except:

(i) the Borrower and its Restricted Subsidiaries may declare and make dividends
or distributions with respect to its Equity Interests payable solely in
additional Equity Interests (other than Disqualified Capital Stock);

(ii) the Borrower or any of its Subsidiaries may make Restricted Payments
contemplated by Section 9.09(c) or Section 9.09(d) or to redeem, acquire, retire
or repurchase shares of Equity Interests of Holdings or the Borrower held by any
present or former officer, manager, consultant, director or employee (or their
respective Affiliates, estates, spouses, former spouses, successors, executors,
administrators, heirs, legatees, distributees or immediate family members) of
Holdings or the Borrower and its Restricted Subsidiaries, upon the death,
disability, retirement or termination of employment of any such Person or
otherwise in accordance with any equity option or equity appreciation rights
plan, any management, director and/or employee equity ownership, benefit or
incentive plan or agreement, equity subscription plan, employment termination
agreement or any other employment agreements or equity holders’ agreement;
provided that the aggregate amount of all cash paid in respect of all such
Restricted Payments or Equity Interests so redeemed, acquired, retired or
repurchased in any calendar year does not exceed the sum of (A) $10,000,000
(with unused amounts in any calendar year being carried over to the next
succeeding calendar year subject to a maximum of $5,000,000 in any calendar year
plus (B) all net cash proceeds obtained by or contributed to the Borrower during
such calendar year from the sales of Qualified Equity Interests to other present
or former officers, consultants, employees, directors and managers in connection
with any permitted compensation and incentive arrangements, but excluding
proceeds constituting a Cure Amount or utilized pursuant to
Section 9.04(c)(i)(A), provided further that cancellation of Debt owing to
Holdings, the Borrower or any Restricted Subsidiary from members of management
of Holdings, the Borrower or its Restricted Subsidiaries in connection with a
repurchase of Equity Interests of Holdings or the Borrower will not be deemed to
constitute a Restricted Payment for purposes of this Section 9.04;

(iii) the Borrower may make Restricted Payments to pay fees and expenses
(including franchise or similar taxes) required to maintain its (or any of its
direct or indirect parents’) corporate existence or related to corporate
overhead and customary salary, bonus and other benefits payable to, and
indemnities provided on behalf of, officers, directors and employees of
Holdings, to the extent such salaries, bonuses, other benefits and indemnities
are attributable to the ownership or operation of the Borrower and the
Restricted Subsidiaries;

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

(v) the Borrower may make and pay Restricted Payments to allow Holdings to pay
fees and expenses to unaffiliated third parties that are due and payable within
thirty (30) days related to any equity issuance or offering or debt issuance,
incurrence or offering, Disposition or acquisition or investment transaction
benefitting the Loan Parties permitted by this Agreement, whether or not
consummated;

(vi) Restricted Payments, so long as, with respect to any such Restricted
Payment, the Specified Restricted Payment Test will be satisfied at the time of
such Restricted Payment; and

 

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(vii) dividends or distributions the proceeds of which shall be used by any
direct or indirect parent of the Borrower that is the common parent of an
affiliated group of corporations filing a consolidated return of which the
Borrower is a member to pay any income Taxes of such affiliated group, provided
that the amount of any dividends or distributions received by such direct or
indirect parent pursuant to this clause (vii) for a taxable period shall not
exceed the amount of Taxes that the Borrower would have paid for such period if
it were a standalone taxpayer or the parent of a standalone group that includes
its Subsidiaries and the receipt by the Borrower of Tax benefits shall be no
less than they would have been had the Borrower been a standalone taxpayer or
the parent of a standalone group that included its Subsidiaries.

(b) Repayment of Capital Debt; Amendment of terms of Capital Debt. The Borrower
will not, and will not permit any Restricted Subsidiary to, prior to the date
that is one (1) year after the Maturity Date: (i) call, make or offer to make
any Redemption of or otherwise Redeem (whether in whole or in part) any Capital
Debt or any Permitted Refinancing Debt in respect thereof (or any subsequent
Permitted Refinancing Debt of Permitted Refinancing Debt); provided that this
clause (i) shall not prohibit (A) the cashless conversion of any convertible
Capital Debt into common Equity Interests of the Borrower or (B) Redemptions, so
long as, with respect to any such Redemption, the Specified Restricted Payment
Test will be satisfied at the time of such Redemption or such Redemption is made
pursuant to a permitted Refinancing of such Capital Debt pursuant to
Section 9.02(g) or 9.02(m); or (ii) amend, modify, waive or otherwise change,
consent or agree to any amendment, modification, waiver or other change to, any
of the terms of any Capital Debt if (A) the effect thereof would be to shorten
its maturity or average life or increase the amount of any payment of principal
thereof or increase the rate or shorten any period for payment of interest
thereon, unless the Borrower could incur such Capital Debt with the revised
terms at such time pursuant to Section 9.02(g), (B) the effect thereof would
cause such Capital Debt to no longer be permitted under Section 9.02(g) or
(C) such action requires the payment of a consent fee (howsoever described),
provided that the foregoing shall not prohibit (1) the correction of defects,
ambiguities or deficiencies which, if implemented when such Capital Debt was
incurred, would have been permitted hereunder or (2) the execution of
supplemental documents associated with the incurrence of additional Capital Debt
to the extent permitted by Section 9.02(g).

(c) Redemption of Permitted Notes and Second Lien Obligations; Amendment of
Permitted Note Documents and Second Lien Documents. The Borrower will not, and
will not permit any Restricted Subsidiary to:

(i) prior to the date that is ninety-one (91) days after the Maturity Date,
call, make or offer to make any optional or voluntary Redemption of or otherwise
optionally or voluntarily Redeem (whether in whole or in part) the Permitted
Notes or any Second Lien Obligations; provided that the Borrower may optionally
prepay the Permitted Notes or any Second Lien Obligations (A) with (1) the net
cash proceeds of any cash from a capital contribution or the net cash proceeds
of any incurrence of any Capital Debt permitted to be incurred pursuant to
Section 9.02(g) or Section 9.02(m) or any issuance of Equity Interests (other
than Disqualified Capital Stock) so long as no Event of Default has occurred and
is continuing or would occur as a result of such Redemption or (2) the net cash
proceeds of any Debt permitted to be incurred hereunder (other than Debt
incurred pursuant to this Agreement), (B) by converting or exchanging such
Permitted Notes or Second Lien Obligations into Equity Interests (other than
Disqualified Capital Stock) of the Borrower, (C) if the Specified Restricted
Payment Test will be satisfied at the time of such Redemption or (D) in
connection any “amend and extend” or repricing transactions (on terms consistent
with and no more restrictive than those in the definition of “Permitted
Refinancing Debt”) in respect of the Permitted Notes and the Second Lien
Obligations.

 

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(ii) amend, modify, waive or otherwise change, consent or agree to any
amendment, modification, waiver or other change to, any of the terms of any
Permitted Note Document or Second Lien Document if the effect thereof would be
to shorten its maturity or average life or increase the amount of any cash
payment of principal thereof or increase the interest rate to the extent payable
in cash or shorten any period for payment of interest thereon, unless the
Borrower could incur Permitted Notes or Second Lien Obligations with the revised
terms at such time pursuant to Section 9.02; provided that the foregoing shall
not prohibit the correction of defects, ambiguities or deficiencies which can be
adopted without consent of all or any portion of the holders of the Permitted
Notes or Second Lien Obligations or which, if implemented when such Permitted
Notes or Second Lien Obligations were incurred, would have been permitted
hereunder.

Section 9.04 shall not restrict the payment of any dividend or distribution or
the Redemption within 60 days after the date of declaration of the dividend or
distribution or giving of the Redemption notice, as the case may be, if, at the
date of declaration or notice, the dividend, distribution or Redemption payment
would have complied with the provisions of Section 9.04.

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

(a) Investments outstanding on the date hereof (provided that any such
Investment in excess of $1,000,000 individually or $5,000,000 in the aggregate
shall only be permitted under this clause (a) to the extent such Investment is
listed on Schedule 9.05 or Schedule 7.12);

(b) accounts or notes receivable arising from the grant of trade credit in the
ordinary course of business;

(c) (i) Investments in assets that constituted Cash Equivalents at the time such
Investments were made and (ii) pledges and deposits of cash earnest money and
endorsements of negotiable instruments in connection with transactions otherwise
permitted by Section 9.05;

(d) Investments (i) made by a Loan Party in the Borrower or any Subsidiary
Guarantor, (ii) made by a Subsidiary that is not a Guarantor in a Loan Party
(other than Holdings) and its Subsidiaries and (iii) made by a Loan Party in a
Subsidiary that is not a Guarantor or Holdings; provided that the amount of any
such Investment under Section 9.05(d)(iii) at the time such Investment is made,
when combined with each other such Investment made pursuant to this
Section 9.05(d), shall not exceed the sum of (A) the greater of $25,000,000 and
3.5% of Consolidated Net Tangible Assets (measured as of the date such
Investment is made based upon the financial statements most recently available
prior to such date), (B) the Available Amount at such time and (C) any portion
of the Available Amount previously used to make an Investment pursuant to this
Section 9.05(d);

(e) subject to the limits in Section 9.06, Investments (including, without
limitation, capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower or a
Restricted Subsidiary with others in the ordinary course of business; provided
that (i) any such venture is engaged exclusively in oil and gas exploration,
development, production, processing and related activities, including
transportation, (ii) the interest in such venture is acquired in the ordinary
course of business and on fair and reasonable terms and (iii) such venture
interests acquired and capital contributions made (valued as of the date such
interest was acquired or the contribution made) do not exceed, in the aggregate
at any time outstanding an amount equal to $10,000,000;

 

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

(g) loans and advances to officers, directors, employees and consultants of the
Borrower (or any direct or indirect parent thereof) or any of its Restricted
Subsidiaries (in each case, in compliance with applicable law in all material
respects, including Section 402 of the Sarbanes Oxley Act of 2002) (i) for
reasonable and customary business-related travel, entertainment, relocation and
analogous ordinary business purposes (including employee payroll advances),
(ii) in connection with such Person’s purchase of Equity Interests of the
Borrower (or any direct or indirect parent thereof); provided that, to the
extent such loans and advances are made in cash, the amount of such loans and
advances used to acquire such Equity Interests shall be contributed to any Loan
Party in cash) or (iii) in the ordinary course of business, in an aggregate
principal amount at any time for all amounts incurred under this Section 9.05(g)
outstanding not to exceed $10,000,000;

(h) Investments in stock, obligations or securities received in settlement of
debts owing to the Borrower or any Restricted Subsidiary received as
satisfaction or potential satisfaction of such debts or 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(h)
exceeds $10,000,000;

(i) One or more substantially contemporaneous Investments in Equity Interests or
purchase of substantially all of the assets of any Person owning Oil and Gas
Properties which, after giving effect to such Investments, will be a
Wholly-Owned Restricted Subsidiary and a Guarantor or will be merged into or
with a Wholly-Owned Restricted Subsidiary that is a Guarantor; provided that
(i) such Person complies with the requirements of Section 8.13, (ii) no Default
or Event of Default would result from such Person becoming a Guarantor and
(iii) the Borrower shall have furnished to the Administrative Agent, not less
than five (5) Business Days prior written notice of its intent to make such an
Investment;

(j) Investments arising out of transactions permitted under Sections 9.03, 9.04
or 9.08; and

(k) other Investments; provided that (i) immediately after giving effect to the
making of any such Investment on a Pro Forma Basis, (A) no Default or Event of
Default shall have occurred and be continuing or would immediately occur as a
result of such Investment and (B) Liquidity is not less than 10.0% of the then
effective Borrowing Base or (ii) the Fair Market Value of any such Investment at
the time such Investment is made (as determined by the Borrower acting in good
faith), when combined with each other such Investment made pursuant to this
Section 9.05(k)(ii), shall not exceed in the aggregate at any time the sum of
(A) $10,000,000 plus (B) the Available Amount plus (C) any portion of the
Available Amount previously used to make an Investment pursuant to this
Section 9.05(k)(ii).

