Exhibit 10.1

 

 

 

DEBTOR-IN-POSSESSION CREDIT AGREEMENT

dated as of

January 22, 2018

among

EXCO RESOURCES, INC.,

as Borrower

CERTAIN SUBSIDIARIES OF BORROWER,

as Guarantors

The Lenders Party Hereto

and

HAMBLIN WATSA INVESTMENT COUNSEL LTD.,

as Administrative Agent

 

 

 

 

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TABLE OF CONTENTS

 

Page

 

ARTICLE I DEFINITIONS

     1  

Section 1.01. Defined Terms

     1  

Section 1.02. Classification of Loans and Borrowings

     36  

Section 1.03. Terms Generally

     36  

Section 1.04. Accounting Terms; GAAP

     37  

Section 1.05. Oil and Gas Definitions

     37  

Section 1.06. Time of Day

     37  

ARTICLE II THE CREDITS

     37  

Section 2.01. Commitments

     37  

Section 2.02. Termination and Reduction of the Commitments

     38  

Section 2.03. [Reserved]

     39  

Section 2.04. Loans and Borrowings

     39  

Section 2.05. Requests for Borrowings

     39  

Section 2.06. Reserved

     40  

Section 2.07. Letters of Credit

     40  

Section 2.08. Funding of Borrowings

     45  

Section 2.09. Interest Elections

     46  

Section 2.10. Repayment of Loans; Evidence of Debt

     47  

Section 2.11. Optional Prepayment of Loans

     49  

Section 2.12. Mandatory Prepayment of Loans

     49  

Section 2.13. Fees

     51  

Section 2.14. Interest

     52  

Section 2.15. Alternate Rate of Interest

     53  

Section 2.16. Increased Costs

     54  

Section 2.17. Break Funding Payments

     55  

Section 2.18. Taxes

     55  

Section 2.19. Payments Generally; Pro Rata Treatment; Sharing of Set-offs

     60  

Section 2.20. Mitigation Obligations; Replacement of Lenders; Illegality

     62  

Section 2.21. Defaulting Lenders

     64  

Section 2.22. Returned Payments

     65  

Section 2.23. [Reserved]

     66  

Section 2.24. Superpriority Nature of Obligations and Liens

     66  

ARTICLE III BORROWING BASE

     67  

Section 3.01. Initial Borrowing Base

     67  

Section 3.02. Scheduled and Interim Redeterminations

     67  

Section 3.03. Scheduled and Interim Redetermination Procedure

     67  

Section 3.04. Effectiveness of a Redetermined Borrowing Base

     69  

Section 3.05. Lenders’ Sole Discretion

     70  

Section 3.06. Mandatory Borrowing Base Reduction

     70  

 

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ARTICLE IV REPRESENTATIONS AND WARRANTIES

     71  

Section 4.01. Organization; Powers

     71  

Section 4.02. Authorization; Enforceability

     71  

Section 4.03. Governmental Approvals; No Conflicts

     71  

Section 4.04. Financial Condition; No Material Adverse Effect

     72  

Section 4.05. Properties

     72  

Section 4.06. Litigation and Environmental Matters

     73  

Section 4.07. Compliance with Laws and Agreements

     73  

Section 4.08. Investment Company Status

     73  

Section 4.09. Taxes

     74  

Section 4.10. ERISA

     74  

Section 4.11. Disclosure

     74  

Section 4.12. [Reserved]

     74  

Section 4.13. Capitalization and Credit Party Information

     74  

Section 4.14. Margin Stock

     74  

Section 4.15. Oil and Gas Interests

     75  

Section 4.16. Insurance

     75  

Section 4.17. [Reserved]

     75  

Section 4.18. Deposit Accounts

     76  

Section 4.19. Maintenance of Properties

     76  

Section 4.20. Foreign Corrupt Practices

     76  

Section 4.21. Anti-Corruption Laws and Sanctions

     77  

Section 4.22. Security Interest in Collateral

     77  

Section 4.23. Locations of Business and Offices

     77  

Section 4.24. [Reserved]

