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Exhibit 10.1
 Execution Version

 
Fourth Amended And Restated Credit Agreement
 
Dated As Of
 
April 28, 2009
 
Among
 
Linn Energy, LLC,
As Borrower,
 
BNP Paribas,
As Administrative Agent,
 
Royal Bank of Canada,
As Syndication Agent,
 
The Royal Bank of Scotland plc, Citibank, NA, Calyon, New York Branch and
Barclays Bank plc,
As Co-Documentation Agents
 
and
 
The Lenders Party Hereto
 

 

 
Joint Lead Arrangers and Joint Book Runners
 

 
BNP Paribas
RBC Capital Markets
 

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Houston 3931255v.7
 
 

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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
22
Section 1.04
Terms Generally
22
Section 1.05
Accounting Terms and Determinations; GAAP
23
 
ARTICLE II
The Credits
 
Section 2.01
Commitments
23
Section 2.02
Loans and Borrowings.
23
Section 2.03
Requests for Borrowings
25
Section 2.04
Interest Elections.
26
Section 2.05
Funding of Borrowings.
28
Section 2.06
Termination and Reduction of Aggregate Maximum Credit Amounts.
29
Section 2.07
Borrowing Base.
30
Section 2.08
Letters of Credit.
32
 
ARTICLE III
Payments of Principal and Interest; Prepayments; Fees
 
Section 3.01
Repayment of Loans
37
Section 3.02
Interest.
38
Section 3.03
Alternate Rate of Interest
39
Section 3.04
Prepayments.
39
Section 3.05
Fees.
41
 
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs.
 
Section 4.01
Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
42
Section 4.02
Presumption of Payment by the Borrower
43
Section 4.03
Certain Deductions by the Administrative Agent
44
Section 4.04
Payments and Deductions to a Defaulting Lender.
44
 
ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality
 
Section 5.01
Increased Costs.
46
Section 5.02
Break Funding Payments
47
Section 5.03
Taxes.
48

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Section 5.04
Designation of Different Lending Office; Replacement of Lenders.
49
Section 5.05
Illegality
49
 
ARTICLE VI
Conditions Precedent
 
Section 6.01
Effective Date
50
Section 6.02
Each Credit Event
52
 
ARTICLE VII
Representations and Warranties
 
Section 7.01
Organization; Powers
53
Section 7.02
Authority; Enforceability
53
Section 7.03
Approvals; No Conflicts
53
Section 7.04
Financial Position; No Material Adverse Change.
54
Section 7.05
Litigation
54
Section 7.06
Environmental Matters
54
Section 7.07
Compliance with the Laws and Agreements; No Defaults.
55
Section 7.08
Investment Company Act
56
Section 7.09
Taxes
56
Section 7.10
ERISA
56
Section 7.11
Disclosure; No Material Misstatements
57
Section 7.12
Insurance
57
Section 7.13
Restriction on Liens
58
Section 7.14
Subsidiaries
58
Section 7.15
Location of Business and Offices
58
Section 7.16
Properties; Titles, Etc.
58
Section 7.17
Maintenance of Properties
59
Section 7.18
Gas Imbalances, Prepayments
60
Section 7.19
Marketing of Production
60
Section 7.20
Swap Agreements
60
Section 7.21
Use of Loans and Letters of Credit
60
Section 7.22
Solvency
60
 
ARTICLE VIII
Affirmative Covenants
 
Section 8.01
Financial Statements; Other Information
61
Section 8.02
Notices of Material Events
64
Section 8.03
Existence; Conduct of Business
64
Section 8.04
Payment of Obligations
65
Section 8.05
Performance of Obligations under Loan Documents
65
Section 8.06
Operation and Maintenance of Properties
65
Section 8.07
Insurance
66
Section 8.08
Books and Records; Inspection Rights
66
Section 8.09
Compliance with Laws
66

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Section 8.10
Environmental Matters.
66
Section 8.11
Further Assurances.
67
Section 8.12
Reserve Reports.
68
Section 8.13
Title Information.
69
Section 8.14
Additional Collateral; Additional Guarantors.
70
Section 8.15
ERISA Compliance
70
Section 8.16
Marketing Activities
71
Section 8.17
Swap Agreements
71
Section 8.18
Clean Down Period
71
 
ARTICLE IX
Negative Covenants
 
Section 9.01
Financial Covenants.
72
Section 9.02
Debt
72
Section 9.03
Liens
73
Section 9.04
Dividends, Distributions and Redemptions.
74
Section 9.05
Investments, Loans and Advances
75
Section 9.06
Nature of Business
76
Section 9.07
Limitation on Leases
76
Section 9.08
Proceeds of Notes
77
Section 9.09
ERISA Compliance
77
Section 9.10
Sale or Discount of Receivables
77
Section 9.11
Mergers, Etc
77
Section 9.12
Sale of Properties
78
Section 9.13
Environmental Matters
78
Section 9.14
Transactions with Affiliates
78
Section 9.15
Subsidiaries
79
Section 9.16
Negative Pledge Agreements; Dividend Restrictions
79
Section 9.17
Gas Imbalances, Take-or-Pay or Other Prepayments
79
Section 9.18
Swap Agreements
79
Section 9.19
Tax Status as Partnership
80
 
ARTICLE X
Events of Default; Remedies
 
Section 10.01
Events of Default
80
Section 10.02
Remedies.
82
Section 10.03
Disposition of Proceeds
83
 
ARTICLE XI
The Administrative Agent
 
Section 11.01
Appointment; Powers
83
Section 11.02
Duties and Obligations of Administrative Agent
83
Section 11.03
Action by Agent
84
Section 11.04
Reliance by Agent
85

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Section 11.05
Subagents
85
Section 11.06
Resignation or Removal of Agents
85
Section 11.07
Agents and Lenders
86
Section 11.08
No Reliance.
86
Section 11.09
Administrative Agent May File Proofs of Claim
87
Section 11.10
Authority of Administrative Agent to Release Collateral and Liens
87
Section 11.11
The Arrangers and the Agents
88
 
ARTICLE XII
Miscellaneous
 
Section 12.01
Notices.
88
Section 12.02
Waivers; Amendments.
89
Section 12.03
Expenses, Indemnity; Damage Waiver.
90
Section 12.04
Successors and Assigns.
93
Section 12.05
Survival; Revival; Reinstatement.
96
Section 12.06
Counterparts; Integration; Effectiveness.
96
Section 12.07
Severability
97
Section 12.08
Right of Setoff
97
Section 12.09
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
97
Section 12.10
Headings
99
Section 12.11
Confidentiality
99
Section 12.12
Interest Rate Limitation
100
Section 12.13
EXCULPATION PROVISIONS
101
Section 12.14
Collateral Matters; Swap Agreements
101
Section 12.15
No Third Party Beneficiaries
101
Section 12.16
USA Patriot Act Notice
102

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ANNEXES, EXHIBITS AND SCHEDULES
 
Annex I
List of Maximum Credit Amounts
Exhibit A
Form of Note
Exhibit B
Form of Compliance Certificate
Exhibit C
Security Instruments
Exhibit D
Form of Assignment and Assumption
Exhibit E
Form of Borrowing Request
Exhibit F
Form of Interest Election Request
Exhibit G
Reserve Report Certificate
Schedule 7.05
Litigation
Schedule 7.14
Subsidiaries and Partnerships
Schedule 7.18
Gas Imbalances
Schedule 7.19
Marketing Contracts
Schedule 7.20
Swap Agreements

 

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THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 28, 2009, is
among Linn Energy, LLC, a limited liability company duly formed and existing
under the laws of the State of Delaware (the “Borrower”); each of the Lenders
from time to time party hereto; BNP PARIBAS (in its individual capacity, “BNP
Paribas”), as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the “Administrative Agent”); Royal Bank of
Canada (in its individual capacity, “RBC”), as syndication agent for the Lenders
(in such capacity, together with its successor in such capacity, the
“Syndication Agent”), and The Royal Bank of Scotland plc, Citibank, NA, Calyon
New York Branch and Barclays Bank plc, as co-documentation agents (in such
capacities, together with their successors in such capacity, the
“Co-Documentation Agents”) for the Lenders.
 
R E C I T A L S
 
A.         The Borrower, the Administrative Agent and other financial
institutions named and defined therein as lenders and agents entered into that
certain Credit Agreement dated as of April 13, 2005, as amended by the First
Amendment, dated May 3, 2005, the Second Amendment dated August 12, 2005, the
Third Amendment dated October 27, 2005 and the Fourth Amendment dated
December 19, 2005.
 
B.         The Borrower and the Administrative Agent amended and restated such
Credit Agreement and entered into, with other financial institutions named and
defined therein as lenders and agents, that certain Amended and Restated Credit
Agreement dated as of April 7, 2006 as amended by the First Amendment, dated
May 5, 2006.
 
C.         The Borrower, and the Administrative Agent amended and restated such
Amended and Restated Credit Agreement, and entered into, with other financial
institutions named and defined therein as lenders and agents, that certain
Second Amended and Restated Credit Agreement, dated August 1, 2006, as amended
by the First Amendment, dated February 1, 2007, the Second Amendment, dated
June 29, 2007 and the Third Amendment, dated July 13, 2007.
 
D.         The Borrower, and the Administrative Agent amended and restated such
Second Amended and Restated Credit Agreement, and are parties to that certain
Third Amended and Restated Credit Agreement, dated August 31, 2007, as amended
by the First Amendment, dated November 2, 2007, the Second Amendment, dated
January 31, 2008, the Third Amendment, dated June 16, 2008 and the Fourth
Amendment, dated August 20, 2008 pursuant to which such lenders provided certain
loans to and extensions of credit on behalf of the Borrower (as heretofore
amended, modified or supplemented, the “Existing Credit Agreement”).
 
E.          The Borrower has requested the Lenders, and the Lenders have agreed,
to amend and restate the Existing Credit Agreement, subject to the terms and
conditions of this Agreement.
 
F.          Now, therefore, 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:
 
Credit Agreement
Houston 3931255v.7
 
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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 whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
 
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
 
“Affected Loans” has the meaning assigned such term in Section 5.05.
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
 
“Agent” means the Administrative Agent, the Syndication Agents, any
Co-Documentation Agent or any combination of them as the context requires.
 
“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.
 
“Agreement” means this Fourth Amended and Restated Credit Agreement as the same
may from time to time be further amended, modified, supplemented or restated.
 
“Alternate Base Rate” means, for any day, a rate per annum equal to the highest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1%, (c) the LIBO Rate for a one month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1.50%, and (d) the Reference Bank Cost
of Funds Rate on such day, provided that, in the context of this definition of
Alternate Base Rate and for the avoidance of doubt, the LIBO Rate for any day
shall be based on the rate as quoted at approximately 11:00 a.m. London time on
such day to the Administrative Agent’s London office for dollar deposits of
$5,000,000 having a one-month maturity.  Any change in the Alternate Base Rate
due to a change in the Prime Rate, the Federal Funds Effective Rate, the LIBO
Rate or the Reference Bank Cost of Funds Effective Rate shall be effective from
and including the effective date of such change in the Prime Rate, the Federal
Funds Effective Rate the LIBO Rate or the Reference Bank Cost of Funds Effective
Rate, respectively.
 
“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, as the case may be, the rate per annum set forth in the
Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization
Percentage then in effect:
 
Credit Agreement
Houston 3931255v.7
 
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Borrowing Base Utilization Percentage
Eurodollar Loans
ABR Loans
Less than 50%
2.500%
1.000%
Greater than or equal to 50% and less than 85%
2.750%
1.250%
Greater than or equal to 85%
3.250%
1.750%

Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change, provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then until such time as a Reserve Report is delivered the “Applicable Margin”
means the rate per annum set forth on the grid when the Borrowing Base
Utilization Percentage is at its highest level.
 
“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.
 
“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person whose long term senior unsecured debt rating is A/A2 by S&P
or Moody’s (or their equivalent) or higher.
 
“Arrangers” means BNP Paribas and RBC Capital Markets, in their capacities as
joint lead arrangers and joint book runners hereunder.
 
“Asset Sale” means, solely for purposes of Section 3.04(c), the sale, transfer
or other disposition (by way of merger, casualty, condemnation or otherwise) by
the Borrower or any of the Subsidiaries to any Person other than the Borrower or
any Guarantor of (a) any Equity Interests in any of the Subsidiaries (including
any such sale by the issuer of such Equity Interests but excluding directors’
qualifying shares) or (b) any other assets of the Borrower or any of the
Subsidiaries (other than (x)(i) inventory (including Hydrocarbons), (ii)
damaged, obsolete or worn out assets, scrap and equipment no longer used in the
operations of the Borrower or any Subsidiary, and (iii) Investments permitted by
Section 9.05, in each case disposed of in the ordinary course of business and
(y) any sale, transfer or other disposition that, together with all related
sales, transfers or other dispositions, has a value not in excess of $25,000,000
in the aggregate).
 
“Assignee” means the Person identified as such in an Assignment and Assumption.
 
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit D or any other form approved by the Administrative Agent.
 
“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.
 
Credit Agreement
Houston 3931255v.7
 
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“Available Cash” means, with respect to any fiscal quarter ending prior to the
Termination Date:
 
(a)        the sum of (i) all cash and cash equivalents of the Borrower and each
Subsidiary on hand at the end of such fiscal quarter; and (ii) all additional
cash and cash equivalents of the Borrower and each Subsidiary on hand on the
date of determination of Available Cash for such fiscal quarter resulting from
working capital borrowings made subsequent to the end of such fiscal quarter,
less
 
(b)        the amount of any cash reserves established by the board of directors
of the Borrower to (i) provide for the proper conduct of the business of the
Borrower and each Subsidiary (including reserves for future capital expenditures
including drilling and acquisitions and for anticipated future credit needs of
the Borrower and each Subsidiary), (ii) comply with applicable law or any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Borrower or any Subsidiary is a party or by which it is
bound or its assets are subject or (iii) provide funds for distributions with
respect to any one or more of the next four fiscal quarters;
 
provided that disbursements made by the Borrower or any Subsidiary or cash
reserves established, increased or reduced after the end of such fiscal quarter
but on or before the date of determination of Available Cash with respect to
such fiscal quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such fiscal quarter
if the board of directors so determines.
 
“Bank Price Deck” means the Administrative Agent’s forward curve for oil,
natural gas and other hydrocarbons as of the most recent Proposed Borrowing Base
Notice.
 
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.
 
“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 Section 2.07(e), Section 2.07(f), Section 8.13(c), Section 9.02(e)
or Section 9.12(d).
 
“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.
 
“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 Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03 in substantially the form of Exhibit E.
 
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“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 Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.
 
“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $10,000,000 in the aggregate for any
calendar year.
 
“Change in Control” means the occurrence of any of the following events:  (a)
any Person or group of Persons acting in concert as a partnership or other group
(a “Group of Persons”), shall be the legal or beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
more than 35% of the combined voting power of the then total membership
interests (including all securities which are convertible into membership
interests) of the Borrower, provided, that a “Group of Persons” shall not
include the underwriter in any firm underwriting undertaken in connection with
any public offering of the Borrower, or (b) occupation of a majority of the
seats (other than vacant seats) on the board of directors (or board of managers)
of the Company by Persons who were neither (i) nominated by the board of
directors of the Borrower nor (ii) appointed by directors a majority of whom
were so nominated.
 
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or any Issuing Bank (or,
for purposes of Section 5.01(b), by any lending office of such Lender or by such
Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
 
“Clean Down Period” has the meaning assigned such term in Section 8.18.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
 
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
modified from time to time pursuant to Section 2.06
 
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and (b) modified from time to time pursuant to assignments by or to such Lender
pursuant to Section 12.04(b).  The amount representing each Lender’s Commitment
shall at any time be the lesser of such Lender’s Maximum Credit Amount and such
Lender’s Applicable Percentage of the then effective Borrowing Base.
 
“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following:  (a) the net income of any Person in
which the Borrower or a Consolidated Subsidiary has an interest (which interest
does not cause the net income of such other Person to be consolidated with the
net income of the Borrower and the Consolidated Subsidiaries in accordance with
GAAP), except to the extent of the amount of dividends or distributions actually
paid in cash during such period by such other Person to the Borrower or to a
Consolidated Subsidiary, as the case may be; (b) the net income (but not loss)
during such period of any Consolidated Subsidiary to the extent that the
declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Subsidiary is not at the time permitted by operation
of the terms of its charter or any agreement, instrument or Governmental
Requirement applicable to such Consolidated Subsidiary or is otherwise
restricted or prohibited, in each case determined in accordance with GAAP; (c)
any extraordinary gains or losses during such period; (d) non-cash gains, losses
or adjustments under FASB Statement No. 133 as a result of changes in the fair
market value of derivatives; (e) any gains or losses attributable to writeups or
writedowns of assets, including ceiling test writedowns; and (f) non-cash
share-based payments under FASB Statement No. 123R; and provided further that if
the Borrower or any Consolidated Subsidiary shall acquire or dispose of any
Property during such period, then Consolidated Net Income shall be calculated
after giving pro forma effect to such acquisition or disposition, as if such
acquisition or disposition had occurred on the first day of such period.
 
“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
 
“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.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person will be deemed to “control” such other
Person.  “Controlling” and “Controlled” have meanings correlative thereto.
 
“Cost of Funds” means with respect to any Non-Defaulting Lender, the rate per
annum quoted by such Non-Defaulting Lender to the Administrative Agent as
contemplated in Section 2.04(f) as its cost of funds with respect to a Borrowing
Request, as determined solely by such Non-Defaulting Lender in its reasonable
discretion based upon such factors as such non
 
Credit Agreement
Houston 3931255v.7
 
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Defaulting Lender shall deem appropriate from time to time, including market,
regulatory and liquidity conditions; provided that such rate is not necessarily
the cost to such Non-Defaulting Lender of funding the specific Borrowing
Request.
 
“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, accrued expenses, liabilities or other
obligations of such Person, in each such case to pay the deferred purchase price
of Property or services; (d) 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 has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or with respect to which such Person otherwise
assures a creditor against loss of the Debt (howsoever such assurance shall be
made) to the extent of the lesser of the amount of such Debt and the maximum
stated amount of such guarantee or assurance against loss; (h) all obligations
or undertakings of such Person to maintain or cause to be maintained the
financial position or covenants of others or to purchase the Debt or Property of
others; (i) obligations to deliver commodities, goods or services, including,
without limitation, Hydrocarbons, in consideration of one or more advance
payments, other than gas balancing arrangements in the ordinary course of
business; (j) obligations to pay for goods or services whether or not such goods
or services are actually received or utilized by such Person (other than
obligations under firm transportation or drilling contracts); (k) 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;
(l) Disqualified Capital Stock; and (m) the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment.  The 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.
 
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
 
“Defaulting Lender” means any Lender, as reasonably determined by the
Administrative Agent, that has (a) failed to fund any portion of its Loans or
participations in Letters of Credit within three (3) Business Days of the date
required to be funded by it hereunder, unless with respect to the Loans, the
subject of a good faith dispute, (b) notified the Borrower, the Administrative
Agent, the Issuing Bank or any Lender in writing that it does not intend to
comply with any of its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement, unless the reason such Lender is not
complying with such obligations is due to a good faith dispute with regard to
such obligations, (c) otherwise failed to pay over to the Administrative Agent
or any other Lender any other amount required to be paid by it hereunder within
three (3)
 
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Houston 3931255v.7
 
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Business Days of the date when due, unless the subject of a good faith dispute,
or (d) become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment, provided that a Lender shall
not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any Equity Interest in such Lender or parent company thereof by a Governmental
Authority or agency thereof.
 