Section 9.06 Nature of Business; International Operations. The Borrower and its
Restricted Subsidiaries, taken as a whole, will not materially change the
character of their business as an independent oil and gas exploration and
production company and business ancillary or reasonably related thereto or a
reasonable extension thereof. After the date hereof, the Borrower and its
Restricted Subsidiaries will not acquire or make any other expenditures (whether
such expenditure is capital, operating or otherwise) in or related to, any Oil
and Gas Properties not located within the geographical boundaries of the United
States, except with respect to the continuation of any businesses acquired
pursuant to the Contribution and Merger.

 

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Section 9.07 Mergers, Etc. Neither the Borrower nor any of its Restricted
Subsidiaries will merge into or with or consolidate with any other Person, or
Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of their Property, taken as a whole, to any other Person,
except that:

(a) any Subsidiary may merge or consolidate with:

(i) the Borrower, provided that the Borrower shall be the continuing or
surviving Person or

(ii) any one or more other Subsidiaries, provided that (A) when any Restricted
Subsidiary is merging with any other Subsidiary, the continuing or surviving
Person (unless such surviving Person is designated an Unrestricted Subsidiary
hereunder) shall be a Restricted Subsidiary and (B) when any Guarantor is
merging with any other Subsidiary, (1) the continuing or surviving Person shall
be, or substantially concurrently therewith become, a Guarantor or (2) the
transaction must be permitted as an Investment under Section 9.05;

provided that in the event such Subsidiary merging into the Borrower and one or
more other Subsidiaries is an Unrestricted Subsidiary, such Subsidiary must be
able to be designated as a Restricted Subsidiary pursuant to the proviso of
Section 8.16(c) at the time of such merger or consolidation.

(b)

(i) any Restricted Subsidiary may merge or consolidate with any other Person
that is not the Borrower or a Subsidiary in a transaction in which such
Restricted Subsidiary is the surviving or continuing Person in connection with
an Investment permitted under Section 9.05; or

(ii) the Borrower may merge or consolidate with any other Person that is not a
Subsidiary in a transaction in which the Borrower is the surviving or continuing
Person in connection with an Investment permitted under Section 9.05; provided,
that the Borrower may not, in any event, be organized in any jurisdiction other
than the United States of America, any State thereof or the District of
Columbia; or

(iii) the Borrower may merge or consolidate with an Affiliate solely for the
purpose of (A) reincorporating the Borrower in another jurisdiction; and/or
(B) creating a holding company above it that is the direct parent of Borrower
and which is organized in any State of the United States of America or the
District of Columbia; provided that, (1) concurrently with any such event, such
holding company shall guarantee the Indebtedness and pledge its Equity Interests
in the Borrower; however such guarantee and pledge shall not be required if such
actions are not permitted under the Second Lien Documents in respect of the
Existing Second Lien Facility or are subject to a consent from the lenders
thereunder which cannot be obtained; provided further that, in case of clause
(A) and clause (B), the Borrower may not, in any event, be organized in or merge
with a surviving Person that is organized in, any jurisdiction other than the
United States of America, any State thereof or the District of Columbia ; or

(iv) the Borrower may merge or consolidate with any other Person that is not a
Subsidiary in a transaction where the Borrower is not the surviving or
continuing Person in connection with an Investment permitted under Section 9.05
if (A) the surviving Person is organized in the United States of America, any
State thereof or the District of Columbia (such surviving Person, the “Successor
Borrower”), (B) the Successor Borrower shall expressly assume all the
obligations of the Borrower under

 

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this Agreement and the other Loan Documents pursuant to a supplement hereto or
thereto in form reasonably satisfactory to the Administrative Agent, (C) no
Borrowing Base Deficiency or Event of Default has occurred and is continuing at
the date of such merger or consolidation or would immediately result from such
consummation of such merger or consolidation, (D) the Successor Borrower shall
be in Pro Forma Compliance with the Financial Performance Covenant after giving
effect to such merger, amalgamation or consolidation, (E) each Guarantor, unless
it is the other party to such merger, amalgamation or consolidation, shall have
by a supplement to the Guaranty and Pledge Agreement confirmed that its
guarantee thereunder shall apply to the Successor Borrower’s obligations under
this Agreement, (F) each Subsidiary grantor and each Subsidiary pledgor, unless
it is the other party to such merger, amalgamation or consolidation, shall have
by a supplement to the Loan Documents confirmed that its obligations thereunder
shall apply to the Successor Borrower’s obligations under this Agreement,
(G) each mortgagor of a Mortgaged Property, unless it is the other party to such
merger or consolidation, shall have by an amendment to or restatement of the
applicable Mortgage confirmed that its obligations thereunder shall apply to the
Successor Borrower’s obligations under this Agreement, (H) the Borrower shall
have delivered to the Administrative Agent an officer’s certificate stating that
such merger, amalgamation or consolidation and any supplements to the Loan
Documents preserve the enforceability of the guarantee under the Guaranty and
Pledge Agreement and the perfection and priority of the Liens under the Security
Documents, and (I) if reasonably requested by the Administrative Agent, an
opinion of counsel shall be required to be provided to the effect that such
merger, amalgamation or consolidation does not violate this Agreement or any
other Loan Document (it being understood that if the foregoing requirements are
satisfied, the Successor Borrower will succeed to, and be substituted for, the
Borrower under this Agreement).

(c) any Restricted Subsidiary may Dispose of all or substantially all of its
Property (upon voluntary liquidation or otherwise) to Holdings, the Borrower or
to another Subsidiary; provided that (i) if the transferor in such a transaction
is a Restricted Subsidiary, then the transferee must either be the Borrower or
another Restricted Subsidiary (unless such Disposition would otherwise be
permitted as an Investment in an Unrestricted Subsidiary or is otherwise
permitted under Section 9.05) and (ii) if the transferor is a Loan Party, then
(A) the transferee must either be the Borrower or be a Subsidiary Guarantor or
substantially concurrently with such Disposition become a Subsidiary Guarantor
or (B) the Disposition must be permitted as an Investment under Section 9.05;

(d) the Borrower and the Restricted Subsidiaries may Dispose of Property to any
Person (other than a Subsidiary) that is permitted pursuant to Section 9.08;

(e) any Restricted Subsidiary may liquidate or dissolve if (A) the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the Lenders
and (B) to the extent such Restricted Subsidiary is a Loan Party, any assets of
such Restricted Subsidiary not otherwise transferred or Disposed of in
accordance with Section 9.05 or Section 9.08, such assets shall be transferred
to the Borrower or a Subsidiary Guarantor after giving effect to such
liquidation or dissolution; and

(f) the Borrower and its Restricted Subsidiaries may consummate the
Transactions.

Section 9.08 Disposition of Properties. The Borrower will not, and will not
permit any Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer (each of the foregoing, a “Disposition”) any Property except:

(a) Dispositions of Hydrocarbons, inventory and other goods held for sale in the
ordinary course of business;

 

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(b) (i) Dispositions of Hydrocarbon Interests to which no Proved Reserves are
attributable and (ii) Oil and Gas Properties that are not Borrowing Base
Properties and other assets not included in the Borrowing Base;

(c) Dispositions of (i) equipment, vehicles and immaterial assets (other than
accounts receivable or Borrowing Base Properties) that are no longer necessary
for the business of the Borrower or such Restricted Subsidiary or is replaced by
equipment, vehicles and other assets of at least comparable value and use and
(ii) Cash Equivalents;

(d) Dispositions (including (x) Casualty Events (without regard to the amount
thereof) or in connection with any condemnation proceeding and (y) Dispositions
to Unrestricted Subsidiaries) of any Borrowing Base Properties of the Borrower
or any Restricted Subsidiary or any interest therein or the Equity Interests of
any Person owning Borrowing Base Properties; provided that (i) the consideration
received from such Disposition shall comprise at least 75% cash, (ii) the
consideration received in respect of such Disposition shall be equal to or
greater than Fair Market Value (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 such determination), (iii) if such 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 and (iv) if
such Dispositions of Borrowing Base Properties or Equity Interests of any Person
owning Borrowing Base Properties could reasonably be expected to result in a
Borrowing Base reduction pursuant to Section 2.08(b), then no later than two
(2) Business Days prior to the date of consummation of any such Disposition, the
Borrower shall provide notice to the Administrative Agent of such Disposition
and the Borrowing Base Properties so Disposed and the Borrowing Base shall be
adjusted in accordance with the provisions of Section 2.08(b);

(e) the Borrower and the Restricted Subsidiaries may Dispose of Property or
assets to the Borrower or to another Subsidiary; provided that

(i) subject to clause (ii) below, if the transferor in such a transaction is a
Restricted Subsidiary, then the transferee must either be the Borrower or
another Restricted Subsidiary (unless such Disposition would otherwise be
permitted as an Investment in an Unrestricted Subsidiary or is otherwise
permitted under Section 9.05);

(ii) if the transferor is a Loan Party, then (A) the transferee must either be
the Borrower or be a Subsidiary Guarantor or substantially concurrently with
such Disposition become a Subsidiary Guarantor or (B) the Disposition must be
permitted as an Investment in an Unrestricted Subsidiary or otherwise be
permitted under Section 9.05; and

(iii) any Disposition of Borrowing Base Properties to any Person other than the
Borrower or a Subsidiary Guarantor shall also be subject to, and constitute a
Disposition regulated by Section 9.08(d);

(f) the Borrower and the Restricted Subsidiaries may lease, sublease, license or
sublicense (on a non-exclusive basis with respect to any intellectual property)
real, personal or intellectual property (other than Oil and Gas Properties) in
the ordinary course of business;

(g) transfers of Property subject to a Casualty Event or in connection with any
other Casualty Event or condemnation proceeding with respect to Property of the
Borrower or any Restricted Subsidiary;

 

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(h) Dispositions of accounts receivable (i) in connection with the collection or
compromise thereof (other than in connection with a securitization or factoring
financing transaction) or (ii) to the extent the proceeds thereof are used to
prepay any Loans then outstanding (pursuant to and in accordance with the terms
hereof);

(i) the unwinding of any Swap Agreement;

(j) Liens permitted under Section 9.03;

(k) Restricted Payments permitted under Section 9.04 and transactions permitted
by Section 9.05 (other than the intercompany transactions (which, for avoidance
of doubt, are addressed in Section 9.08(e))) and Section 9.07 (other than
Section 9.07(d)); provided that, notwithstanding the foregoing, any Disposition
of Borrowing Base Properties to any Person other than the Borrower or a
Subsidiary Guarantor shall also be subject to, and constitute a Disposition
regulated by, Section 9.08(d); and

(l) Dispositions made to joint ventures in which the Borrower and/or its
Restricted Subsidiaries own an Equity Interests; provided that (i) any such
joint venture is a permitted Investment under Section 9.05, (ii) immediately
prior and after giving effect to any such Disposition, (A) no Borrowing Base
Deficiency shall have occurred or be continuing and (B) the Liquidity Test shall
be satisfied and (iii) no later than two (2) Business Days prior to the date of
consummation of a Disposition of Borrowing Base Properties or Equity Interests
of a Person owning Borrowing Base Properties, the Borrower shall provide notice
to the Administrative Agent of such Disposition and the Borrowing Base
Properties so Disposed and the Borrowing Base shall be adjusted in accordance
with the provisions of Section 2.08(b).