     77  

Section 4.25. Gas Imbalances, Prepayments

     77  

Section 4.26. Marketing of Production

     78  

Section 4.27. Restriction on Liens

     78  

Section 4.28. Hedging Transactions

     78  

Section 4.29. Use of Loans

     78  

Section 4.30. Foreign Operations

     78  

ARTICLE V CONDITIONS

     78  

Section 5.01. Effective Date

     78  

Section 5.02. Each Credit Event

     81  

ARTICLE VI AFFIRMATIVE COVENANTS

     83  

Section 6.01. Financial Statements; Other Information

     83  

Section 6.02. Notices of Material Events

     85  

Section 6.03. Existence; Conduct of Business

     86  

Section 6.04. Payment of Obligations

     86  

Section 6.05. Insurance

     86  

Section 6.06. Operation and Maintenance of Properties

     86  

Section 6.07. Books and Records; Inspection Rights

     87  

Section 6.08. Compliance with Laws

     87  

 

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Section 6.09. Use of Proceeds and Letters of Credit

     88  

Section 6.10. Reserve Reports

     88  

Section 6.11. Title Data

     89  

Section 6.12. Swap Agreements

     89  

Section 6.13. Restricted Subsidiaries

     90  

Section 6.14. Pledged Equity Interests

     90  

Section 6.15. Production Proceeds and Bank Accounts

     90  

Section 6.16. Unrestricted Subsidiaries

     91  

Section 6.17. [Reserved]

     91  

Section 6.18. Further Assurances

     91  

Section 6.19. Sale Milestone; Plan of Reorganization

     91  

Section 6.20. Maintenance of Insurance

     92  

Section 6.21. Environmental Matters

     92  

Section 6.22. ERISA Compliance

     92  

Section 6.23. Performance of Obligations

     93  

Section 6.24. [Reserved]

     93  

Section 6.25. Marketing Activities

     93  

Section 6.26. Budget Compliance and Permitted Variances

     93  

Section 6.27. Midstream Contracts

     94  

ARTICLE VII NEGATIVE COVENANTS

     94  

Section 7.01. Indebtedness

     94  

Section 7.02. Liens

     96  

Section 7.03. Fundamental Changes and Dispositions

     97  

Section 7.04. Investments, Loans, Advances, Guarantees and Acquisitions

     100  

Section 7.05. Swap Agreements

     101  

Section 7.06. Restricted Payments

     103  

Section 7.07. Transactions with Affiliates

     103  

Section 7.08. Restrictive Agreements

     103  

Section 7.09. Disqualified Stock and Fiscal Year

     104  

Section 7.10. Amendments of Organizational Documents; Certain Agreements,
Existing Senior Notes, and Second Lien                   Debt

     104  

Section 7.11. Minimum Liquidity Test

     104  

Section 7.12. Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities

     104  

Section 7.13. [Reserved]

     105  

Section 7.14. Use of Proceeds

     105  

Section 7.15. Budget Variance

     105  

Section 7.16. ERISA Compliance

     105  

Section 7.17. Environmental Matters

     105  

Section 7.18. Gas Imbalances, Take-or-Pay or Other Prepayments

     105  

Section 7.19. Sale or Discount of Receivables

     106  

Section 7.20. [Reserved]

     106  

Section 7.21. Nature of Business

     106  

Section 7.22. Subsidiaries

     106  

Section 7.23. Contracts and Leases

     106  

 

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Section 7.24. No International Operations