“Determination Date” has the meaning given such term in Section 2.04(f)(i).
 
“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 one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.
 
“Distribution Borrowing” means that portion of any Borrowing the proceeds of
which are used to make any Restricted Payment constituting a distribution to
members of the Borrower made in accordance with Section 9.04(a)(iii).
 
“dollars” or “$” refers to lawful money of the United States of America.
 
“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, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: Interest Expense, income taxes,
depreciation, depletion, amortization and other similar charges, minus all
noncash income added to Consolidated Net Income.
 
“EDGAR” means the Electronic Data Gathering Analysis and Retrieval system
operated by the SEC.
 
“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).
 
“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).
 
Credit Agreement
Houston 3931255v.7
 
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“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health and safety (to the extent relating to exposure to Hazardous
Materials), the environment or the preservation or reclamation of natural
resources, in effect in any and all jurisdictions in which the Borrower or any
Subsidiary is conducting or at any time has conducted business, or where any
Property of the Borrower or any Subsidiary is located, including without
limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air
Act, as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the 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 Hazardous Materials Transportation Act, as amended.  The term “oil”
shall have the meaning specified in OPA, the terms “hazardous substance” and
“release” (or “threatened release”) have the meanings specified in CERCLA, the
terms “solid waste” and “disposal” (or “disposed”) have the meanings specified
in RCRA and the term “oil and gas waste” shall mean those waste that are
excluded from the definition of “hazardous waste” pursuant to 40 C.F.R. Section
261.4(b)(5) (“Section 261.4(b)(5)”); provided, however, that (a) in the event
either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment and (b) to the extent the laws of the
state or other jurisdiction in which any Property of the Borrower or any
Subsidiary is located establish a meaning for “oil,” “hazardous substance,”
“release,” “solid waste,” “disposal” or “oil and gas waste” which is broader
than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5), such
broader meaning shall apply.
 
“Environmental Permit” means any permit, registration, license, approval,
consent, exemption, variance, or other authorization of a Governmental Authority
required under or issued pursuant to applicable Environmental Laws.
 
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.
 
“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or any of its Subsidiaries would be deemed to
be a “single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
 
“ERISA Event” means (a) a reportable event described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower or any
of its Subsidiaries 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) in each case solely with respect to a Plan subject to
 

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Houston 3931255v.7
 
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Title IV of ERISA, the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under section 4041 of ERISA, (d)
the institution of proceedings to terminate a Plan by the PBGC, (e) receipt by
the Borrower or any of its Subsidiaries or any ERISA Affiliate of a notice of
withdrawal liability pursuant to section 4202 of ERISA with respect to any
Multiemployer Plan or (f) any other event or condition which might constitute
grounds under section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan subject to Title IV of ERISA.
 
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the LIBO Rate.
 
“Event of Default” has the meaning assigned such term in Section 10.01.
 
“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any of its Subsidiaries or materially
impair the value of material 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 the Borrower or any of its Subsidiaries to provide collateral to the
depository institution; (f)
 
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Houston 3931255v.7
 
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easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any Property of the Borrower or any of its Subsidiaries for
the purpose of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
of its Subsidiaries or materially impair the value of any material 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,
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, provided that any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired and no action to enforce such Lien has been commenced;
and (i) Liens arising from precautionary Uniform Commercial Code financing
statement filings entered into by the Borrower and the Subsidiaries covering
Property under true leases entered into in the ordinary course of business;
provided, further that Liens described in clauses (a) through (e) shall remain
“Excepted Liens” only for so long as no action to enforce such Lien has been
commenced and no intention to subordinate the first priority Lien granted in
favor of the Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens.
 
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America or such other jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable lending
office is located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located and (c) in the case of a Foreign Lender any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender’s failure to comply
with Section 5.03(e), unless such Foreign Lender (or its assignor, if any) was
entitled at the time of designation of a new lending office (or assignment) to
receive additional amounts with respect to such withholding tax pursuant to
Section 5.03(a) or Section 5.03(c).
 
“Existing Credit Agreement” has the meaning assigned to such term in Recital D.
 
“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if
 
Credit Agreement
Houston 3931255v.7
 
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necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received from three Federal funds brokers of recognized standing
selected by the Administrative Agent.
 
“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person.  Unless
otherwise specified, all references to a Financial Officer herein means a
Financial Officer of the Borrower.
 
“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).
 
“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
 
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
 
“Funded Debt” means any Debt of the type described in clause (a), (e), (i) or
(m) of the definition thereof other than Loans.
 
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.
 
“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 or any of its Subsidiaries, any of their Properties, any Agent, any
Issuing Bank or any Lender.
 
“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
 
“Guarantors” means the Subsidiaries of the Borrower listed on Part I of
Schedule 7.14 and each other Material Domestic Subsidiary or other Domestic
Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b).
 
“Guaranty Agreement” means the Fourth Amended and Restated Guaranty and Pledge
Agreement executed by the Guarantors on the date hereof unconditionally
guarantying on a joint and several basis, payment of the Indebtedness, as the
same may be amended, modified or supplemented from time to time.
 
“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law and including, without
limitation:  (a) any chemical,
 

Credit Agreement
Houston 3931255v.7
 
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compound, material, product, byproduct, substance or waste defined as or
included in the definition or meaning of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) petroleum
hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil
and gas waste, crude oil, and any components, fractions, or derivatives thereof;
and (c) radioactive materials, asbestos containing materials, polychlorinated
biphenyls, or radon.
 
“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
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
 
“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
 
“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.
 
“Indebtedness” means, without duplication, any and all amounts owing or to be
owing by the Borrower or any Guarantor (whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising):  (a) to the Administrative Agent, any Issuing
Bank or any Lender under any Loan Document; (b) to any Lender or any Affiliate
of a Lender under any Swap Agreements among such Person and the Borrower or any
Subsidiary and (c) all renewals, extensions and/or rearrangements of any of the
above.
 
“Indemnified Taxes” means Taxes other than Excluded Taxes.
 
“Initial Reserve Report” means that certain Reserve Report by DeGolyer and
MacNaughton, dated January 23, 2009, with respect to Oil and Gas Properties of
the Borrower, as of December 31, 2008.
 
“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04 in substantially the form
of Exhibit F.
 
“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including (a) to the extent included
in interest expense under GAAP:  (i) amortization of debt discount, (ii)
capitalized interest and (iii) the portion of any payments or accruals under
 
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Houston 3931255v.7
 
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Capital Leases allocable to interest expense, plus the portion of any payments
or accruals under Synthetic Leases allocable to interest expense whether or not
the same constitutes interest expense under GAAP and (b) cash dividend payments
by the Borrower in respect of any Disqualified Capital Stock; but excluding
non-cash gains, losses or adjustments under FASB Statement No. 133 as a result
of changes in the fair market value of derivatives.
 
“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
 
“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).
 
“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 unfunded subscription agreement to make any such acquisition or
fund capital calls (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, but excluding any unconsummated purchase and sale
agreements to purchase all or substantially all the Equity Interests of Persons
owning Oil and Gas Properties); (b) the making of any deposit with, or advance,
loan or capital contribution to, assumption of Debt of, 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 or supplies sold by such
Person in the ordinary course of business); (c) the purchase or acquisition (in
one or a series of transactions) of Property of another Person that constitutes
a business unit or (d) the entering into of any guarantee of, or other
contingent obligation (including the deposit of any Equity Interests to be sold)
with respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.
 
“Issuing Bank” means each of BNP Paribas and any other Lender agreeing to act as
an Issuing Bank, in its capacity as an issuer of Letters of Credit hereunder,
and its successors in such capacity as provided in Section 2.08(i).  Any Issuing
Bank may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of such Issuing Bank, in which case
 
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Houston 3931255v.7
 
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the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
 
“LC Commitment” at any time means Fifty Million Dollars ($50,000,000).
 
“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter
of Credit issued by such Issuing Bank.
 
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time.  The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
 
“Lender Hedging Obligation” means all liabilities and obligations of a Lender or
its Affiliates as a counterparty under a Swap Agreement to the Borrower or a
Subsidiary of the Borrower.
 
“Lenders” means the Persons listed on Annex I, and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
 
“Letter of Credit” means any letter of credit issued pursuant to this Agreement.
 
“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with any Issuing
Bank relating to any Letter of Credit issued by such Issuing Bank.
 
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period.  In the event that such rate does not appear on such page (or otherwise
on such screen), the “LIBO Rate” shall be determined by reference to such other
comparable publicly available service for displaying eurodollar rates as may be
selected by the Administrative Agent or, in the absence of such availability, by
reference to the rate at which the Administrative Agent is offered dollar
deposits at or about 11:00 A.M., London time, two Business Days prior to the
beginning of such Interest Period in the interbank Eurodollar market where its
Eurodollar and foreign currency and exchange operations are then being conducted
for delivery on the first day of such Interest Period for the number of days
comprised therein.
 
“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for
 
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security purposes or (b) production payments and the like payable out of Oil and
Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which they have acquired or hold subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
 
“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.
 
“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.
 
“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50.0%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50.0%) of the outstanding
aggregate principal amount of the Loans and participation interests in Letters
of Credit (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)).
 
“Managers” means the members of the Board of Managers or Board of Directors
(however designated from time to time) of the Borrower as constituted from time
to time.
 
“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, condition (financial
or otherwise) or prospects of the Borrower and the Guarantors taken as a whole,
(b) the ability of the Borrower, any of its Subsidiaries or any Guarantor to
perform any of its obligations under any Loan Document to which it is a party,
(c) the validity or enforceability of any Loan Document or (d) the rights and
remedies of or benefits available to the Administrative Agent, any other Agent,
any Issuing Bank or any Lender under any Loan Document.
 
“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary
that (a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries,
owns Property having a fair market value of $10,000,000 or more.
 
“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 Subsidiaries in an aggregate principal amount exceeding
$10,000,000.  For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any of its Subsidiaries in respect
of any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.
 
“Maturity Date” means August 1, 2012.
 
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“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) or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(b).
 
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.
 
“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.
 
“Multiemployer Plan” means a multiemployer plan as defined in section 3(37) or
4001 (a)(3) of ERISA to which any Borrower or any Subsidiary or any ERISA
Affiliate is making or accruing an obligation to make contributions, or has
within the six calendar years preceding the date hereof, made or accrued an
obligation to make contributions.
 
“Net Cash Proceeds” means (a) in connection with any issuance or sale of Equity
Interests, Debt securities, Casualty Events or the incurrence of Debt, the cash
proceeds received from such issuance or incurrence, net of attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith; and (b) in connection with any Asset Sale, the cash
proceeds thereof (including cash proceeds subsequently received (as and when
received) in respect of noncash consideration initially received), net of (i)
selling and other expenses (including reasonable broker’s fees or commissions,
legal fees, transfer and similar taxes, and the Borrower’s good faith estimate
of income taxes actually paid or payable in connection with such sale), (ii)
amounts provided as a reserve, in accordance with GAAP, against any liabilities
under any indemnification obligations or purchase price adjustment associated
with such Asset Sale (provided that, to the extent and at the time any such
amounts are released from such reserve, such amounts shall constitute Net Cash
Proceeds) and (iii) any amount payable in respect of any Debt for borrowed money
which is secured by the asset sold in such Asset Sale and which is required to
be repaid with such proceeds (excluding any such Debt assumed by the purchaser
of such asset).
 
“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).
 
“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.
 
“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
 
Credit Agreement
Houston 3931255v.7
 
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(including without limitation all units created under orders, regulations and
rules of any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; (d) all operating agreements, contracts and other
agreements, including production sharing contracts and agreements, which relate
to any of the Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; (e) all Hydrocarbons in and under and which may be produced and saved
or attributable to the Hydrocarbon Interests, including all oil in tanks, and
all rents, issues, profits, proceeds, products, revenues and other incomes from
or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment, rental equipment or other personal Property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells, injection wells
or other wells, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.
 
“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or Property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.
 
“Participant” has the meaning set forth in Section 12.04(c)(i).
 
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
 
“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all
of the Senior Notes or any Permitted Refinancing Debt theretofore incurred (as
applicable, the “Refinanced Debt”); provided that (a) such new Debt is in an
aggregate principal amount not in excess of $255,927,000; (b) such new Debt has
a stated maturity no earlier than the day 365 days after August 1, 2012; and (c)
such new Debt (and any guarantees thereof) is subordinated in right of payment
to the Indebtedness (or, if applicable, the Guaranty Agreement) to at least the
same extent as the Refinanced Debt or is otherwise subordinated on terms
reasonably satisfactory to the Administrative Agent.
 
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
 
Credit Agreement
Houston 3931255v.7
 
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“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored or maintained by the
Borrower, any of its Subsidiaries or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored or maintained
by the Borrower, any of its Subsidiaries or an ERISA Affiliate.
 
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by BNP Paribas 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 BNP Paribas as a general reference rate of interest, taking into
account such factors as BNP Paribas may deem appropriate; it being understood
that many of BNP Paribas’s commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or best rate actually charged
to any customer and that BNP Paribas may make various commercial or other loans
at rates of interest having no relationship to such rate.
 
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.
 
“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i).
 
“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).
 
“Proved Developed Producing Properties” means Oil and Gas Properties which are
categorized as “Proved Reserves” that are both “Developed” and “Producing”, as
such terms are defined in the Definitions for Oil and Gas Reserves as
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.
 
“Proved Properties” means Oil and Gas Properties which are identified as “Proved
Reserves” on the most recent Engineering Report.
 
“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment or defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of any
such Debt.  “Redeem” has the correlative meaning thereto.
 
“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).
 
“Reference Bank Cost of Funds Rate” means the rate determined pursuant to
Section 2.04(f)(ii).
 
“Register” has the meaning assigned such term in Section 12.04(b)(iv).
 
Credit Agreement
Houston 3931255v.7
 
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“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person’s Affiliates.
 
“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing.
 
“Remedial Work” has the meaning assigned such term in Section 8.10(a).
 
“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st or
June 30th (or such other date in the event of an Interim Redetermination) the
oil and gas reserves attributable to the Oil and Gas Properties of the Borrower
and its 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 economic assumptions consistent
with the Administrative Agent’s lending requirements at the time.
 
“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person.  Unless
otherwise specified, all references to a Responsible Officer herein means 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 Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries.
 
“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.
 
“Scheduled Redetermination” has the meaning assigned such term 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.
 
“Security Instruments” means the Guaranty Agreement, if any, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit C, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by the Borrower or any
other Person (other than Swap Agreements with the Lenders or any Affiliate of a
Lender or participation or similar agreements between any Lender and any
 

Credit Agreement
Houston 3931255v.7
 
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other lender or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or performance of
the Indebtedness, the Notes, this Agreement, or reimbursement obligations under
the Letters of Credit, as such agreements may be amended, modified, supplemented
or restated from time to time.
 
“Senior Notes” means the $255,927,000, 9-7/8% Senior Notes due 2018 and any
Permitted Refinancing Debt in respect thereof.
 
“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:  (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” means a Subsidiary of the Borrower.
 
“Super-Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two-thirds percent (66-⅔%) of
the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two-thirds
percent (66-⅔%) of the outstanding aggregate principal amount of the Loans and
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)).
 
“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 rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Borrower or any of its
Subsidiaries shall be a Swap Agreement.
 
“Swap PV” means, with respect to any Swap Agreement, the present value,
discounted at 9% per annum, of the future receipts expected to be paid to the
Borrower under such Swap Agreement netted against the Bank Price Deck in effect
as of the most recent Proposed Borrowing Base Notice, provided however, that the
“Swap PV” shall never be less than $0.00.
 
“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
 
Credit Agreement
Houston 3931255v.7
 
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U.S. federal income taxes, if the lessee in respect thereof is obligated to
either purchase for an amount in excess of, or pay upon early termination an
amount in excess of, 80% of the residual value of the Property subject to such
operating lease upon expiration or early termination of such lease.
 
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
 
“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.
 
“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement and each other Loan Document
to which it is a party, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, and the grant of Liens by the
Borrower on Mortgaged Properties and other Properties pursuant to the Security
Instruments and (b) each Guarantor, the execution, delivery and performance by
such Guarantor of each Loan Document to which it is a party, the guaranteeing of
the Indebtedness and the other obligations under the Guaranty Agreement by such
Guarantor and such Guarantor’s grant of the security interests and provision of
collateral under the Security Instruments, and the grant of Liens by such
Guarantor on Mortgaged Properties and other Properties pursuant to the Security
Instruments.
 
“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 LIBO Rate.
 
“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.  The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined.  Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in
 
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Houston 3931255v.7
 
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part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person’s successors and assigns (subject to
the restrictions contained in the Loan Documents), (d) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word
“from” means “from and including” and the word “to” means “to and including” and
(f) any reference herein to Articles, Sections, 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 terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Majority Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision  amended in accordance herewith.
 
ARTICLE II
The Credits
 
Section 2.01            Commitments.  Subject to the terms and conditions set
forth herein, each Lender agrees to make Loans to the Borrower during the
Availability Period in an aggregate principal amount that will not result in (a)
such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or
(b) the total Revolving Credit Exposures exceeding the total
Commitments.  Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, repay and reborrow the
Loans.
 
Section 2.02             Loans and Borrowings.
 
(a)        Borrowings; Several Obligations.  Each Loan shall be made as part of
a Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.
 
(b)        Types of Loans.  Subject to Section 3.03, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith.  Each Lender at its option may make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any
 
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Houston 3931255v.7
 
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exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement.
 
(c)        Minimum Amounts; Limitation on Number of Borrowings.  At the
commencement of each Interest Period for any Eurodollar Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 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 $250,000 and not less than $1,000,000; provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section
2.08(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 twelve (12)
Eurodollar Borrowings outstanding.  Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
 
(d)        Notes.  Upon the request of a Lender, the Loans made by such Lender
shall be evidenced by a single promissory note of the Borrower in substantially
the form of Exhibit A, dated, (i) as of the date of this Agreement in the case
of any Lender party hereto as of the date of this Agreement or (ii) as of the
effective date of the Assignment and Assumption in the case of any Lender that
becomes a party hereto pursuant to an 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.  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,
upon the request of such Lender, deliver or cause to be delivered on the
effective date of such increase or decrease, a new Note payable to the order of
such Lender in a principal amount equal to its Maximum Credit Amount after
giving effect to such increase or decrease, and otherwise duly completed, and
such Lender shall promptly return to the Borrower the previously issued Note
held by such Lender.  The date, amount, Type, interest rate and, if applicable,
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Note, and, prior to any transfer, may be endorsed by such Lender on a
schedule attached to such Note or any continuation thereof or on any separate
record maintained by such Lender.  Failure to make any such notation or to
attach a schedule shall not affect any Lender’s or the Borrower’s rights or
obligations in respect of such Loans or affect the validity of such transfer by
any Lender of its Note.
 
(e)        Loans and Borrowings under the Existing Credit Agreement.  On the
Effective Date (or as soon as practicable with respect to (iii)):
 
(i)           the Borrower shall pay all accrued and unpaid commitment fees,
break funding fees under Section 5.02 and all other fees that are outstanding
under the Existing Credit Agreement for the account of each “Lender” under the
Existing Credit Agreement;
 
(ii)          each “ABR Loan” and “Eurodollar Loan” outstanding under the
Existing Credit Agreement shall be deemed to be amended and restated with the
proceeds of a
 
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Houston 3931255v.7
 
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new ABR Loan or Eurodollar Loan, as applicable, and continued as existing Loans
under this Agreement and not as a novation;
 
(iii)         the Administrative Agent shall use reasonable efforts to cause
each “Lender” under the Existing Credit Agreement to deliver to the Borrower as
soon as practicable after the Effective Date the Note issued by the Borrower to
it under the Existing Credit Agreement, marked “canceled” or otherwise similarly
defaced;
 
(iv)         any letters of credit outstanding under the Existing Credit
Agreement shall be deemed issued under this Agreement; and
 
(v)          the Existing Credit Agreement and the commitments thereunder shall
be superceded by this Agreement and such commitments shall terminate.
 