Section 9.09 Transactions with Affiliates. Except as otherwise disclosed on
Schedule 9.09 and for Capital Debt otherwise permitted under this Agreement, the
Borrower will not, and will not permit any Restricted Subsidiary to, enter into
any transaction, including any purchase, sale, lease or exchange of Property or
the rendering of any service, with any Affiliate (other than the Borrower or any
Restricted Subsidiary of the Borrower or any entity that becomes a Restricted
Subsidiary as a result of such transaction) 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
restrictions shall not apply to:

(a) any amendments to the transaction set forth on Schedule 9.09 or arrangement
similar thereto to the extent such an amendment or arrangement is not adverse,
taken as a whole, to the Lenders in any material respect (as determined by the
Borrower in good faith);

(b) transactions permitted under Section 9.04, Section 9.05 and Section 9.08;

(c) employment and severance arrangements and health, disability and similar
insurance or benefit plans between the Borrower (or Holdings) and the
Subsidiaries and their respective directors, officers, employees or consultants
(including management and employee benefit plans or agreements, subscription
agreements or similar agreements pertaining to the repurchase of Equity
Interests pursuant to put/call rights or similar rights with current or former
employees, officers, directors or consultants and equity option or incentive
plans and other compensation arrangements) in the ordinary course of business or
as otherwise approved by the board of directors or managers of the Borrower (or
Holdings);

 

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(d) any issuance of Equity Interests or other payments, awards or grants in
cash, securities, Equity Interests or otherwise pursuant to, or the funding of,
employment arrangements, equity options and equity ownership plans approved by
the board of directors or board of managers of the Borrower (or any direct or
indirect parent thereof);

(e) any transaction in respect of which the Borrower delivers to the
Administrative Agent a letter addressed to the board of directors or managers of
the Borrower from an accounting, appraisal or investment banking firm, in each
case of nationally-recognized standing that is in the good faith determination
of the Borrower qualified to render such letter, which letter states that such
transaction is (i) fair, from a financial point of view, to the Borrower or such
Restricted Subsidiary or (ii) on terms, taken as a whole, that are no less
favorable to the Borrower or such Restricted Subsidiary, as applicable, than
would be obtained in a comparable arm’s length transaction with a person that is
not an Affiliate; and

(f) customary agreements and arrangements with oil and gas royalty trusts and
master limited partnership agreements that comply with the affiliate transaction
provisions of such royalty trust or master limited partnership agreement.

Section 9.10 Subsidiaries. Except to the extent set forth on Schedule 7.12 or in
connection with the continuation of any businesses acquired pursuant to the
Contribution and Merger, the Borrower shall have no Foreign Subsidiaries.

Section 9.11 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 Contractual Requirement (other than this
Agreement, the Security Instruments, the Second Lien Documents, Permitted Notes
Documents, Capital Leases or purchase money Debt and any Permitted Refinancing
Debt in respect of the foregoing) which in any way (x) prohibits the granting,
conveying, creation or imposition of a Lien on any of its Properties in favor of
the Administrative Agent for the benefit of the Lenders or (y) prohibits 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 unless the Borrower determines in good faith
when entering into such Contractual Requirement that it would not materially
hinder the Borrower’s ability to meet its obligations under this Agreement;
provided that the foregoing shall not apply to each of the following Contractual
Requirements that:

(a) (i) exist on the Closing Date and (to the extent not otherwise permitted by
this Section 9.11) are listed on Schedule 9.11 and (ii) to the extent
Contractual Requirements permitted by subclause (i) are set forth in an
agreement evidencing Debt, are set forth in any agreement evidencing any
Permitted Refinancing Debt incurred to Refinance such Debt so long as such
Permitted Refinancing Debt does not expand the scope of such Contractual
Requirement;

(b) are binding on a Restricted Subsidiary at the time such Restricted
Subsidiary first becomes a Restricted Subsidiary of the Borrower or becoming
binding on the Borrower or a Restricted Subsidiary as a result of a merger or
consolidation, acquisition of assets or any Subsidiary Redesignation, so long
as, in each case, such Contractual Requirements were not entered into solely in
contemplation of such Person becoming a Restricted Subsidiary of the Borrower;

(c) arise in connection with a Disposition permitted by Section 9.08 with
respect to Property related to such Disposition;

(d) restrict the use of cash or other deposits imposed by customers under
contracts entered into in the ordinary course of business; and

 

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(e) are imposed by Governmental Requirements.

Section 9.12 Gas Imbalances, Take-or-Pay or Other Prepayments. Except (a) as set
forth on Schedule 7.16 or (b) thereafter either disclosed in writing to the
Administrative Agent or included in the most recently delivered Reserve Report
Certificate, 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 Oil and Gas Properties of the Borrower or any Restricted
Subsidiary that would require the Borrower or any such Restricted Subsidiary to
deliver Hydrocarbons at some future time without then or thereafter receiving
full payment therefor exceeding two percent (2.0%) of the aggregate volumes of
Hydrocarbons (on an Mcf equivalent basis) listed in the most recent Reserve
Report.

Section 9.13 Swap Agreements. The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than:

(a) Swap Agreements in respect of commodities (i) with an Approved Counterparty
and (ii) the notional volumes for which (when aggregated with other commodity
Swap Agreements then in effect other than puts, floors and basis differential
swaps on volumes already hedged pursuant to other Swap Agreements) do not
exceed, as of the date that the latest Swap Agreement is entered into, (A)(1)
for the period 1 to 24 months after such date of execution, one hundred percent
(100%) of the Current Production for each month during the period during which
such Swap Agreement is in effect for each of crude oil and natural gas,
calculated separately, (2) for the period 25 to 36 months after such date of
execution, seventy-five percent (75%) of the Current Production for each month
during the period during which such Swap Agreement is in effect for each of
crude oil and natural gas, calculated separately, and (3) for the period 37 to
60 months after such date of execution, fifty percent (50%) of the Current
Production for each month during the period during which such Swap Agreement is
in effect for each of crude oil and natural gas, calculated separately, in each
case, such percentage of Current Production as forecast based on the Initial
Reserve Reports or the most recent Reserve Report delivered pursuant to
Section 8.11 (the “Ongoing Swaps”); provided, that the Borrower may purchase
puts and floors the notional volumes for which exceed the foregoing percentage
limitations (but which do not exceed one hundred percent (100%) of the Current
Production for the relevant calendar year); provided further, that the Borrower
may update any such forecast by providing the Administrative Agent additional
information reasonably satisfactory to the Administrative Agent reflecting new
reasonably anticipated Hydrocarbon production from new wells or other production
improvements (such information, a “Production Forecast Update”);

(b) in connection with a proposed Permitted Acquisition (a “Proposed
Acquisition”) and in addition to the Ongoing Swaps, Swap Agreements in respect
of commodities (i) with an Approved Counterparty and (ii) the notional volumes
for which (exclusive of puts, floors and basis differential swaps on volumes
already hedged pursuant to other Swap Agreements) do not exceed fifteen percent
(15%) of the reasonably anticipated Hydrocarbon production from the Borrower and
its Restricted Subsidiaries’ total Proved Reserves prior to the consummation of
the Proposed Acquisition, as forecast based on the Initial Reserve Reports or
the most recent Reserve Report delivered pursuant to Section 8.11, which
forecast may be updated pursuant to a Production Forecast Update, for a period
not exceeding thirty-six (36) months from the most recent date any such Swap
Agreement was entered into (the “Acquisition Swap”); provided that such
Acquisition Swaps shall only permitted under this clause (b) during the period
from (i) the date on which the Borrower or such Restricted Subsidiary signs a
definitive acquisition agreement in connection with a Proposed Acquisition to
(ii) the earliest of (A) the date of consummation of such Proposed Acquisition,
(B) the date of termination of such Proposed Acquisition and (C) 90 days after
the date of execution of such definitive acquisition agreement (or such longer
period as to which the Administrative Agent may agree) (it is understood, for
avoidance of doubt, that the Acquisition Swaps may be permitted as Ongoing Swaps
to the extent such Acquisition Swaps could be

 

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entered into under Section 9.13(a)); provided further that, to the extent not
otherwise permitted pursuant to Section 9.13(a), all such Acquisition Swaps
entered into with respect to a Proposed Acquisition must be terminated or
unwound within 90 days following the date of termination of such Proposed
Acquisition (it being understood that any such termination or unwind shall not
result in a Borrowing Base reduction pursuant to Section 2.08(c));

(c) Swap Agreements in respect of interest rates with an Approved Counterparty,
as follows: (i) Swap Agreements effectively converting interest rates from fixed
to floating, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Subsidiaries then in effect effectively
converting interest rates from fixed to floating) do not exceed 50% of the then
outstanding principal amount of the Borrower’s Debt for borrowed money which
bears interest at a fixed rate and (ii) Swap Agreements effectively converting
interest rates from floating to fixed, the notional amounts of which (when
aggregated with all other Swap Agreements of the Borrower and its Subsidiaries
then in effect effectively converting interest rates from floating to fixed) do
not exceed 75% of the then outstanding principal amount of the Borrower’s Debt
for borrowed money which bears interest at a floating rate.