     106  

Section 7.25. Plan of Reorganization

     106  

ARTICLE VIII GUARANTEE OF OBLIGATIONS

     106  

Section 8.01. Guarantee of Payment

     106  

Section 8.02. Guarantee Absolute

     107  

Section 8.03. Guarantee Irrevocable

     107  

Section 8.04. Reinstatement

     107  

Section 8.05. Subrogation

     108  

Section 8.06. Subordination

     108  

Section 8.07. Payments Generally

     108  

Section 8.08. Setoff

     109  

Section 8.09. Formalities

     109  

Section 8.10. Limitations on Guarantee

     109  

Section 8.11. Keepwell

     109  

ARTICLE IX EVENTS OF DEFAULT

     110  

ARTICLE X THE ADMINISTRATIVE AGENT

     113  

ARTICLE XI MISCELLANEOUS

     115  

Section 11.01. Notices

     115  

Section 11.02. Waivers; Amendments

     117  

Section 11.03. Expenses; Indemnity; Damage Waiver

     119  

Section 11.04. Successors and Assigns

     121  

Section 11.05. Survival

     125  

Section 11.06. Counterparts; Integration; Effectiveness; DIP Order Controlling

     126  

Section 11.07. Severability

     126  

Section 11.08. Right of Setoff

     126  

Section 11.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

     127  

Section 11.10. WAIVER OF JURY TRIAL

     127  

Section 11.11. Headings

     128  

Section 11.12. Confidentiality

     128  

Section 11.13. Interest Rate Limitation

     129  

Section 11.14. USA PATRIOT Act

     129  

Section 11.15. Flood Insurance Regulation

     129  

Section 11.16. No Fiduciary Duty

     129  

Section 11.17. No Third Party Beneficiaries

     130  

Section 11.18. Acknowledgement and Consent to Bail-In of EEA Financial
Institutions

     130  

 

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EXHIBITS:

 

Exhibit A    –      Form of Assignment and Assumption Exhibit B    –      Form
of Counterpart Agreement Exhibit C    –      Form of Note Exhibit D-1    –     
Form of U.S. Tax Certificate (for Non-U.S. [Lenders] [Participants] That Are Not
Partnerships) Exhibit D-2    –      Form of U.S. Tax Certificate (for Non-U.S.
[Lenders][Participants] That are Partnerships) Exhibit E    –      Form of
Prepayment Option Notice

SCHEDULES:

 

Schedule 1.01    –    Existing Letters of Credit Schedule 2.01(A)    –   
Applicable Percentages and Commitments Schedule 2.01(B)    –    Existing RBL LC
Exposure and Existing RBL Loans Schedule 3.03    –    Midstream Contracts
Schedule 4.06    –    Disclosed Matters Schedule 4.13    –    Capitalization and
Credit Party Information Schedule 4.25    –    Gas Imbalances; Prepayments
Schedule 4.26    –    Marketing of Production Schedule 4.30    –    Foreign Oil
and Gas Interests Schedule 5.01(a)    –    Loan Documents Schedule 5.01(t)    –
   First Day Orders Schedule 7.01    –    Existing Indebtedness Schedule 7.02   
–    Existing Liens Schedule 7.07    –    Transactions with Affiliates Schedule
7.08    –    Existing Restrictions

 

 

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DEBTOR-IN-POSSESSION CREDIT AGREEMENT

THIS DEBTOR-IN-POSSESSION CREDIT AGREEMENT dated as of January 22, 2018, among
EXCO RESOURCES, INC., a Texas corporation, as a debtor and debtor-in-possession
pursuant to a Bankruptcy Case referred to below, as Borrower, CERTAIN
SUBSIDIARIES OF BORROWER, each as a debtor and debtor-in-possession pursuant to
a Bankruptcy Case referred to below, as Guarantors, the LENDERS party hereto,
and HAMBLIN WATSA INVESTMENT COUNSEL LTD., as Administrative Agent.

RECITALS

WHEREAS, on January 15, 2018 (the “Petition Date”), the Borrower and certain
Subsidiaries of the Borrower named as Guarantors herein (in such capacity, each
a “Debtor” and collectively, the “Debtors”) filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court;

WHEREAS, the Borrower has requested that the Lenders make post-petition loans
and provide other financial or credit accommodations to the Borrower, and the
Lenders have agreed, subject to the terms and conditions set forth herein, to
extend (a) a senior secured debtor-in-possession revolving credit facility in an
aggregate principal amount of $125,000,000 (the “Revolver A Facility”) and (b) a
senior secured debtor-in-possession revolving credit facility in an aggregate
principal amount up to $125,000,000 (the “Revolver B Facility”, and together
with the Revolver B Facility, the “DIP Facilities”), the proceeds of which shall
be used by the Borrower to refinance in part the loans and other obligations
outstanding under the Existing RBL Facility;

WHEREAS, the Guarantors have agreed to guarantee the Obligations of Borrower
hereunder and Borrower and each Guarantor have agreed to secure all of the
Obligations hereunder by granting to the Administrative Agent, for the benefit
of the Secured Parties, a Lien on substantially all of their assets on the terms
and conditions set forth in the DIP Orders when entered; and

WHEREAS, pursuant to the terms and conditions of the DIP Orders when entered,
all Obligations will be secured by valid perfected Liens on substantially all of
Borrower’s and each Guarantor’s assets, having the priorities set forth in the
DIP Orders, when entered, and in all cases, subject to the Carve Out.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:

Article I

Definitions

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

“13-Week Forecast” has the meaning assigned to such term in Section 6.26(a).