It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence repayment of any such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the obligations of the Borrower outstanding thereunder.
 
Section 2.03            Requests for Borrowings.  To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 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 12:00 noon, 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 2.08(e).  Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy 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 in compliance with Section 2.02:
 
(i)           the aggregate amount of the requested Borrowing;
 
(ii)          the date of such Borrowing, which shall be a Business Day;
 
(iii)         whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
 
(iv)         in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term “Interest Period”;
 
(v)          the amount of the then effective Borrowing Base, 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
 
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(vi)         the location and number of the Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of Section 2.05.
 
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be a Eurodollar Loan having an Interest Period of one month.  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
total Revolving Credit Exposures to exceed the total Commitments (i.e., the
lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing
Base).
 
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 telecopy 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:
 
(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)(iii) and
(iv) shall be specified for each resulting Borrowing);
 
(ii)           the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
 
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Houston 3931255v.7
 
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(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.
 
(e)        Effect of Failure to Deliver Timely Interest Election Request and
Events of Default and Borrowing Base Deficiencies 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 continued as a Eurodollar Loan having an
Interest Period of one-month.  Notwithstanding any contrary provision hereof,
(i) if an Event of Default has occurred and is continuing:  (A) 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 (B) unless repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto and (ii) if a
Borrowing Base Deficiency exists:  (A) outstanding Borrowings may not be
converted or continued as Eurodollar Borrowings unless, after giving effect
thereto and to the conversion or continuation of Borrowings to ABR Borrowings,
there are ABR Borrowings in an amount no less than the amount of such Borrowing
Base Deficiency and (B) unless sooner repaid, any Eurodollar Borrowing in excess
of the Borrowing Base shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.
 
(f)         Reference Bank Cost of Funds Rate.
 
(i)           For each Business Day (A) that the Administrative Agent receives a
Borrowing Request or an Interest Election Request for an ABR Loan (including any
request for a Eurodollar Borrowing converted to an ABR Borrowing pursuant to
Section 3.03 or as a result of illegality pursuant to Section 5.05) (each
individually, an “ABR Request”), on or prior to 1:00 p.m., New York City time on
such Business Day and (B) that an ABR Loan is outstanding under this Agreement
and the Alternate Base Rate (without reference to the Reference Bank Cost of
Funds Rate) communicated by the Administrative Agent on the previous Business
Day has changed, on or prior to 10:00 a.m., New York City time, on each such
Business Day, the Administrative Agent shall communicate the Alternate Base Rate
on such Business Day (without reference to the Reference Bank Cost of Funds Rate
(as defined below)) to each Lender.  Each Lender shall notify the Administrative
Agent no later than 2:00 p.m., New York City time, on
 
Credit Agreement
Houston 3931255v.7
 
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such Business Day an ABR Request is received by the Administrative Agent, and
11:00 a.m., New York City time, on each Business Day that an ABR Loan is
outstanding (in each instance, a “Determination Date”), whether such Lender’s
Cost of Funds exceeds the Alternate Base Rate for such Business Day (without
reference to the Reference Bank Cost of Funds Rate (as defined below)).   Any
Lender that does not provide notice to the Administrative Agent with respect to
its Cost of Funds prior to 2:00 p.m. or 11:00 a.m., New York City time, on such
Business Day, as applicable, shall be deemed to have confirmed to the
Administrative Agent that such Lender’s Cost of Funds does not exceed the
Alternate Base Rate without reference to the Reference Bank Cost of Funds Rate.
 
(ii)           If sixty-five percent (65%) or more of the Lenders with a
Commitment as of an applicable Determination Date (the “Cost of Funds
Calculation Threshold”) notify the Administrative Agent that their Cost of Funds
exceeds the Alternate Base Rate (without reference to the Reference Bank Cost of
Funds Rate) communicated by the Administrative Agent, then the Administrative
Agent shall calculate the “Reference Bank Cost of Funds Rate” which shall be
calculated as the simple average of the Cost of Funds of the Lenders; provided
that, in no instance shall the Cost of Funds for any Lender exceed the Alternate
Base Rate for such Business Day (without reference to the Reference Bank Cost of
Funds Rate) quoted by the Administrative Agent by more than one and a half
percent (1.5%); and provided further that, any Lender which does not submit a
Cost of Funds Rate shall be deemed to have confirmed to the Administrative Agent
that such Lender’s Cost of Funds does not exceed the Alternate Base Rate without
reference to the Reference Bank Cost of Funds Rate. The Alternate Base Rate
communicated by the Administrative Agent as of such Determination Date (without
reference to the Reference Bank Cost of Funds) shall be used for each such
Lender which does not submit a Cost of Funds Rate to calculate the Reference
Bank Cost of Funds Rate.  If the Cost of Funds Calculation Threshold is not met,
then the Reference Bank Cost of Funds Rate shall not be calculated and shall be
disregarded for the purposes of calculating the Alternate Base Rate as of such
Determination Date. For purposes of determining the Reference Bank Cost of Funds
Rate, each Lender and the Administrative Agent may provide notice by electronic
communications pursuant to procedures approved by the Administrative Agent.
 
(iii)          On any Determination Date that a Reference Bank Cost of Funds
Rate is calculated, the Administrative Agent shall calculate the Reference Bank
Cost of Funds Rate in accordance with the procedures set forth in subsection
(ii) above and shall provide such rate to the Borrower and the Lenders no later
than 3:00 pm, New York City time for a ABR Request and 12:00 noon, New York City
time on each Business Day that an ABR Loan is outstanding, which rate shall be
provided as a simple average rate, without identifying the underlying rates
submitted by the Lenders.
 
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
 
Credit Agreement
Houston 3931255v.7
 
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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 2.08(e) shall be remitted by the
Administrative Agent to the Issuing Bank that made such LC
Disbursement.  Nothing herein shall be deemed to obligate any Lender to obtain
the funds for its Loan in any particular place or manner or to constitute a
representation by any Lender that it has obtained or will obtain the funds for
its Loan in any particular place or manner.
 
(b)        Presumption of Funding by the Lenders.  Unless the Administrative
Agent shall have received notice from a Lender prior to the proposed 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 and including the date such amount is made available
to the Borrower to but excluding 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 ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.
 
Section 2.06             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 or the Borrowing Base 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 $500,000 and not less than $1,000,000 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 total
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 Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each
 
Credit Agreement
Houston 3931255v.7
 
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notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be
irrevocable.  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
Effective Date to but excluding October 1, 2009, the amount of the Borrowing
Base shall be $1,750,000,000.  Notwithstanding the foregoing, the Borrowing Base
may be subject to further adjustments from time to time pursuant to Section
2.07(e), Section 2.07(f), Section 8.13(c), Section 9.02(g) or Section
9.12(d).  The Borrowing Base shall, under no circumstances, exceed the Aggregate
Maximum Credit Amounts.
 
(b)        Scheduled and Interim Redeterminations.  Subject to Section 2.07(d),
the Borrowing Base shall be redetermined (a “Scheduled Redetermination”) on
April 1st and October 1st of each year, commencing October 1, 2009.  In
addition, either the Borrower or the Administrative Agent, at the direction of
the Majority Lenders, may, once during each calendar year, each elect to cause
the Borrowing Base to be redetermined between Scheduled Redeterminations (an
“Interim Redetermination”) in accordance with this Section 2.07.  The Borrower
shall have the right, once during each calendar year, to initiate an Interim
Redetermination in addition to the one otherwise provided in this Section
2.07(b) upon the proposed acquisition of Proved Developed Producing Properties
whose purchase price is greater than 10% of the Borrowing Base, provided such
Interim Redetermination is in accordance with this Section 2.07.
 
(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 certificate required to be delivered by the
Borrower to the Administrative Agent, in the case of a Scheduled
Redetermination, pursuant to Sections 8.12(a) and (c), and, in the case of an
Interim Redetermination, pursuant to Sections 8.12(b) and (c), and (B) such
other reports, data and supplemental information, including, without limitation,
the information provided pursuant to Section 8.12(c) and the list of Swap
Agreements per Section 8.01(d), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in good faith, propose a new Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such other
information (including, without limitation, the status of title information with
respect to the Oil and Gas Properties as described in the Engineering Reports
and the existence of any other Debt) as the Administrative Agent, in good faith,
deems appropriate and consistent with its normal oil and gas lending criteria as
it exists at the particular time.  In addition, the Administrative Agent will
summarize the Swap PV of such Swap Agreements as of the date of the Proposed
Borrowing Base Notice.  In no event shall the Proposed Borrowing Base exceed the
Aggregate Maximum Credit Amounts.
 
Credit Agreement
Houston 3931255v.7
 
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(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 8.12(a) and (c) in a timely and complete
manner, then on or before the March 15th and September 15th of such year
following the date of delivery of such Engineering Report or (2) if the
Administrative Agent shall not have received the Engineering Reports required to
be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then promptly after the Administrative Agent has received
complete Engineering Reports from the Borrower and has had a reasonable
opportunity to determine the Proposed Borrowing Base in accordance with Section
2.07(c)(i) and in any event, within fifteen (15) days after the Administrative
Agent has received the required Engineering Report; and
 
(B)          in the case of an Interim Redetermination, promptly, and in any
event, within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.
 
(iii)          Any Proposed Borrowing Base that would increase the Borrowing
Base then in effect must be approved or deemed to have been approved by all of
the Lenders as provided in this Section 2.07(c)(iii); and any Proposed Borrowing
Base that would decrease or maintain the Borrowing Base then in effect must be
approved or be deemed to have been approved by the Super-Majority Lenders 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.  If at the end of such fifteen (15) days, any Lender
has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base.  If, at the end of such 15-day period, all of the
Lenders, in the case of a Proposed Borrowing Base that would increase the
Borrowing Base then in effect, or the Super-Majority Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect, have approved or deemed to have approved, as aforesaid, then the
Proposed Borrowing Base shall become the new Borrowing Base effective on the
date specified in Section 2.07(d).  If, however, at the end of such 15-day
period, all of the Lenders or the Super-Majority Lenders, as applicable, have
not approved or deemed to have approved, as aforesaid, then the Administrative
Agent shall poll the Lenders to ascertain the highest Borrowing Base then
acceptable to a number of Lenders sufficient to constitute the Super-Majority
Lenders and, so long as such amount does not increase the Borrowing Base then in
effect, such amount shall become the new Borrowing Base effective on the date
specified in Section 2.07(d).
 
(d)        Effectiveness of a Redetermined Borrowing Base.  After a redetermined
Borrowing Base is approved or is deemed to have been approved by all of the
Lenders or the Super-Majority Lenders, as applicable, pursuant to Section
2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders
(the “New Borrowing Base Notice”) of the amount of the redetermined Borrowing
Base, and such amount shall become the new Borrowing Base
 
Credit Agreement
Houston 3931255v.7
 
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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 8.12(a) and (c) in a timely and
complete manner, then on the April 1st or October 1st, as applicable, following
delivery of the New Borrowing Base Notice, or (B) if the Administrative Agent
shall not have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on the Business Day next succeeding delivery of the New Borrowing Base
Notice; and
 
(ii)           in the case of an Interim Redetermination, on the Business Day
next succeeding delivery of the 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 under Section 2.07(e), Section 2.07(f), Section
8.13(c), Section 9.02(g) or Section 9.12(d), whichever occurs first.
 
(e)        Reduction of the Borrowing Base Upon Issuance of Funded
Debt.  Notwithstanding anything to the contrary contained herein, upon the
issuance of any Funded Debt (excluding Permitted Refinancing Debt), 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 Debt (excluding any
original issue discount), and the Borrowing Base as so reduced shall become the
new Borrowing Base immediately upon the date of such issuance, effective and
applicable to the Borrower, the Agents, each Issuing Bank and the Lenders on
such date until the next redetermination or modification thereof hereunder.
 
(f)         Reduction of Borrowing Base Upon Termination of Hedge Positions.  If
the Borrower or any Subsidiary shall terminate or create any off-setting
positions in respect of any hedge positions upon which the Lenders relied in
determining the most recent Borrowing Base, and the aggregate Swap PV of all
such terminations and/or offsetting positions exceeds, during any period between
redeterminations of the Borrowing Base, the lesser of (a) $50,000,000 or (b) 3%
of the then effective Borrowing Base, then the Borrowing Base shall be
simultaneously reduced in an amount equal to 65% of such aggregate Swap PV.
 
Section 2.08             Letters of Credit.
 
(a)        General.  Subject to the terms and conditions set forth herein, the
Borrower may request any Issuing Bank to issue Letters of Credit for its own
account or for the account of the Borrower or any of its Subsidiaries, in a form
reasonably acceptable to the Administrative Agent and such 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 a Borrowing Base Deficiency exists at such time
or would exist as a result thereof.  In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit
 
Credit Agreement
Houston 3931255v.7
 
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application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, an Issuing Bank relating to any Letter of Credit, 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
deliver as permitted by Section 12.01(a) (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to any 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 issued by such Issuing Bank 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 2.08(c));
 
(iv)         specifying the amount of such Letter of Credit;
 
(v)          specifying the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit; and
 
(vi)         specifying the 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) 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 and (ii) the total Revolving Credit
Exposures shall not exceed the lesser of the Aggregate Maximum Credit Amounts
and the then effective Borrowing Base.
 
If requested by any Issuing Bank, the Borrower also shall submit a letter of
credit application on such Issuing Bank’s standard form in connection with any
request for a Letter of Credit.
 
(c)        Expiration Date.  Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date eighteen months after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
 
Credit Agreement
Houston 3931255v.7
 
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(d)        Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank that issues such Letter of Credit
or the Lenders, each Issuing Bank that issues a Letter of Credit hereunder
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 any Issuing Bank that issues a Letter of Credit hereunder,
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
2.08(e), or of any reimbursement payment required to be refunded to the Borrower
for any reason.  Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this Section 2.08(d) in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default, the existence
of a Borrowing Base Deficiency or reduction or termination of the Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
 
(e)        Reimbursement.  If any Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit issued by such Issuing Bank, the Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent an amount
equal to such LC Disbursement not later than 1:00 p.m., Houston time, on the
third day after such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 9:00 a.m., Houston time, on
such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 1:00 p.m., Houston time, on (i) the
third day after the Borrower receives such notice, if such notice is received
prior to 9:00 a.m., Houston time, on the day of receipt, or (ii) the Business
Day immediately following the third day after the Borrower receives such notice,
if such notice is not received prior to such time on the day of receipt;
provided that if such LC Disbursement is not less than $1,000,000, the Borrower
shall, subject to the conditions to Borrowing set forth herein, be deemed to
have requested, and the Borrower does hereby request under such circumstances,
that such payment be financed with a Eurodollar Borrowing with an Interest
Period of one month 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 Eurodollar 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 Issuing Bank that issued
such Letter of Credit 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 2.08(e), the Administrative Agent shall distribute such
payment to the Issuing Bank that issued such Letter of Credit or, to the extent
that
 
Credit Agreement
Houston 3931255v.7
 
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Lenders have made payments pursuant to this Section 2.08(e) to reimburse such
Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear.  Any payment made by a Lender pursuant to this Section 2.08(e) to
reimburse any 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.  Any
LC Disbursement not reimbursed by the Borrower or funded as a Loan prior to 1:00
p.m., Houston time, shall bear interest for such day at the Alternate Base Rate
plus the Applicable Margin.
 
(f)        Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a
Letter of Credit issued by such Issuing Bank against presentation of a draft or
other document that does not 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 2.08(f), 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 any Issuing Bank; provided that the foregoing shall not be
construed to excuse any Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of any Issuing Bank (as finally determined by a court of
competent jurisdiction), such Issuing Bank shall be deemed to have exercised all
requisite care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank that issued such Letter
of Credit 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.
 
Credit Agreement
Houston 3931255v.7
 
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(g)       Disbursement Procedures.  Each Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit issued by such Issuing Bank.  Such Issuing Bank
shall promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Issuing Bank
has made or will make an LC Disbursement thereunder; provided that any failure
to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse such Issuing Bank and the Lenders with respect to any
such LC Disbursement.
 
(h)       Interim Interest.  If any Issuing Bank shall make any LC Disbursement,
then, until the Borrower shall have reimbursed such Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans.  Interest accrued pursuant to this Section 2.08(h) shall be for
the account of such Issuing Bank, except that interest accrued on and after the
date of payment by any Lender pursuant to Section 2.08(e) to reimburse such
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
 
(i)         Replacement of an Issuing Bank.  Any Issuing Bank may be replaced or
resign at any time by written agreement among the Borrower, the Administrative
Agent, such resigning or replaced Issuing Bank and, in the case of a
replacement, the successor Issuing Bank.  The Administrative Agent shall notify
the Lenders of any such resignation or replacement of an Issuing Bank.  At the
time any such resignation or replacement shall become effective, the Borrower
shall pay all unpaid fees accrued for the account of the resigning or replaced
Issuing Bank pursuant to Section 3.05(b).  In the case of the replacement of an
Issuing Bank, from and after the effective date of 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 “Issuing Bank” shall be deemed to refer
to such successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require.  After the resignation or
replacement of an Issuing Bank hereunder, the resigning or 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 resignation or replacement, but shall not be
required to issue additional Letters of Credit.
 
(j)         Cash Collateralization.  If (i) any Event of Default shall occur and
be continuing and the Borrower receives notice from the Administrative Agent or
the Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to, in the case of
an Event of Default, the LC Exposure, and in the case of a payment required by
Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of
such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become
 
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Houston 3931255v.7
 
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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 of its Subsidiaries
described in Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants
to the Administrative Agent, for the benefit of each Issuing Bank and the
Lenders, an exclusive first priority and continuing perfected security interest
in and Lien on such account and all cash, checks, drafts, certificates and
instruments, if any, from time to time deposited or held in such account, all
deposits or wire transfers made thereto, any and all investments purchased with
funds deposited in such account, all interest, dividends, cash, instruments,
financial assets and other Property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any or all of the
foregoing, and all proceeds, products, accessions, rents, profits, income and
benefits therefrom, and any substitutions and replacements therefor.  The
Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall
be absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any of its
Subsidiaries may now or hereafter have against any such beneficiary, any Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s and any Guarantor’s obligations under this
Agreement and the other Loan Documents.  The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account; provided that investments of funds in such account in
investments permitted by Section 9.05(c) or (e) may be made at the option of the
Borrower at its direction, risk and expense.  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, on a pro rata basis, each
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, if any, 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.
 
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.
 
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Houston 3931255v.7
 
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Section 3.02             Interest.
 
(a)        ABR Loans.  Each ABR Loan comprising an ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate.
 
(b)        Eurodollar Loans.  Each Eurodollar Loan comprising a Eurodollar
Borrowing shall bear interest at the LIBO Rate for the Interest Period in effect
for such Eurodollar Loan plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate.
 