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01 Events of Default. While continuing, 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) days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any Guarantor in any Loan Document or any amendment or modification
of any Loan Document or waiver under such Loan Document, or in any certificate
(or other document containing a certification from a Loan Party or a Responsible
Officer thereof) delivered pursuant to or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder, shall prove to
have been incorrect in any material respect when made or deemed made;

(d) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 8.01(k), Section 8.02(a), Section 8.03 (solely
with respect to the maintenance of the Borrower’s existence) or in Article IX;
provided that a Default as a result of a breach of Section 9.01(a) (a “Financial
Covenant Default”) is subject to the provisions and Cure Right set forth in
Section 10.03;

(e) any Loan Party 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(c) or Section 10.01(d)) or any
other Loan Document, and such failure shall continue unremedied for a period of
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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(f) the Borrower or any Material 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
such failure continues after the applicable grace or notice period, if any,
specified in the relevant document for such Material Indebtedness;

(g) any event or condition exists that results in any Material Indebtedness of
the Borrower or any Material Subsidiary becoming due prior to its scheduled
maturity or that enables or permits (after the giving of notice and any
applicable grace periods) the holder or holders of any such Material
Indebtedness or any trustee or agent on its or their behalf to cause any 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 an event or condition requires the Borrower or any Material Subsidiary to
make an offer in respect thereof; provided that this clause (g) shall not apply
to secured Debt that becomes due as a result of the voluntary sale or transfer
of the property or assets securing such Debt, if such sale or transfer is
permitted hereunder and under the documents providing for such Debt;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Material Subsidiary or their debt, or of a
substantial part of their assets, under any Federal, state (or, in the case of a
Foreign Subsidiary which is a Material Subsidiary, applicable 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 Material Subsidiary or
for a substantial part of its assets, and, in any such case, such proceeding,
petition or appointment shall continue undismissed or stayed for sixty (60) days
or an order for relief approving or ordering any of the foregoing shall be
entered;

(i) the Borrower or any Material Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state (or, in the case of a Foreign Subsidiary which
is a Material Subsidiary, applicable foreign) bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest, any proceeding or petition described in
Section 10.01(h), (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any Material Subsidiary 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 or (iv) make a general assignment for the
benefit of creditors;

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

(k) (i) one or more judgments for the payment of money in an aggregate amount in
excess of the greater of $25,000,000 or five percent (5%) of the then effective
Borrowing Base (to the extent not covered by independent third party insurance
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 would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, shall be rendered against the Borrower, any Material
Subsidiary or any combination thereof and such judgment shall not have been
satisfied, vacated, discharged or stayed or bonded pending an appeal for a
period of sixty (60) consecutive days;

(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

 

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repudiated by any of them, or cease to create a valid and perfected Lien of the
priority required thereby on any material portion of the Collateral purported to
be covered thereby, except, in each case, to the extent permitted by the terms
of the Loan Documents, or the Borrower or any other Loan Party shall so state in
writing;

(m) a Change in Control shall occur; or

(n) an ERISA Event shall have occurred that, when taken together with all other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect.

Section 10.02 Remedies.

(a) In the case of an Event of Default, other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and upon 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/or the LC Commitments, and thereupon the
Commitments and/or the LC Commitments shall terminate immediately, and
(ii) declare the Notes and the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower and the
Guarantors accrued hereunder and under the Notes and the other Loan Documents
(including, without limitation, the payment of cash collateral to secure the LC
Exposure as provided in Section 2.09(k)), shall become due and payable
immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and, in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes 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 Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in
Section 2.09(k)), 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 Notes, whether by
acceleration or otherwise, shall be applied:

(i) first, to payment or reimbursement of that portion of the Indebtedness
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
Indebtedness constituting fees, expenses and indemnities payable to the Lenders
and the Issuing Banks;

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

(iv) fourth, pro rata to payment of principal outstanding on the Loans and
payment of Secured Swap Obligations and Secured Cash Management Obligations;

 

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(v) fifth, to serve as cash collateral to be held by the Administrative Agent to
secure the LC Exposure;

(vi) sixth, pro rata to any other Indebtedness; and

(vii) seventh, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

Section 10.03 Equity Cure.

(a) Financial Performance Covenant Cure Right. Notwithstanding anything to the
contrary contained in Article X hereof or in any Loan Document, in the event
that the Borrower fails to comply with the Financial Performance Covenant,
(i) the Borrower shall be permitted on or prior to the 10th day following the
date the certificate calculating compliance with the Financial Performance
Covenant for the relevant Test Period is required to be delivered pursuant to
Section 8.01(c) (the “Cure Deadline”), to cure such failure to comply by
receiving cash contributions to its equity capital or cash proceeds from an
issuance of Qualified Equity Interests as a cash capital contribution
(collectively, the “Cure Right”), and (ii) upon receipt by the Borrower of such
cash proceeds (such cash amount used to cure a Financial Covenant Default, the
“Cure Amount”) pursuant to the exercise of such Cure Right, the Financial
Performance Covenant shall be recalculated by increasing EBITDA by the Cure
Amount (and such increase to EBITDA shall be taken into account in subsequent
Test Periods that include the fiscal quarter with respect to which the Cure
Right was exercised); provided that EBITDA shall not be increased by more than
the amount necessary for the Borrower to be in compliance with the Financial
Performance Covenant.

(b) Treatment of Cure Amount. There shall be no pro forma reduction in
Consolidated First Lien Secured Debt with the Cure Amount for purposes of
determining compliance with Section 9.01(a) for the fiscal quarter with respect
to which such Cure Right was exercised. The parties hereby acknowledge that this
Section 10.03 may not be relied on for purposes of calculating any financial
ratios other than as applicable to Section 9.01(a) and shall not result in any
adjustment to any baskets or other amounts other than the amount of the EBITDA
for the purpose of Section 9.01(a).

(c) Cure of Financial Covenant Default. If a Financial Covenant Default has
occurred and is continuing and if, after giving effect to the recalculation of
the Financial Performance Covenant pursuant to this Section 10.03, the Borrower
is in compliance with the Financial Performance Covenant, the Borrower shall be
deemed to have satisfied the Financial Performance Covenant as of the relevant
date of determination with the same effect as though there had been no failure
to comply therewith at such date, and the Financial Covenant Default shall be
deemed cured for the purposes of this Agreement.

(d) Limitations on Exercise of Cure Right. (i) In each four-fiscal-quarter
period there shall be at least two fiscal quarters in which the Cure Right is
not exercised and (ii) the Cure Right shall not be exercised more than five
times during the term of this Agreement (provided that, if the Borrower
exercises its Cure Right prior to the date financial statements are required to
be delivered for a relevant fiscal quarter and the Cure Amount associated
therewith is insufficient to cure a Financial Covenant Default with respect to
such quarter, any subsequent exercise of a Cure Right prior to the Cure Deadline
to ‘top-up’ such Cure Amount shall not count as an additional exercise of the
Cure Right).

 

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(e) Exercise of Remedies. Upon receipt by the Administrative Agent of written
notice, on or prior to the Cure Deadline, that the Borrower intends to exercise
a Cure Right in respect of a fiscal quarter, the Lenders shall not be permitted
to accelerate Loans held by them or to exercise remedies on the basis of a
failure to comply with the requirements of the Financial Performance Covenant,
unless such failure is not cured pursuant to the exercise of the Cure Right on
or prior to the Cure Deadline; it is understood, for the avoidance of doubt,
(i) that the Cure Right shall not affect, in any way, the rights and remedies of
the Lenders, the Administrative Agent or the Issuing Banks with respect to any
other Default or Event of Default and (ii) none of the Lenders or the Issuing
Banks shall be required to make Loans in respect of a Borrowing or issue, renew
or extend any Letters of Credit during the 10 day period referred to above,
unless the Borrower shall have received the Cure Amount and the failure to
comply with the Financial Covenant has been cured pursuant to the exercise of
the Cure Right.

ARTICLE XI

THE ADMINISTRATIVE AGENT

Section 11.01 Appointment; Powers. Each of the Lenders and each Issuing Bank
hereby irrevocably (subject to Section 11.06) appoints the Administrative Agent
as its agent and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof and the other Loan Documents, together with such actions and
powers as are reasonably incidental thereto.

Section 11.02 Duties and Obligations of Administrative Agent. The Administrative
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (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 have no duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to Holdings, the
Borrower or any of its Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by
the Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in Article VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent’s satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of any
Loan Party or any Subsidiaries of the Borrower 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 and Issuing
Bank 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 or Issuing
Bank unless the Administrative Agent shall have received written notice from
such Lender or Issuing Bank prior to the proposed closing date specifying its
objection thereto.

 

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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
Lender, the Required 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 liability or which is contrary to this Agreement, the
Loan Documents or applicable law. 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, the Required Lenders or the Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, including its own
ordinary negligence, except for its own gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final and
non-appealable judgment).

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 (as determined by a
court of competent jurisdiction in a final and non-appealable judgment). 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 of 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 of its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of Article XI shall apply to any such sub-agent and to
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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. The Administrative
Agent shall not be responsible for the negligence or misconduct of any
sub-agents except to the extent that a court of competent jurisdiction
determines in a final and non-appealable judgment that the Administrative Agent
acted with gross negligence or willful misconduct.

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, any Administrative Agent may resign at any time upon thirty
(30) days written notice by notifying the Lenders, the Issuing Bank and the
Borrower. The Administrative Agent may be removed at any time with or without
cause at the reasonable request of the Majority Lenders and the Borrower. Upon
any such resignation or removal, the Majority Lenders shall have the right,
subject to the consent of the Borrower, to appoint a successor, which shall be a
bank with an office in the New York, New York, or an Affiliate of any such bank.
If no successor shall have been so appointed by the Majority Lenders (with the
consent of the Borrower) 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 Bank, appoint
a successor Administrative Agent which shall be a bank with an office in the
United States, 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 and under
the other Loan Documents. It is understood that in the case of any Collateral
held by the Administrative Agent on behalf of the Lenders and the Issuing Banks
under any of the Loan Documents, the retiring or removed Administrative Agent
shall continue to hold such Collateral until such time as a successor
Administrative Agent is appointed. The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the Administrative Agent’s resignation hereunder, the provisions of this
Article XI and Section 12.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.

Section 11.07 Administrative Agent as Lender. The bank serving as the
Administrative 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 the Administrative 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 the
Administrative Agent hereunder and without any duty to account therefor to the
Lenders. The term “Lender” or “Lenders” shall, unless otherwise expressly
indicated or unless the context otherwise requires, include the Person serving
as Administrative Agent hereunder in its individual capacity, but not sub-agents
of such Person.

Section 11.08 No Reliance. Each Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and each other Loan
Document to which it is a party. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent 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 Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by any Loan Party or any Subsidiaries of the Borrower of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of any Loan Party or any
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Borrower. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, neither the Administrative Agent nor the Arranger shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of any Loan Party or any
Subsidiaries of the Borrower which may come into the possession of the
Administrative Agent or any of its Affiliates. In this regard, each Lender
acknowledges that Paul Hastings LLP 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 any Loan Party or any of the Subsidiaries of the
Borrower, the Administrative Agent (irrespective of whether the principal of any
Loan or LC Disbursement 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, LC Disbursements and all other
Indebtedness that are owing and unpaid and to file such other documents as may
be necessary or advisable in order to have the claims of the Lenders, the
Issuing Banks and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
Issuing Banks and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders, Issuing Banks and the
Administrative Agent under Section 2.09, Section 3.05 and 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 and the Issuing Banks 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 and the Issuing Banks, 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 3.05 and Section 12.03.

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

Section 11.10 Authority of Administrative Agent to Release Guarantors,
Collateral and Liens. Each Lender and Issuing Bank hereby authorizes the
Administrative Agent to release (a) any Guarantor from the Guaranty and Pledge
Agreement pursuant to a transaction permitted hereunder or pursuant to the terms
hereof and (b) any collateral that is permitted to be sold or released pursuant
to the terms of the Loan Documents. Each Lender and 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 a Guarantor,
Liens, termination statements, assignments or other documents reasonably
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connection with any sale or other disposition of Property in accordance with
Section 12.16 or as otherwise authorized under the Loan Documents. Upon request
by the Administrative Agent at any time, the Majority Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its
interest in particular types or items of property, or to release any Guarantor
from its obligations under the Guaranty and Pledge Agreement pursuant to
Section 12.16.

Section 11.11 The Arrangers, Syndication Agent and Co-Documentation Agents. The
Arrangers, Syndication Agent and Co-Documentation Agents shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than its duties, responsibilities and liabilities in its
capacity as the Administrative Agent or a Lender hereunder.