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“1.5 Lien Collateral Documents” means the Collateral Trust Agreement, all
Collateral Trust Joinder Agreements, the Pledge Agreement, the Security
Agreement and each other Security Instrument (each as defined in the 1.5 Lien
Notes Indenture), each as in effect on the Petition Date, and as amended,
restated, or otherwise modified from time to time as permitted by this
Agreement.

“1.5 Lien Note Documents” means the Intercreditor Agreement, the 1.5 Lien Notes
Indenture, the 1.5 Lien Collateral Documents and each other Note Document (as
defined in the 1.5 Lien Notes Indenture), each as in effect on the Petition
Date, and as amended, restated, or otherwise modified from time to time as
permitted by this Agreement.

“1.5 Lien Notes” means Indebtedness consisting of the Borrower’s $300,000,000
Senior Secured 1.5 Lien Notes due 2022 that is secured by Liens on the
Collateral that are subordinate to the Liens securing the Obligations and
expressly subject to the Intercreditor Agreement.

“1.5 Lien Notes Indenture” means that certain Indenture dated as of March 15,
2017, among the Borrower, the Guarantors (as defined therein), Wilmington Trust
Company, as trustee and Wilmington Trust, National Association, as collateral
trustee, with respect to the issuance of the 1.5 Lien Notes, as amended,
restated, refinanced, replaced, supplemented or otherwise modified from time to
time as of the Petition Date, and as further amended, restated, or otherwise
modified from time to time as permitted by this Agreement.

“1.5 Lien Obligations” means the obligations under the 1.5 Lien Note Documents.

“1.75 Lien Credit Agreement” means that certain 1.75 Lien Term Loan Credit
Agreement, dated as of March 15, 2017, among the Borrower, the Guarantors party
thereto from time to time, the lenders party thereto from time to time,
Wilmington Trust, National Association, as collateral agent, and Wilmington
Trust, National Association, as administrative agent, as amended, restated,
refinanced, replaced, supplemented or otherwise modified from time to time as of
the Petition Date, and as further amended, restated, or otherwise modified from
time to time as permitted by this Agreement.

“1.75 Lien Debt” means Indebtedness for borrowed money incurred under the 1.75
Lien Credit Agreement that is secured by Liens on the Collateral that are
subordinate to the Liens securing the Obligations and the 1.5 Lien Obligations
and expressly subject to the Intercreditor Agreement.

“1.75 Lien Debt Documents” means the Intercreditor Agreement, promissory notes,
security documents, 1.75 Lien Credit Agreement, guarantees and all other
documents or instruments executed and delivered by any Credit Party in
connection with and pursuant to, the incurrence of 1.75 Lien Debt, each as in
effect on the Petition Date, and as further amended, restated, or otherwise
modified from time to time as permitted by this Agreement.

“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.

 

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“Acquisition” means, the acquisition by the Borrower or any Restricted
Subsidiary, whether by purchase, merger (and, in the case of a merger with any
such Person, with such Person being the surviving corporation) or otherwise, of
all or substantially all of the Equity Interest of, or the business, property or
fixed assets of or business line or unit or a division of, any other Person
primarily engaged in the business of producing oil or natural gas or the
acquisition by the Borrower or any Restricted Subsidiary of property or assets
consisting of Oil and Gas Interests.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period or for any ABR Borrowing, an interest rate per annum (rounded
upwards, if necessary, to the next 1/100th of 1%) equal to (i) the LIBO Rate for
such Interest Period multiplied by (ii) the Statutory Reserve Rate; provided
that the Adjusted LIBO Rate shall be the greater of (i) the interest rate per
annum determined pursuant to the foregoing and (ii) 0%.