(c)        Post-Default and Borrowing Base Deficiency Rate.  Notwithstanding the
foregoing, (i) if an Event of Default has occurred and is continuing, or if any
principal of or interest on any Loan or any fee or other amount payable by the
Borrower or any Guarantor hereunder or under any other Loan Document is not paid
when due, whether at stated maturity, upon acceleration or otherwise, and
including any payments in respect of a Borrowing Base Deficiency under Section
3.04(c), then all Loans outstanding, in the case of an Event of Default, and
such overdue amount, in the case of a failure to pay amounts when due, shall
bear interest, after as well as before judgment, at a rate per annum equal to
two percent (2%) plus the rate applicable to ABR Loans as provided in Section
3.02(a), but in no event to exceed the Highest Lawful Rate, and (ii) during any
Borrowing Base Deficiency, the amount of such Borrowing Base Deficiency shall
bear interest, after as well as before judgment, at the rate then applicable to
such Loans, plus the Applicable Margin, if any, plus an additional two percent
(2%), but in no event to exceed the Highest Lawful Rate.
 
(d)        Interest Payment Dates.  Accrued interest on each Loan shall be
payable in arrears on:  (i) with respect to any ABR Loan, the last day of each
March, June, September and December; (ii) with respect to any Eurodollar Loan,
the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part but in all cases to be paid at least every three months and (iii)
in any case, on the Termination Date; provided that (A) interest accrued
pursuant to Section 3.02(c)(i) shall be payable on demand, (B) 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 (C) 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 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 LIBO Rate shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error, and be binding upon the parties hereto.
 
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Houston 3931255v.7
 
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Section 3.03             Altnerate Rate of Interest.  If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
 
(a)        the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the LIBO Rate for such Interest Period; or
 
(b)        the Administrative Agent is advised by the Majority Lenders that the
LIBO Rate for such Interest Period will not adequately and fairly reflect the
cost to such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;
 
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
 
Section 3.04             Prepayments.
 
(a)        Optional Prepayments.  The Borrower shall have the right at any time
and from time to time to prepay any Borrowing in whole or in part, subject to
prior notice in accordance with Section 3.04(b) and payment of applicable
breakage costs, if any, under Section 5.02.
 
(b)        Notice and Terms of Optional Prepayment.  The Borrower shall notify
the Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 12:00 noon, Houston time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, Houston time, one Business Day before the date of
prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid.  Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02.  Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 3.02.
 
(c)        Mandatory Prepayments.
 
(i)           If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), the total
Revolving Credit Exposures exceeds the total Commitments, then the Borrower
shall, on the same Business Day, (A) prepay the Borrowings on the date of such
termination or reduction in an aggregate principal
 
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Houston 3931255v.7
 
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amount equal to such excess, and (B) if any excess remains after prepaying all
of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent
on behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j).
 
(ii)           Upon any redetermination of or adjustment to the amount of the
Borrowing Base in accordance with Section 2.07(a) through (d) or Section
8.13(c), if the total Revolving Credit Exposures exceeds the redetermined or
adjusted Borrowing Base, then the Borrower shall (A) prepay the Borrowings 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 an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).  The Borrower shall
be obligated to make such prepayment and/or deposit of cash collateral within
ninety days (90) following the later of its receipt of the New Borrowing Base
Notice in accordance with Section 2.07(d) or the date the adjustment occurs;
provided that all payments required to be made pursuant to this Section
3.04(c)(ii) must be made on or prior to the Termination Date.
 
(iii)          Upon any adjustments to the Borrowing Base pursuant to Section
2.07(e), Section 2.07(f) or Section 9.12(d), if the total Revolving Credit
Exposures exceed the Borrowing Base as adjusted, then the Borrower shall (A)
prepay the Borrowings 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
an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an
amount equal to such excess to be held as cash collateral as provided in Section
2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit
of cash collateral on the date it or any Subsidiary receives cash proceeds as a
result of such termination, creation of offsetting positions or disposition, as
applicable; provided that all payments required to be made pursuant to this
Section 3.04(c)(iii) must be made on or prior to the Termination Date.
 
(iv)         If, at any time after the Effective Date, the Borrower issues
additional Funded Debt and any Borrowing Base Deficiency exists, then the
Borrower shall (a) use 100% of the Net Cash Proceeds from the issuance of such
Funded Debt to prepay the Borrowings in an aggregate principal amount equal to
such excess, and (b) if, as a result of an LC Exposure, any Borrowing Base
Deficiency remains after prepaying all of the Borrowings, deposit with the
Administrative Agent on behalf of the Lenders an amount equal to the lesser of
such LC Exposure and any remaining Net Cash Proceeds to be held as cash
collateral as provided in Section 2.08(j).  The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral as soon as practical, and
in any event no later than the Business Day after it or any Subsidiary receives
such Net Cash Proceeds as a result of such issuance of Funded Debt.
 
(v)          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
 
Credit Agreement
Houston 3931255v.7
 
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thereto and ending with the Eurodollar Borrowing with the most number of days
remaining in the Interest Period applicable thereto.
 
(vi)         Each prepayment of Borrowings pursuant to this Section 3.04(c)
shall be applied ratably to the Loans included in the prepaid
Borrowings.  Prepayments pursuant to this Section 3.04(c) shall be accompanied
by accrued interest to the extent required by Section 3.02.
 
(vii)        If there is less than $350,000,000 in availability under this
Agreement after giving effect to any adjustment to the Borrowing Base pursuant
to Section 9.12, then the Borrower shall (A) use 100% of the Net Cash Proceeds
from any Asset Sale to prepay the Borrowings until there is at least
$350,000,000 in availability under this Agreement after giving effect to any
adjustments to the Borrowing Base pursuant to Section 9.12 and (B) if, as a
result of an LC Exposure, any Borrowing Base Deficiency remains after prepaying
all of the Borrowings, deposit with the Administrative Agent on behalf of the
Lenders an amount equal to the lesser of such LC Exposure and any remaining Net
Cash Proceeds to be held as cash collateral as provided in Section 2.08(j).  The
Borrower shall be obligated to make such prepayment and/or deposit of cash
collateral as soon as practicable and in any event no later than the Business
Day after it or any Subsidiary receives such Net Cash Proceeds as a result of
such Asset Sale.
 
(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 (subject to Section 4.04(c)(i)) a
commitment fee, which shall accrue at a rate per annum equal to 0.50% on the
average daily amount of the unused amount of the Commitment of such Lender
during the period from and including the date of this Agreement to but excluding
the Termination Date.  Accrued commitment fees shall be payable in arrears on
the last day of March, June, September and December of each year and on the
Termination Date, commencing on the first such date to occur after the date
hereof.  All commitment fees shall be computed on the basis of a year of 360
days, unless such computation would cause interest on the Notes or on other
Indebtedness hereunder to exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
 
(b)        Letter of Credit Fees.  The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender (subject to Section
4.04(c)(iii)) a participation fee with respect to its participations in Letters
of Credit, which shall accrue at the same Applicable Margin used to determine
the interest rate applicable to Eurodollar Loans on the average daily amount of
such Lender’s LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the date of
this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates
 
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Houston 3931255v.7
 
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and the date on which such Lender ceases to have any LC Exposure, (ii) to each
Issuing Bank a fronting fee equal to 0.50% per annum on the face amount of each
Letter of Credit issued by such Issuing Bank hereunder, provided that in no
event shall such fee be less than $500 and (iii) to each Issuing Bank, for its
own account, its standard fees with respect to the amendment, renewal or
extension of any Letter of Credit issued by such Issuing Bank or processing of
drawings thereunder.  Participation 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 and fronting fees with respect to any
Letter of Credit shall be payable at the time of issuance of such Letter of
Credit; 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 an Issuing Bank pursuant to this Section
3.05(b) shall be payable within 10 days after demand.  All participation fees
and fronting fees shall be computed on the basis of a year of 360 days, unless
such computation would exceed the Highest Lawful Rate, in which case such 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).
 
(c)        Administrative Agent Fees.  The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.
 
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs.
 
Section 4.01             Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.
 
(a)        Payments by the Borrower.  Subject to Section 4.04(a), 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,
without defense, deduction, recoupment, set-off or counterclaim (except as
provided in Section 4.04(a)).  Fees, once paid, shall be fully earned and shall
not be refundable under any circumstances, absent manifest error.  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 an 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.
 
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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 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 or any Issuing Bank that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or such Issuing Bank, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or such Issuing Bank, as the case may be, severally agrees
to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or such Issuing Bank with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.
 
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Houston 3931255v.7
 
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Section 4.03             Certain Deductions by the Administrative Agent.  If any
Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(b), Section 2.08(d), Section 2.08(e), Section 4.01(c) or Section
4.02 then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid.
 
Section 4.04             Payments and Deductions to a Defaulting Lender.
 
(a)        If any Lender shall fail to make any payment required to be made by
it pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid in cash.
 
(b)        If a Defaulting Lender (or a Lender who would be a Defaulting Lender
but for the expiration of the relevant grace period) as a result of the exercise
of a set-off shall have received a payment in respect of its Revolving Credit
Exposure which results in its Revolving Credit Exposure being less than its
Applicable Percentage of the aggregate Revolving Credit Exposures, then no
payments will be made to such Defaulting Lender until such time as all amounts
due and owing to the Lenders have been equalized in accordance with each
Lender’s respective pro rata share of the Indebtedness.  Further, if at any time
prior to the acceleration or maturity of the Loans, the Administrative Agent
shall receive any payment in respect of principal of a Loan or a reimbursement
of an LC Disbursement while one or more Defaulting Lenders shall be party to
this Agreement, the Administrative Agent shall apply such payment first to the
Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its
pro rata share until such time as such Borrowing(s) are paid in full or each
Lender (including each Defaulting Lender) is owed its Applicable Percentage of
all Loans then outstanding.  After acceleration or maturity of the Loans,
subject to the first sentence of this Section 4.04(b), all principal will be
paid ratably as provided in Section 10.02(c).
 
(c)        Notwithstanding any provision of this Agreement to the contrary, if
any Lender becomes a Defaulting Lender, then the following provisions shall
apply for so long as such Lender is a Defaulting Lender:
 
(i)           Fees shall cease to accrue on the unfunded portion of the
Commitment of such Defaulting Lender pursuant to Section 3.05.
 
(ii)          The Commitment, the Maximum Credit Amount, the outstanding
principal balance of the Loans and participation interests in Letters of Credit
of such Defaulting Lender shall not be included in determining whether all
Lenders, the Majority Lenders or the Super-Majority Lenders have taken or may
take any action hereunder (including any consent to any amendment or waiver
pursuant to Section 12.02), provided that any waiver, amendment or modification
requiring (A) the consent of all Lenders or (B) the consent of each affected
Lender and which affects such Defaulting Lender, shall require the consent of
such Defaulting Lender;
 
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and provided further that any redetermination or affirmation of the Borrowing
Base shall occur without participation of a Defaulting Lender, but the
Commitments (i.e., the Applicable Percentage of the Borrowing Base of a
Defaulting Lender) may not be increased without the consent of such Defaulting
Lender.
 
(iii)         If any LC Exposure exists at the time a Lender becomes a
Defaulting Lender then:
 
(A)         all or any part of such LC Exposure shall be reallocated among the
Non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (1) the sum of all Non-Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all Non-Defaulting Lenders’ Commitments and (2) the
conditions set forth in Section 6.02 are satisfied at such time;
 
(B)          if the reallocation described in clause (A) above cannot, or can
only partially, be effected, then the Borrower shall within one Business Day
following notice by the Administrative Agent cash collateralize such Defaulting
Lender’s LC Exposure (after giving effect to any partial reallocation pursuant
to clause (A) above) in accordance with the procedures set forth in Section
2.08(e) for so long as such LC Exposure is outstanding;
 
(C)          if the Borrower cash collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to this Section 4.04 then the Borrower shall not
be required to pay any fees to such Defaulting Lender pursuant to Section
3.05(b) with respect to such Defaulting Lender’s LC Exposure during the period
such Defaulting Lender’s LC Exposure is cash collateralized;
 
(D)          if the LC Exposure of the Non-Defaulting Lenders is reallocated
pursuant to Section 4.04(c), then the fees payable to the Lenders pursuant to
Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
Non-Defaulting Lenders’ Applicable Percentages; or
 
(E)          if any Defaulting Lender’s LC Exposure is neither cash
collateralized nor reallocated pursuant to Section 4.04(c)(iii), then, without
prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder,
all commitment fees that otherwise would have been payable to such Defaulting
Lender (solely with respect to the portion of such Defaulting Lender’s
Commitment that was utilized by such LC Exposure) and letter of credit fees
payable under Section 3.05(b) with respect to such Defaulting Lender’s LC
Exposure shall be payable to the Issuing Bank until such LC Exposure is cash
collateralized and/or reallocated.
 
(d)        So long as any Lender is a Defaulting Lender, the Issuing Bank shall
not be required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure will be 100% covered by the Commitments of
the Non-Defaulting Lenders and/or cash collateral will be provided by the
Borrower in accordance with Section 4.04(c), and participating interests in any
such newly issued or increased Letter of Credit shall be allocated among Non
 
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Defaulting Lenders in a manner consistent with Section 2.08(d) (and Defaulting
Lenders shall not participate therein).
 
(e)        In the event that the Administrative Agent, the Borrower and the
Issuing Bank each agrees that a Defaulting Lender has adequately remedied all
matters that caused such Lender to be a Defaulting Lender, then the LC Exposure
of the Lenders shall be readjusted to reflect the inclusion of such Lender’s
Commitment and on such date such Lender shall purchase at par such of the Loans
or participations in Letters of Credit of the other Lenders as the
Administrative shall determine may be necessary in order for such Lender to hold
such Loans in accordance with its Applicable Percentage.
 
ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality
 
Section 5.01             Increased Costs.
 
(a)        Eurodollar Changes in Law.  If any Change in Law shall:
 
(b)        (i)           impose, modify or deem applicable any reserve
(including marginal, special, emergency or supplemental reserves), special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender for Eurocurrency liabilities under
Regulation D of the Board (as the same may be amended, supplemented or replaced
from time to time) or otherwise; or
 
             (ii)           impose on any Lender or the London interbank market
any other condition affecting this Agreement or Eurodollar Loans made by such
Lender;
 
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
 
(c)        Capital Requirements.  If any Lender or any Issuing Bank determines
that any Change in Law regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s or such Issuing Bank’s
capital or on the capital of such Lender’s or such Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by such Issuing Bank, to a level below that which such Lender or
such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or
such Issuing Bank’s holding company with respect to capital adequacy), then from
time to time the Borrower will pay to such Lender or such Issuing Bank, as the
case may be, such additional amount or amounts as will compensate such Lender or
such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for
any such reduction suffered.
 
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(d)        Certificates.  A certificate of a Lender or any Issuing Bank setting
forth in reasonable detail the basis of its request 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 (b) shall be delivered to
the Borrower and shall be conclusive absent manifest error.  The Borrower shall
pay such Lender or such Issuing Bank, as the case may be, the amount shown as
due on any such certificate within 10 days after receipt thereof.
 
(e)        Effect of Failure or Delay in Requesting Compensation.  Failure or
delay on the part of any Lender or any Issuing Bank to demand compensation
pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or
such Issuing Bank’s right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender or any Issuing Bank
pursuant to this Section 5.01 for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or such Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or such Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.  No Lender or Issuing Bank may make any demand
pursuant to this Section 5.01 more than 180 days after the Termination Date.
 
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, or (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the LIBO Rate that
would have been applicable to such Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Loan), over (ii) the amount of interest which
would accrue on such principal amount for such period at the interest rate which
such Lender would bid were it to bid, at the commencement of such period, for
dollar deposits of a comparable amount and period from other banks in the
eurodollar market.
 
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 and reasonably detailed
calculations therefor, upon request of the Borrower, 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 10 days after
receipt thereof.
 
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       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 required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
 
(b)        Payment of Other Taxes by the Borrower.  The Borrower shall pay any
Other Taxes to the relevant Governmental Authority in accordance with applicable
law.
 
(c)        Indemnification by the Borrower.  The Borrower shall indemnify the
Administrative Agent, each Lender and each Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section
5.03) and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate of the Administrative Agent, a Lender or an Issuing
Bank as to the basis of such Indemnified Taxes or Other Taxes and the amount of
such payment or liability under this Section 5.03 shall be delivered to the
Borrower and shall be conclusive absent manifest error.
 
(d)        Evidence of Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
 
(e)        Foreign Lenders.  Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.
 
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       Section 5.04      Designation of Different Lending Office; Replacement of
Lenders.
 
(a)        Designation of Different Lending Office.  If any Lender requests
compensation under Section 5.01, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and (ii)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
 
(b)        Replacement of Lenders.  If (i) any Lender requests compensation
under Section 5.01, (ii) the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, (iii) the obligation of any Lender to make Eurodollar
Loans or continue Loans as Eurodollar Loans has been suspended pursuant to
Section 5.05, (iv) any Lender becomes a Defaulting Lender or (v) any Lender has
voted against an amendment, modification or waiver of any provision of this
Agreement proposed by the Borrower, which proposed amendment, modification or
waiver (A) was approved by Lenders representing no less than 90% of the
aggregate Commitments but (B) required the approval of all of the Lenders and
did not get such approval, then the Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 12.04(b)), all its interests, rights
and obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (1) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (2) 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 (3) 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.  A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
 
Section 5.05             Illegality.  Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender’s obligation to make such Eurodollar Loans shall be
suspended (the “Affected Loans”) until such time as such Lender may again make
and
 
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maintain such Eurodollar Loans and (b) all Affected Loans which would otherwise
be made by such Lender shall be made instead as ABR Loans (and, if such Lender
so requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.
 
ARTICLE VI
Conditions Precedent
 
Section 6.01             Effective Date.  The obligations of the Lenders to make
Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 12.02):
 
(a)        The Arrangers, the Administrative Agent and the Lenders shall have
received all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.
 
(b)        The Administrative Agent shall have received a certificate of the
Borrower and of each Guarantor setting forth (i) resolutions of the Managers,
board of directors or other managing body with respect to the authorization of
the Borrower or such Guarantor to execute and deliver the Loan Documents to
which it is a party and to enter into the transactions contemplated in those
documents, (ii) the individuals (A) who are authorized to sign the Loan
Documents to which the Borrower or such Guarantor is a party and (B) who will,
until replaced by another individual 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 other Loan
Documents to which it is a party, (iii) specimen signatures of such authorized
individuals, and (iv) the articles or certificate of incorporation or formation
and bylaws, operating agreement or partnership agreement, as applicable, of the
Borrower and each Guarantor, in each case, 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 the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Guarantor.
 
(d)        The Administrative Agent shall have received a compliance certificate
which shall be substantially in the form of Exhibit B, duly and properly
executed by a Responsible Officer and dated as of the Effective Date.
 
(e)        The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.
 
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(f)         To the extent requested by a Lender, the Administrative Agent shall
have received duly executed Notes payable to the order of each such Lender in a
principal amount equal to its Maximum Credit Amount dated as of the date hereof.
 
(g)        The Administrative Agent shall have received from each party thereto
duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments, including the Guaranty
Agreement and the other Security Instruments described on Exhibit C.  In
connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall
 
(i)           be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the
end of such definition) on at least 80% of the total value of the Oil and Gas
Properties evaluated in the Initial Reserve Report.
 
(ii)           have received certificates, together with undated, blank stock
powers for each such certificate, representing all of the issued and outstanding
Equity Interests of each of the Guarantors, to the extent such Equity Interests
are certificated.
 
(h)        The Administrative Agent shall have received an opinion of Baker
Hostetler LLP, special counsel to the Borrower, in form and substance
satisfactory to the Administrative Agent, as to such matters incident to the
Transactions as the Administrative Agent may reasonably request.
 
(i)         The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 7.12.
 
(j)         The Administrative Agent shall have received a certificate of a
Responsible Officer certifying that the Borrower has received all consents and
approvals required by Section 7.03.
 