Section 11.12 Intercreditor Agreement. Each Lender (and each Person that becomes
a Lender hereunder pursuant to Section 12.04) hereby authorizes and directs the
Administrative Agent to (a) enter into, join or otherwise become party to
(i) the Intercreditor Agreement and (ii) any Customary Intercreditor Agreement
on behalf of such Lender, in each case, as needed to effectuate the transactions
permitted by this Agreement and agrees that the Administrative Agent may take
such actions on its behalf as is contemplated by the terms of such applicable
intercreditor agreement and (b) provide any consent required under
Section 5.03(a) of the Existing Intercreditor Agreement in order to effectuate
any transaction if such transaction is permitted pursuant to this Agreement.
Without limiting the provisions of Sections 11.02 and 12.03, each Lender hereby
consents to the Administrative Agent and any successor serving in such capacity
and agrees not to assert any claim (including as a result of any conflict of
interest) against the Administrative Agent, or any such successor, arising from
the role of the Administrative Agent or such successor under the Loan Documents
or any such intercreditor agreement so long as it is either acting in accordance
with the terms of such documents and otherwise has not engaged in gross
negligence or willful misconduct (as determined in a final and non-appealable
judgment by a court of competent jurisdiction). In addition, the Administrative
Agent, or any such successor, shall be authorized, without the consent of any
Lender, to execute or to enter into amendments of, and amendments and
restatements of, the Security Instruments, any such intercreditor agreement and
any additional and replacement intercreditor agreements, in each case, in order
to effect the subordination of, and to provide for certain additional rights,
obligations and limitations in respect of, any Liens required by the terms of
this Agreement to be Liens junior to the Indebtedness, that are incurred as
permitted by this Agreement, and to establish certain relative rights as between
the holders of the Indebtedness and the holders of the Debt secured by such
Liens junior to the Indebtedness. In addition, the Administrative Agent, or any
successor, is authorized and is hereby directed by each Lender to, at the
request of the Borrower, enter into a new intercreditor agreement or make
amendments to the Intercreditor Agreement which are substantially consistent and
in the form of Exhibit L.

ARTICLE XII

MISCELLANEOUS

Section 12.01 Notices.

(a) Unless otherwise expressly provided herein, 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 email or fax, as follows:

(i) if to the Borrower or the Administrative Agent, to the address, fax number,
electronic mail address or telephone number specified for such Person on
Schedule 12.01 or to such other address, facsimile number, electronic mail
address or telephone number as shall be designated by such party in a notice to
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(ii) if to any other Lender, to the address, facsimile number, electronic mail
address or telephone number specified set forth in its Administrative
Questionnaire or to such other address, facsimile number, electronic mail
address or telephone number as shall be designated by such party in a notice to
the Borrower and the Administrative Agent.

(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. Documents required
to be delivered pursuant to Section 8.01 may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
the Borrower (or any direct or indirect parent of the Borrower) posts such
documents, or provides a link thereto on the website on the Internet at the
Borrower’s website address listed on Schedule 12.01 (or subsequently identified
in writing to the Administrative Agent) or (ii) on which such documents are
posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant
website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the
Administrative Agent) or (iii) on which such documents are filed for public
availability on the SEC’s Electronic Data Gathering and Retrieval system;
provided that the Borrower shall notify (which may be by facsimile or electronic
mail) the Administrative Agent of the posting of any such documents and provide
to the Administrative Agent by electronic mail electronic versions of such
documents. Any party hereto may change its address, email address or fax 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,
any Issuing Bank and the Lenders hereunder and under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by this Section 12.02, 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) Except as set forth in Section 2.10(c), neither this Agreement nor any
provision hereof nor any Loan Document 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 and acknowledged by the
Administrative Agent or by the Borrower and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall:

(i) increase the Maximum Credit Amount or Commitment of any Lender without the
written consent of such Lender (including in connection with any increase to the
Borrowing Base);

 

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(ii) increase the Borrowing Base without the written consent of all of the
Lenders or decrease or maintain the Borrowing Base without the consent of the
Required Lenders; provided that, for avoidance of doubt, a Scheduled
Redetermination (without prejudice to matters at the discretion of the
Administrative Agent and/or the Borrower, the other procedural steps associated
therewith) and the delivery of a Reserve Report may be postponed by the Majority
Lenders; provided further that it is understood that any waiver (or amendment or
modification that would have the effect of a waiver) of the right of the
Required Lenders to adjust the Borrowing Base or the amount of such adjustment
pursuant to the Borrowing Base Adjustment Provisions in connection with the
occurrence of a relevant event giving rise to such right shall require (A) in
the case of the Borrowing Base Adjustment Provisions set forth in clause (a) of
the definition thereof, the consent of the Required Lenders and (B) otherwise,
the consent of the Majority Lenders;

(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 Indebtedness hereunder or under any other Loan Document, without the
written consent of each Lender adversely affected thereby; provided that only
the consent of the Majority Lenders shall be necessary to waive or postpone any
obligation of the Borrower to pay interest at the default rate under, or amend,
Section 3.02(c);

(iv) subject to Section 12.02(b)(ii), 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 Indebtedness
hereunder or under any other Loan Document, or reduce the amount of, waive or
excuse any such payment, or postpone or extend the Maturity Date without the
written consent of each Lender adversely 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 adversely affected thereby; provided that the Loan Documents may be
amended with the consent of the Majority Lenders in order to modify any
provision relating to pro rata payments or sharing of payments among the Lenders
in connection with any Permitted Extension Amendment;

(vi) waive or amend Section 10.02(c) or Section 12.13 or change the definition
of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, or “Subsidiary”,
without the written consent of each Lender; provided that any waiver or
amendment to Section 10.02(c), to Section 12.13 or to this proviso in this
Section 12.02(b)(vi), or any amendment or modification to any Security
Instrument that results in the Secured Swap Obligations secured by such Security
Instrument no longer being secured thereby on an equal and ratable basis with
the principal of the Loans, or any amendment or other change to the definition
of the terms “Secured Swap Agreement,” “Secured Swap Obligations” or “Secured
Swap Party,” shall also require the written consent of each Secured Swap Party
adversely affected thereby;

(vii) release substantially all of the Guarantors or Collateral (except as
permitted by the Loan Documents) or reduce the percentage set forth in
Section 8.13(a) to less than 80% without the consent of each Lender;

(viii) waive or amend Section 3.04(c) without the written consent of the
Required Lenders;

 

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(ix) change any of the provisions of Section 12.02(b) or the definitions of
“Borrowing Base”, “Majority Lenders”, “Required Lenders” or “Super-Majority
Lenders” or reduce the voting rights of any Lender, without the written consent
of each Lender adversely affected; and

(x) no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent or any Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative
Agent or any Issuing Bank, as the case may be.

For the avoidance of doubt, amendments and waivers of the First Lien Secured
Leverage Ratio (or any of financial definitions used to determine the First Lien
Secured Leverage Ratio) shall only require the consent of the Majority Lenders.

(c) Notwithstanding anything to the contrary in any Loan Document, the
Intercreditor Agreement and any Security Instruments or related documents
executed by the Borrower and its Restricted Subsidiaries in connection with this
Agreement may be amended, supplemented and waived with the consent of the
Administrative Agent at the request of the Borrower without the need to obtain
the consent of any other Lender if such amendment, supplement or waiver is
delivered in order to cause such documents to be consistent with this Agreement
and the other Loan Documents.

(d) Notwithstanding anything to the contrary contained in the Loan Documents,
the Administrative Agent, without the consent of any Lender, shall be permitted
to enter into any amendments, waivers, modifications or supplements to the
Intercreditor Agreement or any Customary Intercreditor Agreement, at the request
of the Borrower, if the Administrative Agent would have been permitted hereunder
to enter into a new Customary Intercreditor Agreement, which contained the terms
set forth in such amendment, waiver, modification or supplement, at the time
when such amendment, waiver, modification or supplement is entered into.

(e) Notwithstanding anything to the contrary contained in the Loan Documents,
the Administrative Agent and the Borrower, may amend, modify or supplement any
Loan Document without the consent of any Lender in order to (i) correct, amend,
cure or resolve any ambiguity, omission, defect, typographical error,
inconsistency or other manifest error therein, (ii) add a guarantor or
collateral or otherwise enhance the rights and benefits of the Lenders
(including pursuant to Section 2.10(b)(vi), Section 9.02(k) and the definition
of Permitted Extension Amendments), (iii) make administrative or operational
changes not adverse to any Lender or (iv) adhere to any local Governmental
Requirement or advice of local counsel.

(f) Notwithstanding anything in the Loan Documents to the contrary, (i) no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that (A) the Maximum Credit Amount and
Commitment of any Defaulting Lender may not be increased or extended without the
consent of such Lender and (B) any waiver, amendment or modification requiring
the consent of all Lenders or each affected Lender, where such Defaulting Lender
is an affected Lender, shall require the consent of such Defaulting Lender (it
is understood, for avoidance of doubt, that no Defaulting Lender shall have any
right to approve or disapprove any increase, decrease or reaffirmations of the
amount of the Borrowing Base) and (ii) if any Person who is a Prohibited Lender
becomes a Lender or a Participant despite the prohibitions on such occurrence in
the Loan Documents, such Person shall have no right to approve or disapprove any
amendment, waiver or consent hereunder.

(g) Notwithstanding anything in the Loan Documents to the contrary, the Borrower
may, by written notice to the Administrative Agent from time to time, make one
or more offers to all Lenders to make one or more Permitted Extension Amendments
pursuant to procedures reasonably specified by the Administrative Agent and
reasonably acceptable to the Borrower. Such notice shall set

 

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forth (i) the terms and conditions of the requested Permitted Extension
Amendments and (ii) the date on which responses from the applicable Lenders in
respect of such Permitted Extension Amendment are required to be received (which
shall not be less than three (3) Business Days after the date of such notice).
Only those Lenders that consent to such Permitted Extension Amendment (the
“Accepting Lenders”) will have the maturity of their applicable Loans and
Commitments extended and be entitled to the benefits provided thereby, which
shall have effect notwithstanding the pro rata sharing provisions of Section
4.01 (and for the avoidance of doubt, no Lender shall be required to consent to
any Permitted Extension Amendment (and any decision whether to become an
Accepting Lender shall be made in such Lender’s sole and absolute discretion)).
The Borrower and each Accepting Lender shall execute and deliver to the
Administrative Agent such documentation as the Administrative Agent shall
reasonably specify to evidence the acceptance of the Permitted Extension
Amendments and the terms and conditions thereof (for the avoidance of doubt,
each of the parties hereto hereby agrees that the Borrower may undertake such
transactions without the consent of any Lender who is not party to such
Permitted Extension Amendment or Incremental Increase). The Administrative Agent
shall promptly notify each Lender as to the effectiveness of each Permitted
Extension Amendment. Each of the parties hereto hereby agrees that, upon the
effectiveness of any Permitted Extension Amendment, this Agreement shall be
deemed amended, as may be necessary or appropriate, in the reasonable opinion of
the Administrative Agent, to effect the terms and provisions of the Permitted
Extension Amendment with respect to the Loans and Commitments of the Accepting
Lenders (including any amendments necessary to treat the Loans and Commitments
of the Accepting Lenders in a manner consistent with the other Loans and
Commitments under this Agreement or as contemplated by the Permitted Extension
Amendment).

Section 12.03 Expenses, Indemnity; Damage Waiver.