“Administrative Agent” means Hamblin Watsa Investment Counsel Ltd., in its
capacity as contractual representative of the Lenders hereunder pursuant to
Article X and not in its individual capacity as a Lender, and any successor
agent appointed pursuant to Article X.

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

“Advance Payment Contract” means any contract whereby any Credit Party either
(a) receives or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance Payment”) to be applied toward payment of the purchase
price of Hydrocarbons produced or to be produced from Oil and Gas Interests
owned by any Credit Party and which Advance Payment is, or is to be, paid in
advance of actual delivery of such production to or for the account of the
purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard “take or pay” provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.

“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.

“Aggregate Credit Exposure” means, as of any date of determination, the sum of
the Credit Exposure of all of the Lenders as of such date.

“Aggregate Revolver A Credit Exposure” means, as of any date of determination,
the sum of the Revolver A Credit Exposure of all of the Revolver A Lenders as of
such date.

“Aggregate Revolver B Credit Exposure” means, as of any date of determination,
the sum of the Revolver B Credit Exposure of all of the Revolver B Lenders as of
such date.

 

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“Aggregate Unused Commitment” means, as of any date of determination, the sum of
the Unused Commitments of all the Lenders as of such date.

“Agreement” means this Debtor-in-Possession Credit Agreement, as amended,
restated, supplemented, or otherwise modified from time to time.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on
such day plus 0.25% and (c) the Adjusted LIBO Rate for a three month Interest
Period on such day (or if such day is not a Business Day, the immediately
preceding Business Day) plus 0.50%, provided that for the purpose of this
definition, the Adjusted LIBO Rate for any day shall be based on the LIBO Screen
Rate (or if the LIBO Screen Rate is not available for such one month Interest
Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such
day; provided, further, that if any of the aforesaid rates shall be less than
zero for any determination, such rate shall be deemed to be zero for such
determination of the Alternate Base Rate. Any change in the Alternate Base Rate
due to a change in the Prime Rate, the FRBNY Rate or the Adjusted LIBO Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the FRBNY Rate or the Adjusted LIBO Rate, respectively.

“Alternate Testing Date” has the meaning assigned to such term in
Section 6.26(b).

“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to the Borrower or its Subsidiaries from time to time
concerning or relating to bribery or corruption.

“Appalachian Area” has the meaning assigned to such term in the Marcellus Joint
Development Agreement as in effect on the Marcellus JV Closing Date and as
amended or restated thereafter so long as the Administrative Agent receives an
executed copy of any agreement evidencing any amendment or restatement of such
definition (or any definition used in such definition).

“Applicable Percentage” means, with respect to any Lender at any time, (a) with
respect to Revolver A Loans and LC Exposure, a percentage equal to a fraction
the numerator of which is such Lender’s Revolver A Commitment and the
denominator of which is the aggregate Revolver A Commitments (provided that, if
the Revolver A Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon such Lender’s share of the Aggregate
Revolver A Credit Exposures at that time), (b) with respect to the Revolver B
Loans, a percentage equal to a fraction the numerator of which is such Lender’s
Revolver B Commitment and the denominator of which is the aggregate Revolver B
Commitments (provided that, if the Revolver B Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon such Lender’s
share of the Aggregate Revolver B Credit Exposures at that time), and (c) with
respect to the Aggregate Credit Exposure, a percentage based upon its share of
the Aggregate Credit Exposure and the Aggregate Unused Commitments; provided
that, in accordance with Section 2.21 (other than Section 2.21(e)), so long as
any Lender shall be a Defaulting Lender, such Defaulting Lender’s Commitment
shall be disregarded in the calculations under clauses (a) and (c) above. The
initial amount of each Lender’s Applicable Percentage is as set forth on
Schedule 2.01(A). If the Commitments have terminated or expired, the Applicable
Percentage of any Lender shall be determined based upon the Commitments most
recently in effect, giving effect to any assignments and to any Lender’s status
as a Defaulting Lender at the time of determination.

 

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“Applicable Rate” means for any day, (i) with respect to any Eurodollar Loan,
4.00%, (ii) with respect to any ABR Loan, 3.00%, and (iii) with respect to the
Unused Commitment Fees payable hereunder, 0.50%.

“Approved Fund” has the meaning assigned to such term in Section 11.04.