(k)        The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a
Reserve Report Certificate.
 
(l)         The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Properties the Borrower,
and its Subsidiaries for each of the following jurisdictions: Delaware and
Oklahoma and any other jurisdiction requested by the Administrative Agent; other
than those being assigned or released on or prior to the Effective Date or Liens
permitted by Section 9.03.
 
(m)       The Administrative Agent shall have received evidence that the
Borrower has entered into Swap Agreements, the prices, volumes and terms of
which are satisfactory to the Arrangers.
 
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(n)        The Administrative Agent shall have received such information as the
Administrative Agent may reasonably require, all of which shall be reasonably
satisfactory to the Administrative Agent in form and substance, on the title to
not less than 80% of the Oil and Gas Properties evaluated in the Initial Reserve
Report.
 
(o)        The Administrative Agent shall have received such other documents as
the Administrative Agent or special counsel to the Administrative Agent may
reasonably request.
 
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the Lenders to make
Loans and of each 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 1:00 p.m., Houston time, on April 28,
2009 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
 
Section 6.02             Each Credit Event.  The obligation of each Lender to
make a Loan on the occasion of any Borrowing (including the initial funding),
and of each Issuing Bank to issue, amend, renew or extend any Letter of Credit,
is subject to the satisfaction of the following conditions:
 
(a)        At the time of and immediately after giving effect to such Borrowing
or the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
 
(b)        At the time of and immediately after giving effect to such Borrowing
or the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Material Adverse Effect shall have occurred.
 
(c)        The representations and warranties of the Borrower and the
Guarantors, set forth in this Agreement and in the other Loan Documents shall be
true and correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are
expressly limited to an earlier date, in which case, on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, such representations and warranties shall
continue to be true and correct as of such specified earlier date.
 
(d)        The making of such Loan or the issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, would not conflict with, or
cause any Lender or any Issuing Bank to violate or exceed, any applicable
Governmental Requirement, and no Change in Law shall have occurred, and no
litigation shall be pending or threatened, which does or, with respect to any
threatened litigation, seeks to, enjoin, prohibit or restrain, the making or
repayment of any Loan, the issuance, amendment, renewal, extension or repayment
of any Letter of Credit or any participations therein or the consummation of the
transactions contemplated by this Agreement or any other Loan Document.
 
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(e)        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 2.08(b), as applicable.
 
Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (e).
 
ARTICLE VII
Representations and Warranties
 
The Borrower represents and warrants to the Lenders that:
 
Section 7.01             Organization; Powers.  Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in or has
applied to qualify to do business in, every jurisdiction where such
qualification is required, except where failure to have such power, authority,
licenses, authorizations, consents, approvals and qualifications could not
reasonably be expected to have a Material Adverse Effect.
 
Section 7.02            Authority; Enforceability.  The Transactions are within
the Borrower’s and each Guarantor’s corporate powers and have been duly
authorized by all necessary corporate and, if required, member action
(including, without limitation, any action required to be taken by any class of
directors of the Borrower or any other Person, whether interested or
disinterested, in order to ensure the due authorization of the
Transactions).  When executed and delivered, each Loan Document to which the
Borrower and any Guarantor is a party will have been duly executed and delivered
by the Borrower and such Guarantor and will constitute 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
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
 
Section 7.03            Approvals; No Conflicts.  The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person (including the
members or any class of directors of the Borrower or any other Person, whether
interested or disinterested), 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
(i) such as have been obtained or made and are in full force and effect and (ii)
for the filing and recording of Security Instruments to perfect the Liens
created hereby and by Security Instruments, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any of its Subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or their Properties, or give rise to a right thereunder to require
 
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any payment to be made by the Borrower or such Subsidiary and (d) will not
result in the creation or imposition of any Lien on any Property of the Borrower
or any of its Subsidiaries (other than the Liens created by the Loan Documents).
 
Section 7.04             Financial Position; No Material Adverse Change.
 
(a)        The Borrower has heretofore furnished to the Lenders the audited
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of December 31, 2008, and related audited consolidated statements of income,
cash flows and changes in members’ equity for the fiscal year ending
December 31, 2008.  The financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Borrower and its consolidated subsidiaries as of such date and for such period
in accordance with GAAP.
 
(b)        Since December 31, 2008, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.
 
(c)        Neither the Borrower nor any of its Subsidiaries has on the date
hereof any material Debt (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 for the (i)
Indebtedness or (ii) as referred to or reflected or provided for in the
Financial Statements.
 
Section 7.05             Litigation.  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 of its Subsidiaries (a) as
to which there is a reasonable possibility of an adverse determination that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect or (b) that involve any Loan
Document.  Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
 
Section 7.06             Environmental Matters.  Except for such matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Borrower:
 
(a)        the Borrower and its Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws;
 
(b)        the Borrower and its Subsidiaries have obtained all Environmental
Permits required for their respective operations and each of their Properties,
with all such Environmental Permits being currently in full force and effect,
and none of Borrower or its Subsidiaries has
 
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received any written notice or otherwise has knowledge that any such existing
Environmental Permit will be revoked or that any application for any new
Environmental Permit or renewal of any existing Environmental Permit will be
protested or denied;
 
(c)        there are no claims, demands, suits, orders, inquiries, or
proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under, any applicable Environmental Laws that is
pending or threatened against the Borrower or its Subsidiaries or any of their
respective Properties or as a result of any operations at the Properties;
 
(d)        none of the Properties contain or have contained any:  (i)
underground storage tanks; (ii) asbestos containing materials in a friable
condition or otherwise requiring abatement under Environmental Laws; or (iii)
landfills or dumps; (iv) hazardous waste management units as defined pursuant to
RCRA or any comparable state law; or (v) sites on or nominated for the National
Priority List promulgated pursuant to CERCLA or any similar state remedial
priority list promulgated or published pursuant to any comparable state law;
 
(e)        there is no Release or threatened Release, of Hazardous Materials at,
on, under or from any of Borrower’s or its Subsidiaries’ Properties, there are
no investigations, remediations, abatements, removals, or monitorings of
Hazardous Materials required under applicable Environmental Laws at such
Properties and none of such Properties are adversely affected by any Release or
threatened Release of a Hazardous Material originating or emanating from any
other real property,
 
(f)         neither the Borrower nor its 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 any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite the Borrower’s or its
Subsidiaries’ Properties and there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written notice.
 
(g)        there has been no exposure of any Person or property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
any of the Borrower’s or its Subsidiaries’ Properties that would reasonably be
expected to form the basis for a material claim for damages or compensation and
there are no conditions or circumstances that would reasonably be expected to
result in the receipt of notice regarding such exposure; and
 
(h)        the Borrower and its Subsidiaries have made available to Lenders
copies of all material environmental site assessment reports and other material
documents relating to any alleged non-compliance with or liability under
Environmental Laws that are in any of the Borrower’s or its Subsidiaries’
possession or control and relating to their respective Properties or operations
thereon.
 
Section 7.07             Compliance with the Laws and Agreements; No Defaults.
 
(a)        Each of the Borrower and its Subsidiaries is in compliance with all
Governmental Requirements applicable to it or its Property and all agreements
and other
 
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instruments binding upon it or its Property, and possesses all licenses,
permits, franchises, exemptions, approvals and other authorizations granted by
Governmental Authorities necessary for the ownership of its Property and the
present conduct of its business, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
 
(b)        Neither the Borrower nor any of its Subsidiaries is in default nor
has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or any of its Subsidiaries to Redeem or
make any offer to Redeem all or any portion of any Debt outstanding under any
indenture, note, credit agreement or instrument pursuant to which any Material
Indebtedness is outstanding or by which the Borrower or any of its Subsidiaries
or any of their Properties is bound.
 
(c)        No Default has occurred and is continuing.
 
Section 7.08             Investment Company Act.  Neither the Borrower nor any
of its Subsidiaries is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
 
Section 7.09            Taxes.  Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns (including extensions) and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which the Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves in
accordance with GAAP or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.  The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of Taxes and other governmental charges are, in the reasonable opinion
of the Borrower, adequate.  No Tax Lien has been filed and, to the knowledge of
the Borrower, no claim is being asserted with respect to any such Tax or other
such governmental charge.
 
Section 7.10             ERISA.  Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:
 
(a)        The Borrower, its Subsidiaries and each ERISA Affiliate have complied
in all material respects with ERISA and, where applicable, the Code regarding
each Plan, if any.
 
(b)        Each Plan, if any, is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
 
(c)        No act, omission or transaction has occurred that could result in
imposition on the Borrower, any of its Subsidiaries or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i) or (l) of section
 
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502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code
or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.
 
(d)        No liability to the PBGC (other than for the payment of current
premiums which are not past due) by the Borrower, any of its Subsidiaries or any
ERISA Affiliate has been or is expected by the Borrower, any of its Subsidiaries
or any ERISA Affiliate to be incurred with respect to any Plan.  No ERISA Event
with respect to any Plan has occurred.
 
(e)        No accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to any
Plan.
 
(f)        Neither the Borrower, its Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
 
(g)        Neither the Borrower, its Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.
 
Section 7.11             Disclosure; No Material Misstatements.  None of the
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrower or any of its Subsidiaries to the Administrative
Agent, any other Agent or any Lender or any of their Affiliates in connection
with the negotiation of this Agreement or any other Loan Document or delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.  There is no fact peculiar to the Borrower or any
of its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect or in the future is reasonably likely to have a Material Adverse Effect
and which has not been set forth in this Agreement or the Loan Documents or the
other documents, certificates and statements furnished to the Administrative
Agent, any other Agent or the Lenders by or on behalf of the Borrower or any of
its Subsidiaries prior to, or on, the date hereof in connection with the
transactions contemplated hereby.  There are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail to
take into account material information regarding the matters reported therein,
it being understood that projections concerning volumes attributable to the 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 have been accurate.
 
Section 7.12            Insurance.  The Borrower has, and has caused all of its
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually
 
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insured against by companies similarly situated and engaged in the same or a
similar business for the assets and operations of the Borrower and its
Subsidiaries.  The Administrative Agent and the Lenders have been named as
additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as loss payee with respect to property loss
insurance.
 
Section 7.13            Restriction on Liens.  Neither the Borrower nor any of
its Subsidiaries is a party to any material agreement or arrangement (other than
Capital Leases creating Liens to the extent permitted by Section 9.03(c), but
then only on the Property subject to such Capital Leases), or subject to any
order, judgment, writ or decree, which either restricts or purports to restrict
its ability to grant Liens to the Administrative Agent and the Lenders on or in
respect of their Properties to secure the Indebtedness and the Loan Documents.
 
Section 7.14            Subsidiaries.  Except as set forth on Schedule 7.14 or
as disclosed in writing to the Administrative Agent (which shall promptly
furnish a copy to the Lenders), and which disclosure shall be a supplement to
Schedule 7.14, the Borrower has no Subsidiaries or foreign operations.
 
Section 7.15            Location of Business and Offices.  The Borrower’s
jurisdiction of organization is Delaware; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Linn Energy, LLC, and
the organizational identification number of the Borrower in its jurisdiction of
organization is 3951040 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(l) in accordance with Section
12.01).  The Borrower’s principal place of business and chief executive offices
are located at the address specified in Section 12.01 (or as set forth in a
notice delivered pursuant to Section 8.01(l) and Section 12.01(c)).  Each
Subsidiary’s jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(l)).
 
Section 7.16             Properties; Titles, Etc.
 
(a)        Each of the Borrower and its Subsidiaries has good and defensible
title to its Oil and Gas Properties evaluated in the most recently delivered
Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 9.03.  After giving
full effect to the Excepted Liens, the Borrower or any of its Subsidiaries
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 such Properties shall not in any material respect
obligate the Borrower or any of its Subsidiaries to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount 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 any of its Subsidiaries’ net revenue
interest in such Property.
 
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(b)        All material leases and agreements necessary for the present conduct
of the business of the Borrower and its Subsidiaries are valid and subsisting,
in full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.
 
(c)        The rights and Properties presently owned, leased or licensed by the
Borrower and its Subsidiaries including, without limitation, all easements and
rights of way, include all rights and Properties necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material respects
as conducted on the date hereof.
 
(d)        All of the material Properties of the Borrower and each of its
Subsidiaries that are reasonably necessary for the operation of their businesses
are in good working condition and are maintained in accordance with prudent
business standards.
 
(e)        The Borrower and each of its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.  The Borrower and its
Subsidiaries either own or have valid licenses or other rights to use all
databases, geological data, geophysical data, engineering data, seismic data,
maps, interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with
such exceptions as could not reasonably be expected to have a Material Adverse
Effect.
 
Section 7.17            Maintenance of Properties.  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) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all Government 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.  Specifically in connection with the foregoing, except
as could not reasonably be expected to have a Material Adverse Effect, (a) no
Oil and Gas Property is subject to having allowable production reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time) and
(b) none of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) is deviated from the vertical more than the
maximum permitted by Government Requirements, and such wells are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of wells located on Properties unitized
therewith, such unitized Properties).  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 Subsidiaries that are
necessary to conduct normal operations are being maintained in a state adequate
to conduct normal operations, and with respect to such
 
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of the foregoing which are operated by the Borrower or any of its Subsidiaries,
in a manner consistent with the Borrower’s or its Subsidiaries’ past practices
(other than those the failure of which to maintain in accordance with this
Section 7.17 could not reasonably be expect to have a Material Adverse Effect).
 
Section 7.18             Gas Imbalances, Prepayments.  As of the date hereof,
except as set forth on Schedule 7.18 or on the most recent 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 Subsidiaries to
deliver, in the aggregate, two percent (2%) or more of the monthly production
from Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor.
 
Section 7.19             Marketing of Production.  Except for contracts listed
and in effect on the date hereof on Schedule 7.19, and thereafter either
disclosed in writing to the Administrative Agent or included in the most
recently delivered Reserve Report (with respect to all of which contracts the
Borrower represents that it or its 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 sixty (60) days notice or less
without penalty or detriment for the sale of production from the Borrower’s or
its 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 more than six (6) months from the date hereof.
 
Section 7.20             Swap Agreements.  Schedule 7.20, as of March 31, 2009,
and after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(d) (as of the relevant period end), sets forth, a true
and complete list of all Swap Agreements of the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net
marked-to-market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.
 
Section 7.21             Use of Loans and Letters of Credit.  The proceeds of
the Loans and the Letters of Credit shall be used (a) to provide working
capital, (b) to amend and restate existing indebtedness (including the Existing
Credit Agreement), (c) for the acquisition, exploration and development of oil
and gas properties, (d) for the issuance of Letters of Credit, and (e) for
general corporate purposes, including Restricted Payments.  The Borrower and its
Subsidiaries are not engaged principally, or as one of its or their important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board).  No part of the proceeds of
any Loan or Letter of Credit will be used for any purpose which violates the
provisions of Regulations T, U or X of the Board.
 
Section 7.22             Solvency.  After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason
 
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of indemnity, offset, insurance or any similar arrangement), at a fair
valuation, of the Borrower and the Guarantors, taken as a whole, will exceed the
aggregate Debt of the Borrower and the Guarantors on a consolidated basis, as
the Debt becomes absolute and matures, (b) each of the Borrower and the
Guarantors will not have incurred or intended to incur, and will not believe
that it will incur, Debt beyond its ability to pay such Debt (after taking into
account the timing and amounts of cash to be received by each of the Borrower
and the Guarantors and the amounts to be payable on or in respect of its
liabilities, and giving effect to amounts that could reasonably be received by
reason of indemnity, offset, insurance or any similar arrangement) as such Debt
becomes absolute and matures and (c) each of the Borrower and the Guarantors
will not have (and will have no reason to believe that it will have thereafter)
unreasonably small capital for the conduct of its business.
 
ARTICLE VIII
Affirmative Covenants
 
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:
 
Section 8.01             Financial Statements; Other Information.  The Borrower
will furnish to the Administrative Agent and each Lender:
 
(a)        Annual Financial Statements.  As soon as available, but in any event
not later than 90 days after the end of each fiscal year, Borrower’s audited
consolidated balance sheet and related statements of operations, members’ equity
and cash flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on by
KPMG, LLP or independent public accountants of recognized national standing and
reasonably acceptable to the Administrative Agent (without a “going concern” or
like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied.
 
(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, its consolidated balance sheet and
related statements of operations, members’ equity and cash flows as of the end
of and for such quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by a Financial Officer as presenting fairly
in all material respects the financial position and results of operations of the
Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes.
 
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(c)        Certificate of Financial Officer -- Compliance.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit B hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 9.01 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the Effective Date and,
if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.
 
(d)        Swap Agreements.  Concurrently with any delivery of financial
statements under Section 8.01(a) and Section 8.01(b), a true and complete list
of all Swap Agreements, as of the last Business Day of such fiscal quarter or
fiscal year, of the Borrower and each of its Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.20, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.
 
(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 8.07, 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)         Other Accounting Reports.  Promptly upon receipt thereof, a copy of
each other report or letter submitted to the Borrower or any of its Subsidiaries
by independent accountants in connection with any annual, interim or special
audit made by them of the books of the Borrower or any such Subsidiary, and a
copy of any response by the Borrower or any such Subsidiary to such letter or
report.
 
(g)        SEC and Other Filings; Reports to shareholders.  Promptly after the
same become publicly available, copies of all periodic and other reports, proxy
statements and other materials 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; provided, however, that the
Borrower shall be deemed to have furnished the information required by this
Section 8.01(g) if it shall have timely made the same available on “EDGAR”
and/or on its home page on the worldwide web (at the date of this Agreement
located at http://www.linnenergy.com); provided further, however, that if any
Lender is unable to access EDGAR or the Borrower’s home page on the worldwide
web, the Borrower agrees to provide such Lender with paper copies of the
information required to be furnished pursuant to this Section 8.01(g) promptly
following notice from the Administrative Agent that such Lender has requested
same.  Information required to be delivered pursuant to this Section 8.01(g)
shall be deemed to have been delivered on the date on which the Borrower
provides notice to the Administrative Agent that such information has been
posted on “EDGAR” or the Borrower’s website or another website identified in
such notice and accessible by the Administrative Agent without charge (and the
Borrower hereby agrees to provide such notice).
 
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(h)        Notices Under Material Instruments.  Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation, indenture,
loan or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.
 
(i)         Lists of Purchasers.  Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of Persons
purchasing Hydrocarbons from the Borrower and its Subsidiaries reasonably
expected to account for at least 80% of the revenues resulting from the sale of
Hydrocarbons produced from the Mortgaged Properties in the quarter following the
“as of” date of such Reserve Report.
 
(j)         Notice of Sales of Oil and Gas Properties.  In the event the
Borrower or any of its Subsidiaries intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties included in the most recently
delivered Reserve Report (or any Equity Interests in any Subsidiary owning
interests in such Oil and Gas Properties) during any period between two
successive Scheduled Redetermination Dates having a fair market value,
individually or in the aggregate, in excess of $10,000,000, prior written notice
of such disposition, the price thereof, the anticipated date of closing, and any
other details thereof reasonably requested by the Administrative Agent or any
Lender.
 
(k)        Notice of Casualty Events.  Prompt written notice, and in any event
within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.
 
(l)         Information Regarding Borrower and Guarantors.  Prompt written
notice of (and in any event within ten (10) days after) any change (i) in 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) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor’s identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor’s federal taxpayer identification number, if any.
 
(m)       Production Report and Lease Operating Statements.  Within 45 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 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
Oil and Gas 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.
 