(a) The Borrower agrees (i) if the Closing Date occurs, to pay or reimburse the
Administrative Agent, each Issuing Bank and the Arrangers for all reasonable and
documented out-of-pocket costs and expenses incurred in connection with the
preparation, negotiation, syndication and execution, performance and
administration of this Agreement and the other Loan Documents, and any
amendment, waiver, consent or other modification of the provisions hereof and
thereof (whether or not the transactions contemplated thereby are consummated),
and the consummation and administration of the transactions contemplated hereby
and thereby (including all Attorney Costs, but excluding allocated costs of
in-house counsel, where counsel shall be limited to Paul Hastings LLP and one
local counsel as reasonably necessary in each relevant jurisdiction material to
the interests of the Administrative Agent, the Issuing Banks or the Lenders,
taken as a whole, or, with the Borrower’s consent (not to be unreasonably
withheld or delayed), other counsel) and (ii) from and after the Closing Date,
to pay or reimburse the Administrative Agent, each Issuing Bank, the Arrangers
and each Lender for all reasonable and documented out-of-pocket costs and
expenses incurred in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of any rights or remedies under
this Agreement or the other Loan Documents (including all such costs and
expenses incurred during any legal proceeding, including any enforcement or
bankruptcy proceeding, and including all respective Attorney Costs (but not
allocated costs of in-house counsel) which shall be limited to Attorney Costs of
one counsel to the Administrative Agent, the Lenders and the Arrangers (and one
local counsel as reasonably necessary in each relevant jurisdiction material to
the interests of the Administrative Agent, the Issuing Banks or the Lenders
taken as a whole (or, with the Borrower’s consent (not to be unreasonably
withheld or delayed), other counsel). The foregoing costs and expenses shall
include all reasonable search, filing and recording charges and fees related
thereto, and other related reasonable and documented out-of-pocket expenses
incurred by the Administrative Agent. The agreements in this Section 12.03(a)
shall survive the termination of the Commitments and repayment of all other
Indebtedness. All amounts due under this Section 12.03(a) shall be paid within
thirty (30) days of receipt by the Borrower of an invoice relating thereto
setting forth such expenses in reasonable detail including, if requested by the
Borrower and to the extent reasonably available, backup documentation supporting
such reimbursement request. If any Loan

 

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Party fails to pay when due any costs, expenses or other amounts payable by it
hereunder or under any Loan Document, such amount may be paid on behalf of such
Loan Party by the Administrative Agent in its sole discretion. This
Section 12.03(a) shall not apply with respect to any Taxes other than Taxes that
represent liabilities, obligations, losses, damages, penalties, claims, demands,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever resulting from a non-Tax claim.

(b) The Borrower shall indemnify and hold harmless the Administrative Agent,
each Arranger, the Syndication Agent, each Co-Documentation Agent, each Issuing
Bank, each Lender (except in the case of any Person who is a Prohibited Lender
and becomes a Lender despite the prohibitions on such occurrence in the Loan
Documents) and each of their respective Affiliates, and each of the officers,
directors, employees, members and agents of each of the foregoing (collectively
the “Indemnitees”) from and against any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits, costs,
expenses and disbursements (including Attorney Costs but limited in the case of
legal fees and expenses to the reasonable and documented out-of-pocket fees,
disbursements and other charges of one counsel to all Indemnitees taken as a
whole and, if reasonably necessary, one local counsel for all Indemnitees taken
as a whole in each relevant jurisdiction that is material to the interests of
the Indemnitees, and solely in the case of an actual or perceived conflict of
interest where the Indemnitee(s) affected by such conflict notifies you of the
existence of such conflict and thereafter retain another firm of counsel for
each group of similarly situated affected Indemnitees, one additional counsel in
each relevant jurisdiction) of any kind or nature whatsoever which may at any
time be imposed on, incurred by or asserted against any such Indemnitee in any
way relating to or arising out of or in connection with (i) the execution,
delivery, enforcement, performance or administration of any Loan Document or any
other agreement, letter or instrument delivered in connection with the
transactions contemplated thereby or the consummation of the transactions
contemplated thereby, (ii) any Commitment, Loan or Letter of Credit or the use
or proposed use of the proceeds therefrom including 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, (iii) to the extent relating to the foregoing, in each
case, any actual or alleged presence or Release of Hazardous Materials at, on,
under or from any property or facility currently or formerly owned, leased or
operated by the Loan Parties or any Subsidiary or any Loan Party’s or
Subsidiary’s violation of, or non-compliance with, any Environmental Laws or
(iv) any actual or prospective claim, litigation, investigation or other
proceeding (including any inquiry or investigation of the foregoing), whether
based on contract, tort or any other theory (including any investigation of,
preparation for, or defense of any pending or threatened claim, investigation,
litigation or proceeding) and regardless of whether any Indemnitee is a party
thereto, and in all cases, whether or not caused by or arising, in whole or in
part, out of the comparative, contributory or sole negligence of an Indemnitee;
provided that, notwithstanding the foregoing, such indemnity shall not, as to
any Indemnitee, be available to the extent that such liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits, costs,
expenses or disbursements resulted from (x) the gross negligence, bad faith or
willful misconduct of such Indemnitee or of any of its controlled Affiliates or
their respective directors, officers, employees or agents (in the case of an
agent, to the extent that such agent acted on behalf of, or at the express
instruction of, such Indemnitee), as determined by a final non-appealable
judgment of a court of competent jurisdiction, (y) a material breach of any
obligations under any Loan Document by such Indemnitee or of any of its
Affiliates or its or their respective directors, officers, employees, members or
agents, as determined by a final non-appealable judgment of a court of competent
jurisdiction or (z) any dispute solely among Indemnitees (other than any claims
against an Indemnitee in its capacity or in fulfilling its role as
Administrative Agent, Issuing Bank or Arranger under any Facility). No
Indemnitee or Loan Party shall be liable for any damages arising from the use by
others of any information or other materials obtained through IntraLinks or
other similar information transmission systems in connection with this
Agreement, nor shall any Indemnitee, Loan Party or any Subsidiary have any
liability for any special, punitive, indirect or consequential damages relating
to this Agreement or any other Loan Document or arising out of its activities in
connection herewith or therewith (whether before

 

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or after the Closing Date) (other than, in the case of any Loan Party, in
respect of any such damages incurred or paid by an Indemnitee to a third party
and for any out-of-pocket expenses); it being agreed that this sentence shall
not limit the indemnification obligations of the Borrower or any other Loan
Party. In the case of an investigation, litigation or other proceeding to which
the indemnity in this Section 12.03(b) applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by any Loan Party, any Subsidiary of any Loan Party, its directors, stockholders
or creditors or an Indemnitee or any other Person, whether or not any Indemnitee
is otherwise a party thereto and whether or not any of the transactions
contemplated hereunder or under any of the other Loan Documents are consummated.
All amounts due under this Section 12.03(b) shall be paid within thirty
(30) days after written demand therefor (together with backup documentation
supporting such reimbursement request); provided, however, that such Indemnitee
shall promptly refund such amount to the extent that there is a final and
non-appealable judicial determination that such Indemnitee was not entitled to
indemnification rights with respect to such payment pursuant to the express
terms of this Section 12.03(b).

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to the Administrative Agent, the Arrangers or Issuing Banks under
Section 12.03(a) or (b), each Lender severally agrees to pay to the
Administrative Agent, the Arrangers or any Issuing Bank, as the case may be,
such Lender’s Pro Rata Share (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 the Administrative Agent, the Arrangers or Issuing Banks in its capacity
as such.

Section 12.04 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void); provided that the foregoing shall
not prohibit a merger or consolidation by the Borrower with another Person that
is permitted hereunder, (ii) no Lender may assign or otherwise transfer its
rights or obligations hereunder except in accordance with this Section 12.04,
(iii) no Lender may assign to the Borrower or to an Affiliate of the Borrower
all or any portion of such Lender’s rights and obligations under the Agreement
or all or any portion of its Commitments or the Loans owing to it hereunder and
(iv) no Lender may assign or otherwise transfer its rights or obligations
hereunder to any Person that is at such time a Defaulting Lender or a natural
person.

(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 if
such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund
immediately prior to giving effect to such assignment or, if a Payment or
Bankruptcy Event of Default has occurred and is continuing, to any other
assignee; and

(B) the Administrative Agent and each Issuing Bank, provided that no consent of
the Administrative Agent shall be required for an assignment to an assignee that
is a Lender, an Affiliate of a Lender or an Approved Fund immediately prior to
giving effect to such assignment.

 

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

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender,
or an Approved Fund or an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 (and shall be in
increments of $1,000,000 in excess thereof), unless each of the Borrower and the
Administrative Agent otherwise consent, provided that no such consent of the
Borrower shall be required if a Payment or Bankruptcy 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 (unless waived by the Administrative Agent in its
sole discretion);

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

(E) no assignment may be made to a Prohibited Lender without the Borrower’s
prior written consent.

(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 to this Agreement 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 a non-fiduciary agent
of the Borrower, shall maintain at one of its offices a copy of each Assignment
and Assumption delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Maximum Credit Amount of, and principal
amount (and stated interest) 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 absent manifest error, and the
Borrower, the Administrative Agent, any Issuing Bank and the Lenders shall 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. In connection with any changes to the Register, if
necessary, the Administrative Agent will reflect the revisions on Annex I and
forward a copy of such revised Annex I to the Borrower, each Issuing Bank and
each Lender.

 

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(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 and, if required hereunder, applicable tax forms (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in Section 12.04(b) and any written consent to such assignment
required by Section 12.04(b), the Administrative Agent shall accept such
Assignment and Assumption and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this Section 12.04(b). Prior
to such recording, the Borrower and the Administrative Agent may continue to
deal solely and directly with the assigning Lender.

(vi) In connection with any assignment of rights and obligations of any
Defaulting Lender hereunder, no such assignment shall be effective unless and
until, in addition to the other conditions thereto set forth herein, the parties
to the assignment shall make such additional payments to the Administrative
Agent in an aggregate amount sufficient, upon distribution thereof as
appropriate (which may be outright payment, purchases by the assignee of
participations or subparticipations, or other compensating actions, including
funding, with the consent of the Borrower and the Administrative Agent, the
applicable pro rata share of Loans previously requested but not funded by the
Defaulting Lender, to each of which the applicable assignee and assignor hereby
irrevocably consent), to (x) pay and satisfy in full all payment liabilities
then owed by such Defaulting Lender to the Administrative Agent, any Issuing
Bank or any Lender hereunder (and interest accrued thereon) and (y) acquire (and
fund as appropriate) its full pro rata share of all Loans and participations in
Letters of Credit in accordance with its pro rata share. Notwithstanding the
foregoing, in the event that any assignment of rights and obligations of any
Defaulting Lender hereunder shall become effective under Governmental
Requirements without compliance with the provisions of this paragraph, then the
assignee of such interest shall be deemed to be a Defaulting Lender for all
purposes of this Agreement until such compliance occurs.