“Approved Petroleum Engineer” means Netherland Sewell & Associates, Inc., Ryder
Scott Company, L.P. or any other reputable firm of independent petroleum
engineers selected by the Borrower and approved by the Administrative Agent,
which approval shall not be unreasonably withheld.

“Approved Purposes” has the meaning assigned to such term in Section 6.09.

“Assigning Fairfax Lender(s)” has the meaning assigned to such term in
Section 11.04(e).

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee, and accepted by the Administrative Agent, in
the form of Exhibit A or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by
the applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council
of the European Union, the implementing law for such EEA Member Country from
time to time which is described in the EU Bail-In Legislation Schedule.

“Bankruptcy Cases” means the voluntary cases of the Debtors filed under Chapter
11 of the Bankruptcy Code in the Bankruptcy Court.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern
District of Texas.

“Bankruptcy Event” means, with respect to any Person, such Person becomes the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business appointed for it, or, in the good faith determination of the
Administrative Agent, has taken any action in furtherance of, or indicating its
consent to,

 

5

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approval of, or acquiescence in, any such proceeding or appointment, provided
that, for the avoidance of doubt, a Bankruptcy Event shall not result solely by
virtue of (i) any ownership interest, or the acquisition of any ownership
interest, in such Person or any Parent thereof by a Governmental Authority or
instrumentality thereof or (ii) in the case of a solvent Person, the
precautionary appointment of an administrator, guardian, custodian or other
similar official by a Governmental Authority under or based on the law of the
country where such Person is subject to home jurisdiction supervision if
applicable law requires that such appointment not be publicly disclosed where
such action does not result in or provide such Person with immunity from the
jurisdiction of courts within the United States of America or from the
enforcement of judgments or writs of attachment on its assets or permit such
Person (or such Governmental Authority or instrumentality), to reject,
repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“BG Development Costs” means the costs and expenses incurred in the conduct of
development operations in the East Texas/North Louisiana Area pursuant to the BG
JV Documents.

“BG Escrow Account” means that certain escrow account maintained at JPMorgan
Chase Bank, N.A. and established by EOC and BG Production for the purpose of
maintaining deposits from EOC representing, at any time, the estimated amount of
EOC’s share of (x) development and capital costs for the forthcoming three
(3) month period, plus (y) operating expenses for the forthcoming three
(3) month period, in each case, as determined in accordance with the terms of
the BG Joint Development Agreement.

“BG Joint Development Agreement” means that certain Joint Development Agreement,
dated as of August 14, 2009, by and among BG Production and EOC, pursuant to
which the parties thereto entered into a joint development agreement to develop
and operate certain oil and gas properties located in the East Texas/North
Louisiana Area.

“BG Operating Account” means that certain controlled disbursement operating
account maintained at JPMorgan Chase Bank, N.A. and established by EOC and BG
Production for the purpose of funding the costs and expenses associated with the
development of the East Texas/North Louisiana Area in accordance with the terms
of the BG Joint Development Agreement.

“BG Production” means BG US Production Company, LLC, a Delaware limited
liability company.

“BG JV Documents” means the BG Joint Development Agreement and any other
documents, instruments, agreements or certificates contemplated by or executed
in connection therewith.

“Benefit Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which any
Credit Party or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.

 

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“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Board of Directors” means (1) with respect to a corporation, the board of
directors of the corporation or any committee thereof duly authorized to act on
behalf of such board; (2) with respect to a partnership, the board of directors
of the general partner of the partnership; (3) with respect to a limited
liability company, the managing member or members or any controlling committee
of managing members thereof; and (4) with respect to any other Person, the board
or committee of such Person serving a similar function.

“Borrower” means EXCO Resources, Inc., a Texas corporation, as debtor in
possession.

“Borrowing” means (a) Revolver A 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, and (b) Revolver B 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 Article III, as the same may be redetermined, adjusted or
reduced from time to time pursuant to, and in accordance with, the terms of this
Agreement.

“Borrowing Base Deficiency” means, as of any date, the amount, if any, by which
Aggregate Credit Exposure on such date exceeds the Borrowing Base in effect on
such date; provided, that, for purposes of determining the existence and amount
of any Borrowing Base Deficiency, obligations under any Letter of Credit will
not be deemed to be outstanding to the extent such obligations are secured by
cash in the manner contemplated by Section 2.07(j).