(n)        Notices of Certain Changes.  Promptly, but in any event within five
(5) Business Days after the execution thereof, copies of any amendment,
modification or supplement
 
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to the certificate or articles of incorporation, by-laws, any preferred stock
designation or any other organic document of the Borrower or any of its
Subsidiaries.
 
(o)        EDGAR Postings.  In lieu of delivery of paper counterparts of
financial statements or other information required to be delivered to the
Administrative Agent and each Lender pursuant to this Section 8.01, to the
extent such financial statements or other information has been published on
EDGAR, Barrower may send to the Administrative Agent and each Lender notice that
such financial statements or other information is available on EDGAR and
delivery of such notice shall satisfy the Borrower’s requirements under this
Section 8.01 to deliver to the Administrative Agent and each Lender paper
counterparts of such financial statements and other information.
 
(p)        Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries (including,
without limitation, any Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.
 
Section 8.02            Notices of Material Events.  The Borrower will furnish
to the Administrative Agent and each Lender, promptly after the Borrower obtains
knowledge thereof, written notice of the following:
 
(a)        the occurrence of any Default;
 
(b)        the filing or commencement of, or the threat in writing of, any
action, suit, investigation, arbitration or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Subsidiary thereof, or any material adverse development in any action, suit,
proceeding, investigation or arbitration (whether or not previously disclosed to
the Lenders), that, in either case, if adversely determined, could reasonably be
expected to result in liability in excess of $10,000,000;
 
(c)        the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$3,000,000; and
 
(d)        any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
 
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
 
Section 8.03            Existence; Conduct of Business.  The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises
 
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Houston 3931255v.7
 
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material to the conduct of its business and maintain, if necessary, its
qualification to do business in each other jurisdiction in which any of 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 merger, consolidation, liquidation or dissolution permitted
under Section 9.11.
 
Section 8.04            Payment of Obligations.  The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities of the Borrower and all of its Subsidiaries before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any material Property of the Borrower or any
of its Subsidiaries.
 
Section 8.05            Performance of Obligations under Loan Documents.  The
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and the Borrower will cause each of its Subsidiaries to
do and perform every act and discharge all of the obligations to be performed
and discharged by them under the Loan Documents, including, without limitation,
this Agreement, at the time or times and in the manner specified.
 
Section 8.06             Operation and Maintenance of Properties.  The Borrower
will, and will cause each of its Subsidiaries to:
 
(a)        operate its Oil and Gas Properties and other material Properties or
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 proration requirements and Environmental Laws, and all applicable
laws, rules and regulations of every other Governmental Authority from time to
time constituted to regulate the development and operation of its Oil and Gas
Properties and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
 
(b)        keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its material Oil and Gas Properties and
other material Properties, including, without limitation, all material
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 material Oil and Gas Properties and will do all other things
necessary to keep unimpaired their material rights with respect thereto and
prevent any forfeiture thereof or material default thereunder.
 
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(d)        promptly perform or make reasonable and customary efforts to cause to
be performed, in accordance with industry standards and in all material
respects, the obligations required by each and all of the assignments, deeds,
leases, sub-leases, contracts and agreements affecting its interests in its
material Oil and Gas Properties and other material Properties.
 
(e)        to the extent the Borrower or one of its Subsidiaries is not the
operator of any Property, the Borrower shall use reasonable efforts to cause the
operator to comply with this Section 8.06.
 
Section 8.07            Insurance.  The Borrower will, and will cause each of
its Subsidiaries to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will give at
least 30 days prior notice of any cancellation to the Administrative Agent.
 
Section 8.08            Books and Records; Inspection Rights.  The Borrower
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities.  The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its Properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
 
Section 8.09            Compliance with Laws.  The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to them or their Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
 
Section 8.10             Environmental Matters.
 
(a)        The Borrower shall at its sole expense (including such contribution
from third parties as may be available):  (i) comply, and shall cause its
Properties and operations and each Subsidiary and each Subsidiary’s Properties
and operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
dispose of or otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions,
 
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approvals, registrations or other authorizations, if any, required under
applicable Environmental Laws to be obtained or filed in connection with the
operation or use of the Borrower’s or its Subsidiaries’ Properties, which
failure to obtain or file could reasonably be expected to have a Material
Adverse Effect; (iv) promptly commence and diligently prosecute to completion,
and shall cause each Subsidiary to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring, containment,
cleanup, removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in the event any Remedial Work is required
or reasonably necessary under applicable Environmental Laws because of or in
connection with the actual or suspected past, present or future disposal or
other release of any oil, oil and gas waste, hazardous substance or solid waste
on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties,
which failure to commence and diligently prosecute to completion could
reasonably be expected to have a Material Adverse Effect; and (v) establish and
implement, and shall cause each Subsidiary to establish and implement, such
reasonable policies of environmental audit and compliance as may be reasonably
necessary to continuously determine and assure that the Borrower’s and its
Subsidiaries’ obligations under this Section 8.10(a) are timely and fully
satisfied, which failure to establish and implement could reasonably be expected
to have a Material Adverse Effect.
 
(b)        The Borrower will promptly, but in any event within five (5) days
thereof, notify the Administrative Agent and the Lenders in writing of any
threatened action, investigation or inquiry by any Governmental Authority or any
threatened demand or lawsuit by any landowner or other third party against the
Borrower or its Subsidiaries or their Properties of which the Borrower has
knowledge in connection with any Environmental Laws (excluding routine testing
and corrective action) if the Borrower reasonably anticipates that such action
will result in liability (whether individually or in the aggregate) in excess of
$10,000,000, not fully covered by insurance, subject to normal deductibles.
 
(c)        The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders and
no more than once per year in the absence of any Event of Default (or as
otherwise reasonably required to be obtained by the Administrative Agent or the
Lenders by any Governmental Authority), in connection with any future
acquisitions of material Oil and Gas Properties or other material Properties.
 
Section 8.11             Further Assurances.
 
(a)        The Borrower at its sole expense will, and will cause each of its
Subsidiaries to, promptly execute and deliver to the Administrative Agent all
such other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any of its
Subsidiaries, as the case may be, in the Loan Documents, including the Notes, or
to further evidence and more fully describe the collateral intended as security
for the Indebtedness, or to correct any omissions in this Agreement or the
Security Instruments, or to state more fully the obligations secured therein, or
to perfect, protect or preserve any Liens created pursuant to this Agreement or
any of the Security Instruments or the priority thereof, or to make any
recordings, file any notices or obtain any consents, all as may be reasonably
 
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necessary or appropriate, in the sole discretion of the Administrative Agent, in
connection therewith.
 
(b)        The Borrower hereby authorizes the Administrative Agent to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Mortgaged Property without the signature of the
Borrower or any other Guarantor where permitted by law.  A carbon, photographic
or other reproduction of the Security Instruments or any financing statement
covering the Mortgaged Property or any part thereof shall be sufficient as a
financing statement where permitted by law.  The Administrative Agent will
promptly send the Borrower any financing or continuation statements it files
without the signature of the Borrower or any other Guarantor and the
Administrative Agent will promptly send the Borrower the filing or recordation
information with respect thereto.
 
Section 8.12             Reserve Reports.
 
(a)        On or before March 1st and September 1st of each year, the Borrower
shall furnish to the Administrative Agent and the Lenders a Reserve Report as of
the immediately preceding December 31 or June 30, as applicable.  The Reserve
Report as of December 31 of each year shall be prepared by one or more petroleum
engineers reasonably acceptable to the Administrative Agent and the June 30
Reserve Report of each year shall be prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be true
and accurate and to have been prepared in accordance with the procedures used in
the immediately preceding December 31 Reserve Report.
 
(b)        In the event of an Interim Redetermination, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate in all material respects and to have
been prepared in accordance with the procedures used in the immediately
preceding December 31 Reserve Report.  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 required by
the Administrative Agent as soon as possible, but in any event no later than
thirty (30) days following the receipt of such request.
 
(c)        With the delivery of each Reserve Report, the Borrower shall provide
to the Administrative Agent and the Lenders a certificate from a Responsible
Officer, in substantially the form of Exhibit G hereto (the “Reserve Report
Certificate”), certifying that in all material respects:  (i) the information
provided by the Borrower in connection with the preparation of such Reserve
Report and any other information delivered in connection therewith by the
Borrower is true and correct, and any projections based upon such information
have been prepared in good faith based upon assumptions believed by the Borrower
to be reasonable, subject to uncertainties inherent in all projections, (ii) the
Borrower or its Subsidiaries owns good and defensible title to the Oil and Gas
Properties evaluated in such Reserve Report and such Properties are free of all
Liens except for Liens permitted by Section 9.03, (iii) except as set forth on
an exhibit to the certificate, on a net basis there are no gas imbalances, take
or pay or other prepayments in excess of the volume specified in Section 7.18
with respect to their Oil and
 
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Gas Properties evaluated in such Reserve Report that would require the Borrower
or any of its Subsidiaries to deliver Hydrocarbons either generally or produced
from such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their Oil and Gas Properties have
been sold since the date of the last Borrowing Base determination except as set
forth on an exhibit to the certificate, which certificate shall list all of its
Oil and Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, (v) attached to the certificate is a list of all marketing
agreements entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report that the Borrower could reasonably be expected
to have been obligated to list on Schedule 7.19 had such agreement been in
effect on the date hereof and (vi) attached thereto is a schedule of the Oil and
Gas Properties evaluated by such Reserve Report that are Mortgaged Properties
and demonstrating the percentage of the present value that such Mortgaged
Properties represent.
 
Section 8.13             Title Information.
 
(a)        On or before the delivery to the Administrative Agent and the Lenders
of each Reserve Report required by Section 8.12(a), to the extent requested by
the Administrative Agent, the Borrower will deliver title information in form
and substance reasonably acceptable to the Administrative Agent covering enough
of the Oil and Gas 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 such
portion of Oil and Gas Properties evaluated by such Reserve Report, not to
exceed 80% of the total value thereof, as may be reasonably requested by the
Administrative Agent.
 
(b)        If the Borrower has provided title information for additional
Properties under Section 8.13(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, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance 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 such portion of Oil and Gas Properties evaluated by such Reserve
Report, not to exceed 80% of the total value thereof, as may be reasonably
requested by the Administrative Agent.
 
(c)        If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 60-day period or the
Borrower does not comply with the requirements to provide acceptable title
information as required by Section 8.13(a) and Section 8.13(b), such default
shall not be a Default, but instead the Administrative Agent and/or the Majority
Lenders shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by the
Administrative Agent or the Lenders.  To the extent that the Administrative
Agent or the Majority Lenders are not reasonably satisfied
 
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with title to any Mortgaged Property after the 60-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the requirements of
Section 8.13(a) and Section 8.13(b), 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 Majority Lenders to cause the
Borrower to be in compliance with the requirement to provide acceptable title
information pursuant to Section 8.13(a) and Section 8.13(b).  This new Borrowing
Base shall become effective immediately after receipt of such notice.
 
Section 8.14             Additional Collateral; Additional Guarantors.
 
(a)        In connection with each redetermination of the Borrowing Base, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% of the total value of the Oil and
Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Subsidiaries to, grant, within sixty (60) days of the delivery of the
certificate contemplated by Section 8.12(c), to the Administrative Agent or its
designee as security for the Indebtedness a first-priority Lien interest
(provided the Excepted Liens of the type described in clauses (a) to (d) and (f)
of the definition thereof may exist, but subject to the provisos at the end of
such definition) on additional 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 80% of such total value.  All such
Liens will be created and perfected by and in accordance with the provisions of
deeds of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent or its designee and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.  In order to comply with the foregoing, if any Subsidiary places a
Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then
it shall become a Guarantor and comply with Section 8.14(b).
 
(b)        If (i) the Borrower determines that any Subsidiary is a Material
Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees any
Debt other than the Indebtedness, and in either case, such Subsidiary is not
already a Guarantor, then the Borrower shall promptly cause such Subsidiary to
guarantee the Indebtedness pursuant to the Guaranty Agreement.  In connection
with any such guaranty, the Borrower shall, or shall cause such Subsidiary to,
(A) execute and deliver a supplement to the Guaranty Agreement executed by such
Subsidiary, (B) pledge all of the Equity Interests of such Subsidiary
(including, without limitation, delivery of original stock certificates
evidencing the Equity Interests of such Subsidiary, together with an appropriate
undated stock powers for each certificate duly executed in blank by the
registered owner thereof) and (C) execute and deliver such other additional
closing documents, certificates and legal opinions as shall reasonably be
requested by the Administrative Agent or its designee.
 
Section 8.15             ERISA Compliance.  The Borrower will promptly furnish,
and will cause its Subsidiaries and any ERISA Affiliate to promptly furnish, to
the Administrative Agent (a)
 
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immediately upon becoming aware of the occurrence of any ERISA Event, a written
notice signed by the President or the principal Financial Officer of the
Borrower, its Subsidiaries or the ERISA Affiliate, as the case may be,
specifying the nature thereof, what action the Borrower, its Subsidiaries or the
ERISA Affiliate is taking or proposes to take with respect thereto, and, if then
known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (b) immediately upon
receipt thereof, copies of any notice of the PBGC’s intention to terminate or to
have a trustee appointed to administer any Plan.
 
Section 8.16            Marketing Activities.  The Borrower will not, and will
not permit any of its Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (a)
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, (b) 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 Subsidiaries that the Borrower or one of its 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 (c) other contracts for the purchase and/or sale of
Hydrocarbons of third parties (i) which have generally offsetting provisions
(i.e., corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (ii) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.
 
Section 8.17            Swap Agreements.  To the extent the Borrower or a
Subsidiary changes the material terms of any Swap Agreement, terminates any Swap
Agreement or enters into a new Swap Agreement which has the effect of creating
an off-setting position that individually, or together with all other such
changes, terminations and/or new Swap Agreements within the preceding 12 months
results in an aggregate Swap PV greater than $10,000,000, the Borrower will give
the Lenders prompt written notice of such event.
 
Section 8.18            Clean Down Period.  During each calendar year during the
term of this Agreement, the Borrower shall cause there to be a period of ten
(10) consecutive days (the “Clean Down Period”) during which (a) there are no
Distribution Borrowings outstanding and (b) no Distribution Borrowings shall be
made.
 
ARTICLE IX
Negative Covenants
 
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:
 
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Section 9.01             Financial Covenants.
 
(a)        Ratio of EBITDA to Interest Expense.  The Borrower will not, as of
the last day of any fiscal quarter, commencing with the fiscal quarter ending
June 30, 2009 and as of the end of each fiscal quarter thereafter, permit its
ratio of EBITDA for the period of four fiscal quarters then ending to Interest
Expense for such period to be less than 2.5 to 1.0.
 
(b)        Current Ratio.  The Borrower will not permit, as of the last day of
any fiscal quarter, its ratio of (i) consolidated current assets (including the
unused amount of the total Commitments, but excluding non-cash assets under FAS
133) to (ii) consolidated current liabilities (excluding non-cash obligations
under FAS 133 and current maturities under this Agreement) to be less than 1.0
to 1.0.
 
Section 9.02             Debt.  Neither the Borrower nor any of its Subsidiaries
will incur, create, assume or suffer to exist any Debt, except:
 
(a)        the Notes or other Indebtedness or any guaranty of or suretyship
arrangement for the Notes or other Indebtedness.
 
(b)        accounts payable and other accrued expenses, liabilities or other
obligations to pay (for the deferred purchase price of Property or services)
from time to time incurred in the ordinary course of business which are not
greater than ninety (90) days past the date of invoice or delinquent or which
are being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP.
 
(c)        intercompany Debt between the Borrower and any of its Subsidiaries or
between Subsidiaries to the extent permitted by Section 9.05(g); provided that
such Debt is not held, assigned, transferred, negotiated or pledged to any
Person other than the Borrower or one of their Wholly-Owned Subsidiaries, and,
provided further, that any such Debt owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Guaranty
Agreement.
 
(d)        endorsements of negotiable instruments for collection in the ordinary
course of business.
 
(e)        Debt (i) associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of Oil and Gas
Properties in the ordinary course of business and (ii) comprised of guarantees
of obligations of Subsidiaries under marketing agreements entered into in the
ordinary course of business.
 
(f)         Capital Leases not to exceed $25,000,000 in the aggregate at any one
time.
 
(g)        Funded Debt and any guarantees thereof, provided that (i)(A) at the
time such Funded Debt is incurred, no Default has occurred and is then
continuing and (B) no Default would result from the incurrence of such Funded
Debt after giving effect to the incurrence of such Funded Debt (and any
concurrent repayment of Debt with the proceeds of such incurrence), (ii)
immediately after the incurrence of such Funded Debt, the Borrowing Base shall
be adjusted
 
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in accordance with Section 2.07(e) and the incurrence of such Funded Debt (and
any concurrent repayment of Debt with the proceeds of such incurrence) would not
result in the total Revolving Credit Exposure exceeding such adjusted Borrowing
Base, (iii) such Funded Debt does not have any scheduled amortization prior to
four years after the Maturity Date, (iv) such Funded Debt does not mature sooner
than four years after the Maturity Date, (v) such Funded Debt and any guarantees
thereof are on market terms for issuers of similar size and credit quality given
the then prevailing market conditions and (vi) such Funded Debt does not have
any mandatory prepayment or redemption provisions (other than customary change
of control or asset sale tender offer provisions) which would require a
mandatory prepayment or redemption in priority to the Indebtedness.
 
(h)        other Debt not to exceed $40,000,000 in the aggregate at any one time
outstanding.
 
(i)         Debt incurred by the Borrower pursuant to the Senior Notes and any
Permitted Refinancing Debt in respect thereof.
 
(j)         Extensions, renewals or replacements of any Debt (for purposes of
this paragraph (j), “refinancing debt”) permitted in clauses (a) through (h) so
long as (i) the principal amount (or accreted value, if applicable) of such
refinancing debt does not exceed the principal amount (or accreted value, if
applicable) of the Debt extended, renewed or replaced (plus all accrued interest
on the Debt and the amount of all expenses and premiums incurred in connection
therewith), (ii) such refinancing debt has a final maturity date later than the
final maturity date of the Debt being extended, renewed or replaced, (iii) if
the Debt being extended, renewed or replaced is subordinated in right of payment
to the obligations under this Agreement, such refinancing debt has a final
maturity date equal to or later than the final maturity date of, and is
subordinated in right of payment to, the obligations under this Agreement on
terms at least as favorable to the Lenders as those contained in the
documentation governing the Debt being extended, renewed or replaced, (iv) such
refinancing debt is incurred either by the Borrower or by a Subsidiary who is
the obligor on the Debt being extended, renewed or replaced, and (v) if incurred
by the Borrower, such refinancing debt may be guaranteed by the Guarantors.
 
Section 9.03             Liens.  Neither the Borrower nor any of its
Subsidiaries will create, incur, assume or permit to exist any Lien on any of
its Properties (now owned or hereafter acquired), except:
 
(a)        Liens securing the payment of any Indebtedness.
 
(b)        Excepted Liens.
 
(c)        Liens in connection with Capital Leases permitted under Section
9.02(f).
 
(d)        Liens on Property not constituting collateral for the Indebtedness
and not otherwise permitted by the foregoing clauses of this Section 9.03;
provided that the aggregate principal or face amount of all Debt secured under
this Section 9.03(d) shall not exceed $10,000,000 at any time.
 
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(e)        Extensions, renewals or replacements of any of the Liens permitted in
clauses (a) through (e) so long as (i) the principal amount of the Debt or
obligation secured thereby is no greater than the principal amount of such Debt
or obligation at the time such Lien was permitted hereunder except for increases
in an amount equal to a reasonable premium or other reasonable amount paid, and
fees and expenses reasonably incurred, in connection with such extension,
renewal, refinancing, or replacement and in an amount equal to any existing
commitments unutilized thereunder, (ii) any such extension, renewal or
replacement Lien is limited to the property originally encumbered thereby, and
(iii) any renewal or extension of the Debt or obligations secured or benefited
thereby is permitted by Section 9.02.
 