(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) sales of participations to any
Prohibited Lenders shall be prohibited (provided that the Administrative Agent
shall have no responsibility for monitoring or enforcing the prohibition on
participations to Prohibited Lenders set forth in this clause (A)), (B) such
Lender’s obligations under this Agreement shall remain unchanged, (C) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (D) the Borrower, the Administrative Agent,
any Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement (and for the avoidance of doubt, each Lender
shall be responsible for the indemnity under Section 12.03(c) without regard to
the existence of any participation). 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 the other Loan Documents and
to approve any amendment, modification or waiver of any provision of this
Agreement or the other Loan Documents; 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 to the extent that
such amendment, consent or waiver would require unanimous consent of the Lenders
(other than any increase to the Borrowing Base). In addition, such agreement
must provide that the Participant be bound by the provisions of

 

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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). Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of
the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
participant’s interest in the Loans or other obligations under this Agreement
(the “Participant Register”); provided that no Lender shall have any obligation
to disclose all or any portion of the Participant Register to any Person
(including the identity of any Participant or any information relating to a
Participant’s interest in any Commitments, Loans or Letters of Credit or its
other obligations under any Loan Document) except to the extent that such
disclosure is necessary in connection with an audit or other proceeding to
establish that such Commitment, Loan, Letter of Credit or other obligation is in
registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be conclusive absent
manifest error and such Lender shall treat each person whose name is recorded in
the Participant Register as the owner of such participation for all purposes of
this Agreement notwithstanding any notice to the contrary. For the avoidance of
doubt, the Administrative Agent (in its capacity as such) shall have no
responsibility for maintaining the Participant Register.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01, Section 5.02 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, not to be unreasonably withheld or
delayed; for the avoidance of doubt, the Borrower shall have reasonable basis
for withholding consent if such Participant after the sale would result in
materially increased obligations to the Borrower or any Guarantors at such time
under Section 5.01 and/or Section 5.03. A Participant shall be entitled to the
benefits of Section 5.03 subject to the requirements and limitations therein,
including the requirements under Section 5.03(e) (it being understood that the
documentation required under Section 5.03(e) shall be delivered to the
participating 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 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.

(f) Notwithstanding any other provision in this Agreement, Prohibited Lenders
will not receive, and are not entitled to receive, information provided by the
Administrative Agent, any Lender or the Borrower or any Restricted Subsidiary
and will not be permitted to attend or participate in meetings or conference
calls in connection with this Agreement, other than the right to receive notices
of prepayments and other administrative notices in respect of its Loans or
Commitments required to be delivered pursuant to Article II.

(g) Notwithstanding anything to the contrary contained herein, if at any time an
Issuing Bank assigns all of its Commitments and Loans pursuant to subsection
(b) above, the Issuing Bank may, upon 30 days’ notice to the Borrower and the
Lenders, resign as an Issuing Bank. In the event of any such resignation as an
Issuing Bank, the Borrower shall be entitled to appoint from among the

 

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Lenders a successor Issuing Bank hereunder; provided, however, that no failure
by the Borrower to appoint any such successor shall affect the resignation of
the retiring Issuing Bank; provided that on or prior to the expiration of such
30-day period with respect to such resignation, the relevant Issuing Bank shall
have identified a successor Issuing Bank willing to accept its appointment as
successor Issuing Bank, and the effectiveness of such resignation shall be
conditioned upon such successor assuming the rights and duties of the Issuing
Bank. If an Issuing Bank resigns as Issuing Bank, it shall retain all the
rights, powers, privileges and duties of an Issuing Bank hereunder with respect
to all Letters of Credit outstanding as of the effective date of its resignation
as an Issuing Bank and all LC Exposure with respect thereto (including the right
to require the Lenders to make ABR Loans or fund risk participations in LC
Disbursements pursuant to Section 2.08(d)). Upon the appointment of a successor
Issuing Bank, (a) such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring Issuing Bank and
(b) the successor Issuing Bank shall issue letters of credit in substitution for
the Letters of Credit, if any, outstanding at the time of such succession or
make other arrangements satisfactory to the retiring Issuing Bank to effectively
assume the obligations of the retiring Issuing Bank with respect to such Letters
of Credit.

Section 12.05 Survival; Revival; Reinstatement.

(a) All representations and warranties made hereunder and in any other Loan
Document or other document delivered in connection with or pursuant to this
Agreement or any other Loan Document shall survive the execution and delivery
hereof and thereof. Such representations and warranties have been or will be
relied upon by the Administrative Agent, the Issuing Banks and the Lenders,
regardless of any investigation made by any such party or on their behalf and
notwithstanding that the Administrative Agent, any Issuing Bank or any Lender
may have had notice or knowledge of any Default 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, Payment in Full or the
termination of this Agreement, any other Loan Document or any provision hereof
or thereof.

(b) To the extent that any payment by or on behalf of the Borrower is made to
the Administrative Agent or any Lender, or the Administrative Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such
setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights or otherwise, then (i) to
the extent of such recovery, the obligation or part thereof originally intended
to be satisfied shall, to the fullest extent possible under provisions of
applicable law, be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred, and (ii) each Lender
severally agrees to pay to the Administrative Agent upon demand its applicable
share of any amount so recovered from or repaid by the Administrative Agent,
plus interest thereon from the date of such demand to the date such payment is
made at a rate per annum equal to the applicable Federal Funds Effective Rate
from time to time in effect.

 

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Section 12.06 Counterparts; Integration; Effectiveness.

(a) This Agreement and each other Loan Document may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery by fax or other
electronic transmission of an executed counterpart of a signature page to this
Agreement and each other Loan Document shall be effective as delivery of an
original executed counterpart of this Agreement and such other Loan Document.
The Administrative Agent may also require that any such documents and signatures
delivered by fax or other electronic transmission be confirmed by a manually
signed original thereof; provided that the failure to request or deliver the
same shall not limit the effectiveness of any document or signature delivered by
fax or other electronic transmission.

(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, 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. Subject to
any conflict provisions in the Intercreditor Agreement which relate to the
relative rights among various classes of creditors, in the event of any conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control; provided that the inclusion of
supplemental rights or remedies in favor of, or limitations upon, the
Administrative Agent or the Lenders in any other Loan Document shall not be
deemed a conflict with this Agreement; provided further that the terms of this
Agreement are expressly subject to the limitations imposed under Section 5.3(b)
of the Existing Intercreditor Agreement and the applicable terms of this
Agreement shall be deemed to be modified so as to conform to the limitations
imposed in such Section 5.3(b) and avoid any conflict therewith. Each Loan
Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.

(c) This Agreement shall become effective when it shall have been executed by
the Borrower and 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, and thereafter shall be binding upon
and inure to the benefit of the Loan Parties, the Administrative Agent and each
Lender and their respective successors and assigns, in each case in accordance
with Section 12.04 (if applicable).

(d) Loan Documents may be signed electronically. The effectiveness of any such
signatures shall, subject to applicable law, have the same force and effect as
manually signed originals and shall be binding on all Loan Parties, the
Administrative Agent, any Issuing Bank and the Lenders.

Section 12.07 Severability. If any provision of this Agreement or any other Loan
Document is held to be invalid, illegal or unenforceable the validity, legality
and enforceability of the remaining provisions of this Agreement and such other
Loan Documents shall not be affected or impaired thereby. The invalidity of a
provision in a particular jurisdiction shall not invalidate or render
unenforceable 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, each Issuing Bank, the Administrative Agent and their
respective Affiliates is authorized at any time and from time to time, to the
fullest extent permitted by law, to setoff and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other obligations (of whatsoever kind, including, without limitations
obligations under Swap Agreements) at any time owing by the Administrative
Agent, such Lender or Issuing Bank to or for the credit or the account of the

 

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Borrower or any Restricted Subsidiary against any of and all the obligations of
the Borrower or any Restricted Subsidiary owed to the Administrative Agent, such
Lender or Issuing Bank now or hereafter existing under this Agreement or any
other Loan Document, irrespective of whether or not the Administrative Agent,
such Lender or such Issuing Bank 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, each Issuing Bank and the Administrative Agent under this
Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which the Administrative Agent, such Lender or such Issuing
Bank may have. Each Lender and each Issuing Bank agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender or Issuing Bank, as applicable; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application.

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

(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY,
DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED
UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
(EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH THEREIN) SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS FOR ITSELF AND ITS
PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING CONTAINED HEREIN OR IN
ANY OTHER LOAN DOCUMENT WILL PREVENT ANY LENDER OR THE ADMINISTRATIVE AGENT FROM
BRINGING ANY ACTION TO ENFORCE ANY AWARD OR JUDGMENT OR EXERCISE ANY RIGHT UNDER
THE SECURITY INSTRUMENTS OR AGAINST ANY COLLATERAL OR ANY OTHER PROPERTY OF ANY
LOAN PARTY IN ANY OTHER FORUM IN WHICH JURISDICTION CAN BE ESTABLISHED.

(c) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO
IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

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(d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 12.01. NOTHING IN THIS AGREEMENT OR IN ANY OTHER
LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.

(e) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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, each Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
Affiliates and 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 required or requested by any
regulatory authority (including any self-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) if required 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 for purposes of evaluating
whether to become an assignee or Participant, or any actual or prospective
Additional Lender or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Agreement relating to the Borrower and its obligations for
purposes of evaluating whether to become a Secured Swap Party, (g) with the
consent of the Borrower, (h) on a confidential basis to (i) any rating agency in
connection with rating the Borrower or its Subsidiaries or the credit facilities
provided hereunder or (ii) the CUSIP Service Bureau or any similar agency to the
extent required in connection with the issuance and monitoring of CUSIP numbers
or other market identifiers with respect to the credit facilities provided
hereunder or (i) 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 and its Affiliates
and, to the Administrative Agent, Issuing Bank or Lender’s knowledge, such
source was not subject to a confidentiality agreement with respect to such
information. For the purposes of this Section 12.11, “Information” means all
information received from the Borrower or any of its Permitted Holders relating
to Holdings or any of its Subsidiaries and their businesses, other than any such
information that is available to the Administrative Agent, any Issuing Bank or
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confidential basis prior to disclosure by the Borrower or a Permitted Holder;
provided that, in the case of information received from the Borrower or any
Permitted Holder after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York 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 Notes, 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 Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Indebtedness is
accelerated by reason of an election of the holder thereof under this Agreement,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to any Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes 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 Collateral Matters; Swap Agreements. Except for as expressly set
forth in Section 12.02(b)(vi), no Secured Swap Party or Secured Cash Management
Bank shall have any voting rights under any Loan Document as a result of the
existence of any Secured Swap Obligations or Secured Cash Management Obligations
owed to it and the Administrative Agent shall have no responsibility for
determining the value of any Secured Swap Obligations or Secured Cash Management
Obligations.

Section 12.14 PATRIOT Act Notice. Each Lender that is subject to the PATRIOT Act
and the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Borrower and each Guarantor that pursuant to the requirements of
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record information that identifies the Borrower and each Guarantor, which
information includes the name, address and tax identification number of the
Borrower and the Guarantors and other information regarding the Borrower and the
Guarantors that will allow such Lender or the Administrative Agent, as
applicable, to identify the Borrower and the Guarantors in accordance with the
PATRIOT Act. This notice is given in accordance with the requirements of the
PATRIOT Act and is effective as to the Lenders and the Administrative Agent.