Section 9.04             Dividends, Distributions and Redemptions.
 
(a)        Restricted Payments.  The Borrower will not, and will not permit any
of its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of their Property to their respective Equity Interest
holders, except (i) the Borrower may declare and pay dividends or distributions
with respect to its Equity Interests payable solely in additional shares of its
Equity Interests (other than Disqualified Capital Stock), (ii) Subsidiaries may
declare and pay dividends or distributions ratably with respect to their Equity
Interests, (iii) so long as no Borrowing Base Deficiency, Default or Event of
Default has occurred and is continuing or would result therefrom, the Borrower
may declare and pay quarterly cash dividends to its members out of Available
Cash for the preceding quarter (including amounts borrowed as contemplated under
clause (a)(ii) of the definition of Available Cash subsequent to the end of such
quarter) and (iv) so long as (A) no Borrowing Base Deficiency, Default or Event
of Default has occurred and is continuing or would result therefrom and (B)
after giving effect thereto, there exists as least $400,000,000 of unused
Borrowing Base availability, the Borrower may repurchase or retire Equity
Interests of the Borrower in an aggregate amount not to exceed $100,000,000
since November 2, 2007.
 
(b)        Redemption or Repayment of Senior Notes.  The Borrower will not, and
will not permit any Subsidiary to:  (i) call, make or offer to make any optional
Redemption of or otherwise optionally Redeem (and in the case of any
subordinated Debt, call, make or offer to make any mandatory or optional
Redemption) whether in whole or in part or repay any Debt permitted to be
incurred hereunder, including the Senior Notes or any Permitted Refinancing
Debt, except with the proceeds of Asset Sales, Casualty Events or Funded Debt,
or the proceeds of the sale or issuance of Equity Interests or Permitted
Refinancing Debt, in each case, in accordance with Section 3.04; (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 notes
evidencing any Debt permitted hereunder, including the Senior Notes or any
Permitted Refinancing Debt, or any indenture, agreement, instrument, certificate
or other document relating to any Debt permitted hereunder if (A) the effect of
such amendment, modification or waiver is to shorten the final maturity, except
as permitted under Section 9.02(g) or in accordance with the definition of
Permitted Refinancing Debt, or increase the amount of any payment of principal
thereof or increase the rate or shorten any period for payment of interest
thereon or modify the method of calculating the interest rate, (B) such action
adds covenants, events of default or other agreements to the extent more
restrictive, taken as a whole, than those contained in this
 
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Agreement, as determined by the Board of Directors of the Borrower in its
reasonable and good faith judgment, or (C) such action adds collateral unless
the Loan Documents are being amended at the same time to reflect such new
collateral, provided that the foregoing shall not prohibit the execution of
supplemental agreements in connection with the issuance of Permitted Refinancing
Debt or the addition of guarantors if required by the terms thereof; and (iii)
if the Senior Notes are contractually subordinated in right of payment,
designate any Debt (other than obligations of the Borrower and the Subsidiaries
pursuant to the Loan Documents) as “Specified Senior Indebtedness” or “Specified
Guarantor Senior Indebtedness” or give any such other Debt any other similar
designation for the purposes of any indentures or other documents relating to
any subordinated Debt permitted hereunder.
 
Section 9.05            Investments, Loans and Advances.  Neither the Borrower
nor any of its Subsidiaries will make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
 
(a)        Investments reflected in the Financial Statements.
 
(b)        accounts receivable arising in the ordinary course of business.
 
(c)        direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.
 
(d)        commercial paper maturing within one year from the date of creation
thereof rated A2 or P2 by S&P or Moody’s.
 
(e)        deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any Lender or any office
located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $250,000,000 (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.
 
(f)         deposits in money market funds investing primarily in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).
 
(g)        Investments (i) made by the Borrower in or to the Guarantors, (ii)
made by any Subsidiary in or to the Borrower or any Guarantor, (iii) made by the
Borrower or any Guarantor in any Person that owns Oil and Gas Properties which
are overriding royalty, royalty interests or other similar non-cost bearing
interests and which do not own other material Properties, provided, that after
the consummation of such Investment (A) the Borrower and its Subsidiaries are in
compliance with all covenants under this Agreement and (B) such Person promptly
becomes a Guarantor or is promptly dissolved into a Guarantor or the Borrower
and (iv) made by the Borrower or any Guarantor in Subsidiaries that are not
Guarantors, provided
 
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that the aggregate of all Investments made by the Borrower and the Guarantors in
or to all Subsidiaries that are not Guarantors shall not exceed $10,000,000 at
any time.
 
(h)        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 any of its Subsidiaries 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, treatment and storage (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.
 
(i)         subject to the limits in Section 9.06, Investments in direct
ownership interests in additional Oil and Gas 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.
 
(j)         loans or advances to employees, officers or directors in the
ordinary course of business of the Borrower or any of its Subsidiaries, in each
case only as permitted by applicable law, including Section 402 of the Sarbanes
Oxley Act of 2002, but in any event not to exceed $1,000,000 in the aggregate at
any time.
 
(k)        Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any of its Subsidiaries 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 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(k) exceeds $1,000,000.
 
(l)         Any guarantee permitted under Section 9.02.
 
Section 9.06            Nature of Business.  Neither the Borrower nor any of its
Subsidiaries will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.  The
Borrower will not, and will not permit any of its Subsidiaries to, operate its
business outside the geographical boundaries of the United States.
 
Section 9.07            Limitation on Leases.  Neither the Borrower nor any of
its Subsidiaries will create, incur, assume or suffer to exist any obligation
for the payment of rent or hire of Property of any kind whatsoever (real or
personal but excluding Capital Leases permitted by Section 9.02(f), leases of
Hydrocarbon Interests and drilling and other similar contracts), under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Borrower and its Subsidiaries pursuant to all such leases or lease
agreements, including, without
 
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Houston 3931255v.7
 
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limitation, any residual payments at the end of any lease, to exceed $10,000,000
in any period of twelve consecutive calendar months during the life of such
leases.
 
Section 9.08            Proceeds of Notes.  The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.21.  Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulations T, U or X or any other regulation of the Board
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.
 
Section 9.09            ERISA Compliance.  Except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
the Borrower and its Subsidiaries will not at any time:
 
(a)        terminate, or permit any ERISA Affiliate to terminate, any Plan in a
manner, or take any other action with respect to any Plan, which could result in
any liability of the Borrower, any of its Subsidiaries or any ERISA Affiliate to
the PBGC.
 
(b)        contribute to or assume an obligation to contribute to, or permit any
ERISA Affiliate to contribute to or assume an obligation to contribute to, any
Multiemployer Plan.
 
(c)        acquire, or permit any ERISA Affiliate to acquire, an interest in any
Person that causes such Person to become an ERISA Affiliate with respect to the
Borrower or any of its Subsidiaries or with respect to any ERISA Affiliate of
the Borrower or any of its Subsidiaries if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such acquisition
has sponsored, maintained, or contributed to, (i) any Multiemployer Plan, or
(ii) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities.
 
Section 9.10            Sale or Discount of Receivables.  Except for receivables
obtained by the Borrower or any of its Subsidiaries out of the ordinary course
of business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, neither the Borrower nor any of its
Subsidiaries will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
 
Section 9.11             Mergers, Etc.  Neither the Borrower nor any of its
Subsidiaries will merge into or with or consolidate with any other Person, or
sell, lease or otherwise dispose of (whether
 
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in one transaction or in a series of transactions) all or substantially all of
its Property to any other Person, except that any Wholly-Owned Subsidiary may
merge with any other Wholly-Owned Subsidiary so long as in the case of any
merger involving a Guarantor, a Guarantor is the surviving entity, and that the
Borrower may merge with any Wholly-Owned Subsidiary so long as the Borrower is
the survivor.
 
Section 9.12            Sale of Properties.  The Borrower will not, and will not
permit any of its Subsidiaries to, sell, assign, farm-out, convey or otherwise
transfer any Property except for:  (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (c) the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use; (d) other sales or
dispositions (including Casualty Events) of Oil and Gas Properties or any
interest therein or Subsidiaries owning Oil and Gas Properties; provided that
(i) 100% of the consideration received in respect of such other sale or
disposition shall be cash, (ii) the consideration received in respect of such
other sale or disposition shall be equal to or greater than the fair market
value of the Oil and Gas Property, interest therein or Subsidiary subject of
such other sale or disposition (as reasonably determined by the board of
directors of the Borrower and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect), (iii) if such other sale or disposition of Oil and
Gas Property or Subsidiary owning Oil and Gas Properties included in the most
recently delivered Reserve Report during any period between two successive
Scheduled Redetermination Dates has a fair market value (as determined by the
Administrative Agent), individually or in the aggregate, in excess of
$50,000,000, the Borrowing Base shall be reduced, effective immediately upon
such sale or disposition, by an amount equal to the value, if any, assigned such
Property as determined in good faith by the Super-Majority Lenders assigned such
Property in the most recently delivered Reserve Report and (iv) if any such
other sale or disposition is of a Subsidiary owning Oil and Gas Properties, such
other sale or disposition shall include all the Equity Interests of such
Subsidiary; and (e) sales and other dispositions of Properties not regulated by
Section 9.12(a) to (d) having a fair market value not to exceed $10,000,000
during any 12-month period.
 
Section 9.13            Environmental Matters.  The Borrower will not, and will
not permit any Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.
 
Section 9.14            Transactions with Affiliates.  The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) 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.
 
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Section 9.15            Subsidiaries.  The Borrower shall have no Subsidiaries
other than Wholly-Owned Subsidiaries.  The Borrower shall not, and shall not
permit its Subsidiaries to, create or acquire any additional Subsidiary unless
the Borrower gives written notice to the Administrative Agent of such creation
or acquisition and complies with Section 8.14(b).  The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign or otherwise dispose
of any Equity Interests in any of its Subsidiaries.  The Borrower shall have no
Foreign Subsidiaries or foreign operations.
 
Section 9.16            Negative Pledge Agreements; Dividend
Restrictions.  Neither the Borrower nor any of its Subsidiaries will create,
incur, assume or suffer to exist any contract, agreement or understanding (other
than this Agreement or the Security Instruments) that in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property in favor of the Administrative Agent and the Lenders or restricts
any 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; provided, however, that the preceding  restrictions will
not apply to encumbrances or restrictions arising under or by reason of (a) any
leases (other than leases of Oil and Gas Properties) or licenses or similar
contracts as they affect any Property or Lien subject to such lease or license,
(b) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into for the direct or indirect sale or disposition of all or
substantially all the equity or Property of such Subsidiary (or the Property
that is subject to such restriction) pending the closing of such sale or
disposition, (c) customary provisions with respect to the distribution of
Property in joint venture agreements or (d) Capital Leases permitted under
Section 9.02(f), but then only on the Property subject of such Capital Leases.
 
Section 9.17            Gas Imbalances, Take-or-Pay or Other Prepayments.  The
Borrower will not, and will not permit any of its Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrower or any of its Subsidiaries that would require the
Borrower or such Subsidiary to deliver, in the aggregate, two percent (2%) or
more of the monthly production of Hydrocarbons at some future time without then
or thereafter receiving full payment therefor.
 
Section 9.18            Swap Agreements.  Neither the Borrower nor any of its
Subsidiaries will enter into any Swap Agreements with any Person other than (a)
Swap Agreements in respect of commodities (i) with an Approved Counterparty,
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 85% of the reasonably anticipated projected
production from Proved Properties for each month during the period during which
such Swap Agreement is in effect for each of crude oil and natural gas,
calculated separately, for the remainder of the calendar year plus the next two
full calendar years succeeding the execution of such Swap Agreement and 70% of
the reasonably anticipated projected production from Proved Properties for each
month during the period during which such Swap Agreement is in effect for each
of crude oil and natural gas, calculated separately, for each month thereafter,
and (iii) the notional volumes for which do not exceed the current net monthly
production (regardless of projected production levels) at the time such Swap
Agreement is executed, calculated separately for each
 
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of crude oil and natural gas, and (b) Swap Agreements in respect of interest
rates with an Approved Counterparty, which effectively convert 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 90%
of the then outstanding principal amount of the Borrower’s Debt for borrowed
money which bears interest at a floating rate.  Notwithstanding anything to the
contrary in this Section 9.18, there shall be no prohibition against the
Borrower entering into any “put” or “call spread option” contracts or commodity
price floors so long as such agreements are entered into for non-speculative
purposes and in the ordinary course of business for the purpose of hedging
against fluctuations of commodity prices.
 
Section 9.19             Tax Status as Partnership.  The Borrower shall not
alter its status as a partnership for purposes of United States Federal Income
taxes.
 
ARTICLE X
Events of Default; Remedies
 
Section 10.01           Events of Default.  One or more of the following events
shall constitute an “Event of Default”:
 
(a)        the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof 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 three Business Days.
 
(c)        any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect when made or deemed made.
 
(d)        the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in, Section 8.01(l),
Section 8.01(m), Section 8.02 Section 8.03 or in Article IX.
 
(e)        the Borrower or any of its Subsidiaries 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) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the earlier to occur of (i) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
 
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of any Lender) or (ii) a Responsible Officer of the Borrower or any of its
Subsidiaries otherwise becoming aware of such default.
 
(f)         the Borrower or any of its Subsidiaries 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
(after giving effect to any applicable notice and cure period).
 
(g)        any event or condition occurs (after giving effect to any notice or
cure period) that results in any Material Indebtedness becoming due prior to its
scheduled maturity or that enables or permits (with or without the giving of
notice, the lapse of time or both) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to become due, or to require the Redemption thereof or any
offer to Redeem to be made in respect thereof, prior to its scheduled maturity
or require the Borrower or any of its Subsidiaries to make an offer in respect
thereof.
 
(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 of its Subsidiaries or its debts, or of a
substantial part of its assets, under any federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered.
 
(i)         the Borrower or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing; or any member of the Borrower shall
make any request or take any action for the purpose of calling a meeting of the
members of the Borrower to consider a resolution to dissolve and wind-up the
Borrower’s affairs.
 
(j)         the Borrower or any of its Subsidiaries shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due.
 
(k)        ii) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 (to the extent not covered by independent third
party insurance provided by insurers of the highest claims paying rating or
financial strength as to which the insurer does not dispute coverage and is not
subject to an insolvency proceeding) or (1) any one or more non monetary
judgments that have, or could reasonably be expected to have,
 
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individually or in the aggregate, a Material Adverse Effect, shall be rendered
against the Borrower, any of its Subsidiaries or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower or any
of its Subsidiaries to enforce any such judgment.
 
(l)         the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by
them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any of its
Subsidiaries shall so state in writing.
 
(m)       an ERISA Event shall have occurred that, when taken together with all
other ERISA Events that have occurred, could reasonably be expected to have a
Material Adverse Effect.
 
(n)        a Change in Control shall occur.
 
Section 10.02           Remedies.
 
(a)        In the case of an Event of Default other than one described in
Section 10.01(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, at
the request of the Majority Lenders, shall, by notice to the Borrower, take
either or both of the following actions, at the same or different times:  (i)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the 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 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(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
2.08(j)), shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.
 
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(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:  first, to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Notes; third, to fees; fourth,
pro rata to principal outstanding on the Notes, to Indebtedness referred to in
Clause (b) of the definition of Indebtedness and to serve as cash collateral to
be held by the Administrative Agent to secure the LC Exposure, in each case,
owing to a Lender or an Affiliate of a Lender; fifth, to any other Indebtedness;
and any excess shall be paid to the Borrower or as otherwise required by any
Governmental Requirement.
 
Section 10.03          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 each Guarantor’s interest in and to production and all proceeds 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, except after the occurrence and during the continuance 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 its Subsidiaries.
 
ARTICLE XI
The Administrative Agent
 
Section 11.01           Appointment; Powers.  Each of the Lenders and each
Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent
and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof and the other Loan Documents, together with such actions and powers
as are reasonably incidental thereto.
 
Section 11.02          Duties and Obligations of Administrative Agent.  The
Administrative Agent shall have no duties or obligations except those expressly
set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term “agent” herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
 
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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 have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in Article VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent, (vi) the existence, value, perfection
or priority of any collateral security or the financial or other condition of
the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii)
any failure by the Borrower or any other Person (other than itself) to perform
any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or
conditions set forth herein or therein.  For purposes of determining compliance
with the conditions specified in Article VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.
 
Section 11.03          Action by Agent.  The Administrative Agent shall have no
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) and in all cases the Administrative Agent shall be fully
justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such
action.  The instructions as aforesaid and any action taken or failure to act
pursuant thereto by the Administrative Agent shall be binding on all of the
Lenders.  If a Default has occurred and is continuing, then the Administrative
Agent shall take such action with respect to such Default as shall be directed
by the requisite Lenders in the written instructions (with indemnities)
described in this Section 11.03, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to
 
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such Default as it shall deem advisable in the best interests of the
Lenders.  In no event, however, shall the Administrative Agent be required to
take any action which exposes the Administrative Agent to personal liability or
which is contrary to this Agreement, the Loan Documents or applicable law.  If a
Default has occurred and is continuing, the Syndication Agents and the
Co-Documentation Agents shall have no obligation to perform any act in respect
thereof.  No Agent shall be liable for any action taken or not taken by it with
the consent or at the request of the Majority Lenders or the Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or
under any other Loan Document or under any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith
INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.
 
Section 11.04          Reliance by Agent.  Each 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.  Each
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 each
Issuing Bank hereby waives the right to dispute such Agent’s record of such
statement, except in the case of gross negligence or willful misconduct by such
Agent.  Each 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 Agents may deem and
treat the payee of any Note as the holder thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.
 
Section 11.05          Subagents.  The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this Article XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Agent.
 
Section 11.06          Resignation or Removal of Agents.  Subject to the
appointment and acceptance of a successor Agent as provided in this Section
11.06, any Agent may resign at any time by notifying the Lenders, each Issuing
Bank and the Borrower and any Agent may be removed at any time with or without
cause by the Majority Lenders.  Upon any such resignation or removal, the
Majority Lenders shall have the right, in consultation with the Borrower, to
appoint a successor.  If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation or removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders and each Issuing
Bank, appoint a successor Agent.  Upon the acceptance of its appointment as
Agent hereunder by a successor, such successor shall succeed to and become
 
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vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder.  The fees payable by the Borrower to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor.  After the Agent’s resignation hereunder, the
provisions of this Article XI and Section 12.03 shall continue in effect for the
benefit of such retiring 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 Agent.
 
Section 11.07          Agents and Lenders.  Each bank serving as an Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not an Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent hereunder.
 
Section 11.08           No Reliance.
 
(a)        Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, any other 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, any
other 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 Agents shall not be required to keep themselves informed as to
the performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries.  Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent and no 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 the Borrower (or any of its Affiliates) which
may come into the possession of such Agent or any of its Affiliates.  In this
regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this
transaction as special counsel to the Administrative Agent only, except to the
extent otherwise expressly stated in any legal opinion or any Loan
Document.  Each other party hereto will consult with its own legal counsel to
the extent that it deems necessary in connection with the Loan Documents and the
matters contemplated therein.
 