Section 12.15 Electronic Execution of Assignments. The words “execute,”
“execution,” “signed,” “signature,” and words of like import in any Assignment
and Assumption or in any amendment or other modification thereof (including
waivers and consents) shall be deemed to include electronic signatures, the
electronic matching of assignment terms and contract formations on electronic
platforms approved by the Administrative Agent, or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

Section 12.16 Release of Liens and Release from Guaranty and Pledge Agreement.
Notwithstanding anything to the contrary in the Loan Documents (but subject to
Section 8.13(c)):

(a) after Payment in Full, the Collateral shall be automatically released from
any Liens created by the Loan Documents, and the Loan Documents and all
obligations (other than those expressly stated to survive such termination) of
the Administrative Agent, the Issuing Banks, the Lenders and each Loan Party
under the Loan Documents shall terminate and each Guarantor shall be released
from the Guaranty and Pledge Agreement, all without delivery of any instrument
or performance of any act by any Person;

(b) the following Collateral shall be automatically released from the Liens
created by the Loan Documents without delivery of any instrument or performance
of any act by any Person:

(i) upon a Disposition of Collateral (including the termination or expiration of
a lease) to a Person other than another Loan Party, the Disposed of Collateral,
to the extent such Disposition is made in compliance with the terms of this
Agreement;

(ii) upon a permitted designation of a Restricted Subsidiary as an Unrestricted
Subsidiary hereunder, the Collateral owned by such Unrestricted Subsidiary;

(iii) upon a release of the Collateral under and pursuant to the terms of each
applicable Security Instrument, such Collateral;

(iv) upon a Subsidiary Guarantor no longer being a Subsidiary Guarantor by
virtue of the definition thereof or a transaction permitted hereunder, the
Collateral owned by such Subsidiary Guarantor; or

(v) upon a transaction permitted under Section 9.07(b), any releases necessary
or desirable (as reasonably determined by the Administrative Agent and Borrower)
to effectuate such transaction.

 

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(c) a Guarantor shall be automatically released from the Guaranty and Pledge
Agreement without delivery of any instrument or performance of any act by any
Person (except with respect to Holdings):

(i) upon a permitted designation of a Restricted Subsidiary as an Unrestricted
Subsidiary pursuant to the terms of this Agreement;

(ii) in respect of a Subsidiary Guarantor, upon such Subsidiary Guarantor no
longer being a Subsidiary Guarantor by (A) virtue of the definition thereof or
(B) a transaction permitted hereunder; or

(iii) upon the release of such Guarantor under and pursuant to the terms of the
Guaranty and Pledge Agreement;

(d) In connection with any termination or release of Collateral from the Liens
securing the Indebtedness or a release of a Guarantor from the Guaranty and
Pledge Agreement, the Administrative Agent shall:

(i) in the case of termination or release of Collateral from the Liens securing
the Indebtedness, (A) execute and deliver to any Loan Party, at such Loan
Party’s expense, all documents that such Loan Party shall reasonably request to
evidence such termination or release (including (1) UCC termination statements
and (2) in the case of a release of Mortgaged Property, a partial release
substantially in the form of Exhibit M)) and (B) return to the Borrower, the
Pledged Collateral (as defined in the Guaranty and Pledge Agreement) that is in
the possession of the Administrative Agent and is the subject of such release
(provided that, upon request by the Administrative Agent, the Borrower shall
deliver to the Administrative Agent a certificate of a Responsible Officer
certifying that such transaction has been or was consummated in compliance with
the Loan Documents), and

(ii) in the case of a release of a Guarantor, execute and deliver a written
release to evidence the release of the Guarantor promptly upon the request of
the Borrower;

(e) any execution and delivery of documents by the Administrative Agent pursuant
to this Section 12.16(e) shall be without recourse to or warranty by the
Administrative Agent; and

(f) the relevant Loan Party shall be permitted to take any action in connection
therewith consistent with such release including the filing of UCC termination
statements.

Section 12.17 Flood Insurance Provisions. Notwithstanding anything in this
Agreement or any other Loan Document to the contrary, in no event is any
“Building” (as defined in the applicable Flood Insurance Regulations) or
“Manufactured (Mobile) Home” (as defined in the applicable Flood Insurance
Regulations) included in the definition of “Mortgaged Property” (as defined in
any Loan Document) and no “Building” or “Manufactured (Mobile) Home” is hereby
encumbered by this Agreement or any other Loan Document.

Section 12.18 No Advisor or Fiduciary Responsibility. In connection with all
aspects of the Loan Documents (including in connection with any amendment,
waiver or other modification hereof or of any other Loan Document), the Borrower
acknowledge and agree, and acknowledge on behalf of its Restricted Subsidiaries,
that: (a) (i) the arranging and other services regarding this Agreement provided
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Co-Documentation Agent, each Issuing Bank and the Lenders are arm’s-length
commercial transactions between the Borrower, each other Loan Party, on the one
hand, and the Administrative Agent, the Arrangers, the Syndication Agent, each
Co-Documentation Agent, each Issuing Bank and the Lenders, on the other hand,
(ii) the Borrower and each of the other Loan Parties has consulted its own
legal, accounting, regulatory and tax advisors to the extent it has deemed
appropriate, and (iii) the Borrower and each other Loan Party is capable of
evaluating, and understands and accepts, the terms, risks and conditions of the
transactions contemplated hereby and by the other Loan Documents; (b) (i) the
Administrative Agent, the Arrangers, the Syndication Agent, each
Co-Documentation Agent and each Lender is and has been acting solely as a
principal and, except as expressly agreed in writing by the relevant parties,
has not been, is not, and will not be acting as an advisor, agent or fiduciary
for the Borrower or any other Loan Party and (ii) neither the Administrative
Agent, the Arrangers, the Syndication Agent, each Co-Documentation Agent, each
Issuing Bank nor any Lender has any obligation to the Borrower or any other Loan
Party with respect to the transactions contemplated hereby except those
obligations expressly set forth herein and in the other Loan Documents; and
(c) the Administrative Agent, the Arrangers, the Syndication Agent, each
Co-Documentation Agent, each Issuing Bank and the Lenders and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Borrower and the other Loan Parties, and
neither the Administrative Agent, the Arrangers, the Syndication Agent, each
Co-Documentation Agent, each Issuing Bank nor any Lender has any obligation to
disclose any of such interests to the Borrower or any other Loan Party. To the
fullest extent permitted by law, each of the Borrower and each other Loan Party
hereby waives and releases any claims that it may have against the
Administrative Agent, the Arrangers, the Syndication Agent, each
Co-Documentation Agent or any Lender with respect to any breach or alleged
breach of fiduciary duty in connection with any aspect of the Loan Documents.

Section 12.19 Swap Agreements under Existing Forest Credit Agreement. Each
Lender party hereto on the Closing Date, for itself and on behalf of its
applicable affiliates, as applicable, hereby acknowledges and agrees that any
Hedging Obligations (as defined in the Existing Forest Credit Agreement) owed to
each such Lender or its applicable affiliate, as applicable, shall cease to
constitute outstanding Obligations (as defined in the Existing Forest Credit
Agreement) for all purposes in connection with the Existing Forest Credit
Agreement and each other Loan Document (as defined in the Existing Forest Credit
Agreement) and shall, instead, constitute outstanding Secured Swap Obligations
in connection with, and as defined in, this Agreement. JPMorgan Chase Bank,
N.A., in its capacity as administrative agent under the Existing Forest Credit
Agreement, shall be entitled to rely on the acknowledgment contained in this
Section 12.19.

Section 12.20 Effect and Mechanics of Amendment and Restatement.

(a) This Agreement does not constitute a novation of the obligations and
liabilities under the Existing Sabine Credit Agreement or evidence the
termination of any such obligations and liabilities.

(b) Concurrently with the Closing Date,

(i) each “Commitment” outstanding under the Existing Sabine Credit Agreement
shall be deemed to be continued under this Agreement and not novated; and

(ii) any existing letters of credit shall be deemed issued under this Agreement.

(c)

(i) Concurrently with the occurrence of the Closing Date, using the applicable
portion of the proceeds of its initial borrowing request hereunder, the Borrower
shall pay all the amounts that are outstanding under the Existing Sabine Credit
Agreement.

 

129

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(ii) Concurrently with the occurrence of the Closing Date,

 

  (A) the parties hereto and each Guarantor acknowledge and agree that the Liens
created by the mortgages securing the Existing Sabine Credit Agreement and the
Security Instruments (as defined in the Existing Sabine Credit Agreement) shall
be carried forward and evidenced by the Security Instruments and have not been
released or impaired in any way, and

(iii) For avoidance of doubt, after giving effect to the payments contemplated
by Section 12.20(c)(i), all participations and other indebtedness, obligations
and liabilities outstanding under the Existing Sabine Credit Agreement
immediately prior to the Closing Date shall continue to constitute
participations, and other indebtedness, obligations and liabilities under this
Agreement.

(iv) It is the intent of the parties hereto that this Agreement amends, restates
and supersedes in its entirety the Existing Sabine Credit Agreement and
re-evidences the obligations of the Borrower and the Loan Parties outstanding
thereunder.

[SIGNATURES BEGIN NEXT PAGE]

 

130

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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:     FOREST OIL CORPORATION    

/s/ David Sambrooks

    Name:   David Sambrooks     Title:   Chief Executive Officer

Signature Page

Second Amended and Restated Credit Agreement

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ADMINISTRATIVE AGENT:    

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent and as Lender

   

/s/ Brian Malone

    Name:   Brian Malone     Title:   Managing Director

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     BARCLAYS BANK PLC, as a Lender    

/s/ Ann E. Sutton

    Name:   Ann E. Sutton     Title:   Director

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     Bank of America N.A., as a Lender    

/s/ Bryan Heller

    Name:   Bryan Heller     Title:   Director

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     Capital One, National Association, as a Lender    

/s/ Mason McGurrin

    Name:   Mason McGurrin     Title:   Managing Director

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     Citibank N.A., as a Lender    

/s/ Jeff Ard

    Name:   Jeff Ard     Title:   Vice President

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     Natixis, New York Branch, as a Lender    

/s/ Stuart Murray

    Name:   Stuart Murray     Title:   Managing Director    

/s/ Leila Zomorrodian

    Name:   Leila Zomorrodian     Title:   Vice President

Signature Page

Second Amended and Restated Credit Agreement

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LENDERS:     UBS AG, STAMFORD BRANCH, as a Lender    

/s/ Lana Gifas

    Name:   Lana Gifas     Title:   Director    

/s/ Jennifer Anderson

    Name:   Jennifer Anderson     Title:   Associate Director

Signature Page

Second Amended and Restated Credit Agreement

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ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Credit Amounts

 

Name of Lender

   Applicable
Percentage     Closing Date
Commitment      Maximum
Credit Amount  

Wells Fargo Bank, National Association

     25 %    $ 250,000,000.00       $ 500,000,000.00   

Barclays Bank PLC

     25 %    $ 250,000,000.00       $ 500,000,000.00   

Bank of America, N.A.

     10 %    $ 100,000,000.00       $ 200,000,000.00   

Capital One, National Association

     10 %    $ 100,000,000.00       $ 200,000,000.00   

Citibank N.A.

     10 %    $ 100,000,000.00       $ 200,000,000.00   

Natixis, New York Branch

     10 %    $ 100,000,000.00       $ 200,000,000.00   

UBS AG, Stamford Branch

     10 %    $ 100,000,000.00       $ 200,000,000.00      

 

 

   

 

 

    

 

 

 

TOTAL:

     100.00 %    $ 1,000,000,000.00       $ 2,000,000,000.00      

 

 

   

 

 

    

 

 

 

Annex I – Page 1