(b)        The Lenders acknowledge that the Administrative Agent and the
Arrangers are acting solely in administrative capacities with respect to the
structuring and syndication of this facility and have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than their administrative duties, responsibilities and
liabilities specifically as set forth in the Loan Documents and in their
capacity as Lenders hereunder.  In structuring, arranging or syndicating this
facility, each Lender acknowledges that the Administrative Agent and/or
Arrangers may be agents or lenders under these Notes, other
 
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loans or other securities and waives any existing or future conflicts of
interest associated with their role in such other debt instruments.  If in its
administration of this facility or any other debt instrument, the Administrative
Agent determines (or is given written notice by any Lender) that a conflict
exists, then it shall eliminate such conflict within 90 days or resign pursuant
to Section 11.06 and shall have no liability for action taken or not taken,
other than actions taken or not taken which represent Administrative Agent’s
gross negligence or willful misconduct, while such conflict existed.
 
Section 11.09          Administrative Agent May File Proofs of Claim.  In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
 
(a)        to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other 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 and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and
 
(b)        to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
 
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.
 
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
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 Collateral
and Liens.  Each Lender and each Issuing Bank hereby authorizes the
Administrative Agent to release any collateral that is permitted to be sold or
released pursuant to the terms of the Loan Documents.  Each Lender and each
Issuing Bank hereby authorizes the Administrative Agent to execute and deliver
to the Borrower, at the Borrower’s sole cost and expense, any and all releases
of Liens,
 
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termination statements, assignments or other documents reasonably requested by
the Borrower in connection with any sale or other disposition of Property to the
extent such sale or other disposition is permitted by the terms of Section 9.12
or is otherwise authorized by the terms of the Loan Documents.
 
Section 11.11          The Arrangers and the Agents.  The Arrangers, the
Syndication Agents and the Co-Documentation Agents shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
individual capacity as Lenders hereunder to the extent they are a party to this
Agreement as a Lender.
 
ARTICLE XII
Miscellaneous
 
Section 12.01           Notices.
 
(a)           Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
 
                     (i)          if to the Borrower, to it at
                    Linn Energy, LLC
                    600 Travis Street, Suite 5100
                    Houston, TX 77002
 
                    Attention: Kolja Rockov
                    Telephone: 281-840-4169
                    Fax: 281-840-4189
                    E-Mail: kr@linnenergy.com
 
                    with a copy to:
 
                    Linn Energy, LLC
                    600 Travis Street, Suite 5100
                    Houston, TX 77002
 
                    Attention:  Charlene A. Ripley
                    Telephone: 281-840-4119
                    Fax:  281-840-4180
                    E-mail: cripley@linnenergy.com
 
                     (ii)         if to the Administrative Agent, to it at
 
                    525 Washington Blvd., 8th floor
                    Jersey City, New Jersey 07310

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                    Attention: Dina Wilson, Loan Assistant
                Telecopy:  201-850-4020
 
                    with a copy to the Administrative Agent at:
 
                    1200 Smith Street, Suite 3100
                    Houston, Texas  77002
                    Attention:  Betsy Jocher/Donna Verwold
                    Telecopy: 713-659-6915
        
                (iii)           if to any other Lender, in their capacity as
such, or any other Lender in its capacity as an Issuing Bank, to it at its
address (or telecopy number) set forth in its Administrative Questionnaire.
 
(b)        Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II, Article III, Article IV and Article V
unless otherwise agreed by the Administrative Agent and the applicable
Lender.  The Administrative Agent or the Borrower may, in its discretion, agree
to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
 
(c)        Any party hereto may change its address or telecopy 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 other 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 other Agent, each 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 Section 12.02(b), and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.  Without limiting the generality of the foregoing, the making of a Loan
or issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any other Agent, any
Lender or any Issuing Bank may have had notice or knowledge of such Default at
the time.
 
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(b)        In each instance subject to Section 4.04(c)(ii), neither this
Agreement nor any provision hereof nor any Security Instrument nor any other
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 or by the Borrower and the Administrative
Agent with the written consent of the Majority Lenders; provided that no such
agreement shall (i) increase the Maximum Credit Amount of any Lender without the
written consent of such Lender, (ii) increase the Borrowing Base without the
consent or deemed consent of each Lender, decrease or maintain the Borrowing
Base without the consent of the Super-Majority Lenders, or modify in any manner
Section 2.07 without the consent of each Lender, (iii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or
under any other Loan Document, without the written consent of each Lender
affected thereby, (iv) postpone the scheduled date of payment 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 Termination Date or the Maturity Date without the written consent
of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c)
in a manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (vi) waive or amend Section 6.01,
Section 10.02(c) or Section 8.14 or change the definition of the terms “Domestic
Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or
“Subsidiary”, without the written consent of each Lender, (vii) release any
Guarantor (except as set forth in the Guaranty Agreement), release all or a
substantial portion of the collateral (other than as provided in Section 11.10),
or reduce the percentage set forth in Section 8.14(a) to less than 80%, without
the written consent of each Lender, (viii) modify the terms of Section 10.02(c)
without the consent of each Lender adversely affected thereby and the consent of
each Person that is adversely affected hereby and a party to a Swap Agreement
secured by the Security Instruments which is not a Lender (or an Affiliate of a
Lender) at the time of such agreement, or (ix) change any of the provisions of
this Section 12.02(b) or the definition of “Majority Lenders” or “Super-Majority
Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or under any
other Loan Documents or make any determination or grant any consent hereunder or
any other Loan Documents, without the written consent of each Lender; provided
further that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent, any other Agent, or any Issuing
Bank hereunder or under any other Loan Document without the prior written
consent of the Administrative Agent, such other Agent or such Issuing Bank, as
the case may be.  Notwithstanding the foregoing, any supplement to Schedule 7.14
(Subsidiaries) shall be effective simply by delivering to the Administrative
Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.
 
       Section 12.03            Expenses, Indemnity; Damage Waiver.
 
(a)        The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent, the Arrangers and their Affiliates,
including, without limitation, the reasonable fees, charges and disbursements of
counsel and other outside consultants for the Administrative Agent, the
reasonable travel, photocopy, mailing, courier, telephone and other
 
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similar expenses and, in connection with the syndication of the credit
facilities provided for herein, the preparation, negotiation, execution,
delivery and administration (both before and after the execution hereof and
including advice of counsel to the Administrative Agent as to the rights and
duties of the Administrative Agent and the Lenders with respect thereto) of this
Agreement and the other Loan Documents and any amendments, modifications or
waivers of or consents related to the provisions hereof or thereof (whether or
not the transactions contemplated hereby or thereby shall be consummated), (ii)
all out-of-pocket costs, expenses, Taxes, assessments and other charges incurred
by any Agent or any Lender in connection with any filing, registration,
recording or perfection of any security interest contemplated by this Agreement
or any Security Instrument or any other document referred to therein, (iii) all
reasonable out-of-pocket expenses incurred by each Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit
issued by such Issuing Bank or any demand for payment thereunder, (iv) all
out-of-pocket expenses incurred by any Agent, any Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for any Agent, any
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section 12.03, or in connection with the Loans
made or Letters of Credit issued hereunder, including, without limitation, all
such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.
 
(b)        THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS, EACH ISSUING
BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS
(EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN EXPENSES IN CONNECTION WITH THE
EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DATED OF
EVEN DATE HEREWITH, WHICH EXPENSES SHALL ONLY BE PAID BY THE BORROWER TO THE
EXTENT PROVIDED IN SECTION 12.03(a)) OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY
WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN
ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE
OF THE PROCEEDS THEREFROM, INCLUDING,
 
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WITHOUT LIMITATION, (A) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A DEMAND FOR
PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUING BANK IF THE DOCUMENTS
PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS
OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF
CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE
BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE,
TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS
WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix)
THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, (x) THE
PAST OWNERSHIP BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY OF THEIR
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND
FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED
RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF
OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OR
ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY
ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE
 
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EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE.
 
(c)        To the extent that the Borrower fails to pay any amount required to
be paid by it to such Agent or any Issuing Bank under Section 12.03(a) or (b),
each Lender severally agrees to pay to such Agent or such Issuing Bank, as the
case may be, such Lender’s Applicable Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against such Agent or such Issuing Bank in its capacity as such.
 
(d)        To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.
 
(e)        All amounts due under this Section 12.03 shall be payable within ten
(10) Business Days of written demand therefor.
 
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) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, each Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
 
(b)        (i)           Subject to the conditions set forth in Section
12.04(b)(ii), any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it) with the prior written
consent (such consent not to be unreasonably withheld) of:
 
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(ii)           the Borrower, provided that no consent of the Borrower shall be
required if such assignment is to a Lender or an Affiliate of a Lender or, if an
Event of Default has occurred and is continuing, is to any other assignee; and
 
                    (iii)           the Administrative Agent, provided that no
consent of the Administrative Agent shall be required for an assignment to an
assignee that is a Lender or any Affiliate of a Lender, immediately prior to
giving effect to such assignment.
 
                     (iv)           Assignments shall be subject to the
following additional conditions:
 
(A)           except in the case of an assignment to a Lender or an Affiliate of
a Lender or an assignment of the entire remaining amount of the assigning
Lender’s Commitment, the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, provided that no such consent of the
Borrower shall be required if an Event of Default has occurred and is
continuing;
 
(B)           each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;
 
(C)           the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and
 
(D)           the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
 
             (v)           Subject to Section 12.04(b)(iv) and the acceptance
and recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section
5.01, Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 12.04 shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(c).
 
                            (vi)           The Administrative Agent, acting for
this purpose as an agent of the Borrower, shall maintain at one of its offices a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Maximum Credit
Amount of, and principal amount of the Loans and LC Disbursements
 
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owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent, each Issuing Bank and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary.  The Register shall be available for inspection by the Borrower,
any Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.  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.
 
                            (vii)           Upon its receipt of a duly completed
Assignment and Assumption executed by an assigning Lender and an assignee, the
assignee’s completed Administrative Questionnaire (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in Section 12.04(b) and any written consent to such assignment required by
Section 12.04(b), the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this Section 12.04(b).
 
(c)        (i)           Any Lender may, without the consent of the Borrower the
Administrative Agent or any Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, each 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.  Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the proviso to Section
12.02 that affects such Participant.  In addition such agreement must provide
that the Participant be bound by the provisions of Section 12.03.  Subject to
Section 12.04(c)(ii), the Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 12.04(b).  To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 12.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 4.01(c) as
though it were a Lender.
 
                    (ii)           A Participant shall not be entitled to
receive any greater payment under Section 5.01 or Section 5.03 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent.  A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits
 
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of Section 5.03 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower,
to comply with Section 5.03(e) as though it were a Lender.
 
(d)        Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such
pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
 
Section 12.05           Survival; Revival; Reinstatement.
 
(a)        All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, any Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated.  The provisions of Section 5.01, Section 5.02,
Section 5.03, Section 12.03, Section 12.11 and Article XI shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the termination of
this Agreement, any other Loan Document or any provision hereof or thereof.
 
(b)        To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.
 
       Section 12.06            Counterparts; Integration; Effectiveness.
 
(a)        This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.
 
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(b)        This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
(c)        Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
 
Section 12.07          Severability.  Any provision of this Agreement or any
other Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof or thereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
 
Section 12.08          Right of Setoff.  If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations (of
whatsoever kind, including, without limitation, obligations under Swap
Agreements) at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower or any of its Subsidiaries against any of and all
the obligations of the Borrower or any of its Subsidiaries owed to such Lender
now or hereafter existing under this Agreement or any other Loan Document,
irrespective of whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be
unmatured.  The rights of each Lender under this Section 12.08 are in addition
to other rights and remedies (including other rights of setoff) which such
Lender or its Affiliates may have.
 
Section 12.09           GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
 
(a)        THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE
OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS
 
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LOCATED.  CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTES.
 
(b)        ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.
 
(c)        EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.
 
(d)        EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED
 
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HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 12.09.
 
Section 12.10          Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
Section 12.11          Confidentiality.  Each of the Agents, 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 and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority or self-regulatory body, (c) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to any other party to this Agreement or any other Loan
Document, (e) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 12.11, to (i) any assignee of or Participant in,
or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty
(or its advisors) to any Swap Agreement relating to the Borrower and their
obligations, (g) with the consent of the Borrower, (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 12.11 or (ii) becomes available to the Administrative Agent, any
Issuing Bank or any Lender on a nonconfidential basis from a source other than
the Borrower, or (i) to the National Association of Insurance Commissioners or
any similar organization or any nationally recognized rating agency that
requires access to information about a Lender’s investment portfolio in
connection with ratings issued with respect to such Lender.  For the purposes of
this Section 12.11, “Information” means all information received from the
Borrower or any of its Subsidiaries relating to the Borrower or any of its
Subsidiaries and their businesses, other than any such information that is
available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower or any of its
Subsidiaries; provided that, in the case of information received from the
Borrower, or any of its Subsidiaries 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.
 
Each Lender acknowledges that information furnished to it pursuant to this
Agreement or the other Loan Documents may include material non-public
information concerning the Borrower and its Affiliates and their related parties
or their respective securities, and confirms that it has developed compliance
procedures regarding the use of material non-public information and agrees that
it will handle such material non-public information in accordance with those
procedures and applicable law, including federal and state securities laws.
 
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All information, including requests for waivers and amendments, furnished by the
Borrower or the Administrative Agent pursuant to, or in the course of
administering, this Agreement or the other Loan Documents will be
syndicate-level information, which may contain material non-public information
about the Borrower and its Affiliates and their related parties or their
respective securities.  Accordingly, each Lender represents to the Borrower and
the Administrative Agent that it has identified in its Administrative
Questionnaire a credit contact who may receive information that may contain
material non-public information in accordance with its compliance procedures and
applicable law, including federal and state securities laws.
 
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 Texas 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:  (a) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the 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 (b) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the 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
 
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payable to such Lender if the total amount of interest had been computed without
giving effect to this Section 12.12.  To the extent that Chapter 303 of the
Texas Finance Code is relevant for the purpose of determining the Highest Lawful
Rate applicable to a Lender, such Lender elects to determine the applicable rate
ceiling under such Chapter by the weekly ceiling from time to time in
effect.  Chapter 346 of the Texas Finance Code does not apply to the Borrower’s
obligations hereunder.
 
Section 12.13          EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”
 
Section 12.14          Collateral Matters; Swap Agreements.  The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
those Lenders or their Affiliates which are counterparties to any Swap Agreement
with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement, including any Swap Agreements between such Persons in
existence prior to the date hereof.  No Lender or any Affiliate of a Lender
shall have any voting rights under any Loan Document as a result of the
existence of obligations owed to it under any such Swap Agreements.
 
Section 12.15          No Third Party Beneficiaries.  This Agreement, the other
Loan Documents, and the agreement of the Lenders to make Loans and the Issuing
Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for
the benefit of the Borrower, and no other Person (including, without limitation,
any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier
or materialsman) shall have any rights, claims, remedies or privileges hereunder
or under any other Loan Document against the Administrative Agent, any other
Agent, the Issuing Bank or any Lender for any reason whatsoever.  There are no
third party beneficiaries.
 
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Section 12.16          USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.
 
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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:                                          LINN ENERGY, LLC
 
 
                     By: /s/ Kolja Rockov
 Name: Kolja Rockov
 Title:   Executive Vice President and Chief Financial Officer

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BNP PARIBAS, as Administrative Agent, Syndication Agent and a Lender
 
 
By: /s/ Doug Liftman
Name: Doug Liftman
Title:   Managing Director
 
 
By: /s/ Betsy Jocher
Name: Betsy Jocher
Title:   Director

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ROYAL BANK OF CANADA, as Syndication Agent and a Lender
 
By: /s/ Don J. McKinnerney
Name: Don J. McKinnerney
Title: Authorized
Signatory                                                                

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THE ROYAL BANK OF SCOTLAND plc, as a Co-Documentation Agent and a Lender
 
By:  /s/ Lucy Walker
Name: Lucy Walker
Title: Vice President

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CITIBANK, NA, as a Co-Documentation Agent and a Lender
 
 
By:  /s/ Todd Mogil
Name: Todd Mogil
Title: Vice President

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CALYON NEW YORK BRANCH, as a Co-Documentation Agent and a Lender
 
 
By: /s/ Tom Byargeon
Name: Tom Byargeon
Title: Managing Director
 
By: /s/ Sharada Manne
Name: Sharada Manne
Title: Director

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BARCLAYS BANK plc, as a Co-Documentation Agent and a Lender
 
 
By: /s/ Maria Lund
Name: Maria Lund
Title: Vice President

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Houston 3931255
 
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THE BANK OF NOVA SCOTIA, as a Lender
 
 
By: /s/ David Mills
Name: David Mills
Title: Managing Director

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Houston 3931255
 
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BANK OF MONTREAL, as a Lender
 
 
By: /s/ James V. Ducote
Name: James V. Ducote
Title: Director

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WACHOVIA BANK, N.A., as a Lender
 
 
By: /s/ Henry R. Biedrzycki
Name: Henry R. Biedrzycki
Title: Director

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SOCIETE GENERALE, as a Lender
 
 
By: /s/ Stephen W. Warfel
Name: Stephen W. Warfel
Title: Managing Director

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COMERICA BANK, as a Lender
 
 
By: /s/ Greg Smith
Name: Greg Smith
Title: Senior Vice President

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ING CAPITAL LLC, as a Lender
 
 
By: /s/ Charles Hall
Name: Charles Hall
Title: Managing Director

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Houston 3931255
 
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FORTIS CAPITAL CORP., as a Lender
 
 
By: /s/ David Montgomery
Name: David Montgomery
Title: Director
 
 
By: /s/ Darrell Holley
Name: Darrell Holley
Title: Managing Director

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Houston 3931255
 
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KEYBANK NATIONAL ASSOCIATION, as a Lender
 
 
By: /s/ Todd Coker
Name: Todd Coker
Title: AVP

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Houston 3931255
 
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CREDIT SUISSE, CAYMAN
ISLANDS BRANCH as a Lender
 
 
By: /s/ Nupur Kumar
Name: Nupur Kumar
Title: Vice President
 
 
By: /s/ Christopher Reo Day
Name: Christopher Reo Day
Title: Associate                                                                

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Houston 3931255
 
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COMPASS BANK, as a Lender
 
 
By: /s/ Greg Determann
Name: Greg Determann
Title:   Vice President

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Houston 3931255
 
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DnB NOR BANK ASA, as a Lender
 
 
By: /s/ Philip F. Kurpiewski
Name: Philip F. Kurpiewski
Title: Senior Vice President
 
 
By: /s/ Alfred C. Jones III
Name: Alfred C. Jones III
Title: Senior Vice
President                                                                

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DZ BANK AG, DEUTSCHE ZENTRAL-GENOSSENSCHAFTSBANK, FRANKFURT AM MAIN, NEW YORK
BRANCH, as a Lender
 
 
By: /s/ Darla A. Plahle
Name: Darla A. Plahle
Title: First Vice President
 
 
By: /s/ John Hammarskjold
Name: John Hammarskjold
Title: Vice
President                                                                

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UNION BANK OF CALIFORNIA, N.A., as a Lender
 
 
By: /s/ Scott Gildea
Name: Scott Gildea
Title: Vice
President                                                                

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Houston 3931255
 
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U.S. BANK NATIONAL ASSOCIATION, as a Lender
 
By: /s/ Justin M. Alexander
Name: Justin M. Alexander
Title: Vice
President                                                                

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Houston 3931255
 
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 ALLIED IRISH BANKS P.L.C., as a Lender
 
 
By: /s/ Vaughn Buck
Name: Vaughn Buck
Title: Executive Vice President
 
 
By: /s/ Mark Connelly
Name: Mark Connelly
Title: Senior Vice President

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Houston 3931255
 
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