“Borrowing Base Properties” means all Oil and Gas Interests of the Borrower and
the Restricted Subsidiaries evaluated by the Lenders for purposes of
establishing the Borrowing Base.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.05.

“Budget” shall have the meaning assigned to such term in Section 5.01(q).

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York, New York or Dallas, Texas are authorized or
required by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term “Business Day” shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, as in effect on the Effective Date,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP, as in effect on the Effective Date.

 

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“Carve Out” shall have the meaning set forth in the applicable DIP Order.

“Cash Collateral Account” means a deposit account with, and in the name of, the
Issuing Bank, for the benefit of the Lenders, established and maintained for the
deposit of cash collateral required under or in connection with this Agreement
and the other Loan Documents.

“Cash Management Obligations” means, with respect to any Credit Party, any
obligations of such Credit Party owed to any Lender (or any Affiliate of any
Lender) in respect of treasury management arrangements, depositary or other cash
management services, including commercial credit card and merchant card
services.

“Change in Law” means (a) the adoption of any law, rule, regulation or treaty
(including any rules or regulations issued under or implementing any existing
law) after the date of this Agreement, (b) any change in any law, rule,
regulation or treaty or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by any
Lender or the Issuing Bank (or, for purposes of Section 2.16(b), by any lending
office of such Lender or by such Lender’s or the 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; provided that notwithstanding anything herein to the contrary,
(i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder, issued in connection
therewith or in implementation thereof, and (ii) all requests, rules, guidelines
and directives promulgated by the Bank for International Settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority) or the
United States of America or foreign regulatory authorities, shall in each case
be deemed to be a “Change in Law”, regardless of the date enacted, adopted,
issued or implemented.

“Change of Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the Effective Date) other
than the Permitted Investors, of Equity Interests representing more than fifty
percent (50%) of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of Borrower; (b) occupation of a majority of
the seats (other than vacant seats) on the Board of Directors of Borrower by
Persons who were neither (i) nominated by the Board of Directors of Borrower nor
(ii) appointed by directors so nominated or (c) the acquisition of direct or
indirect Control of Borrower by any Person or group other than the Permitted
Investors.

“Charges” has the meaning assigned to such term in Section 11.13.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolver A Loans or Revolver B
Loans.

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

 

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“Collateral” means any and all assets of any Credit Party, whether real or
personal, tangible or intangible, on which Liens are purported to be granted
pursuant to the DIP Orders or Security Instruments as security for the
Obligations, but excluding any such assets specifically excluded under the DIP
Orders or the Security Instruments.

“Commitment” means, with respect to each Lender, the sum of such Lender’s
Revolver A Commitment and Revolver B Commitment. The amount of each Lender’s
Commitment is set forth on Schedule 2.01(A), which is inclusive of the Existing
RBL LC Exposure and Existing RBL Loans exchanged and deemed satisfied under this
Agreement and set forth on Schedule 2.01(B), or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Commitment, as applicable.

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

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

“Consolidated Cash Balance” means, at any time, the aggregate amount of
Unrestricted Cash and cash equivalents, marketable securities, treasury bonds
and bills, certificates of deposit, investments in money market funds and
commercial paper, in each case, held or owned by (whether directly or
indirectly), credited to the account of, or otherwise reflected as an asset on
the balance sheet of, the Credit Parties, excluding (i) any cash or cash
equivalents set aside to pay royalty obligations, working interest obligations,
production payments, severance taxes and similar obligations of the Borrower or
any Subsidiary then due and owing (or to be due and owing within thirty
(30) days) to third parties, (ii) any cash or cash equivalents set aside to pay
payroll, payroll taxes, other taxes, employee wage and benefit payments and
trust and fiduciary obligations of the Borrower or any Subsidiary then due and
owing (or to be due and owing within thirty (30) days) and (iii) any cash or
cash equivalents of the Borrower or any Subsidiaries constituting purchase price
deposits held in escrow pursuant to a binding and enforceable purchase and sale
agreement with a third party containing customary provisions regarding the
payment and refunding of such deposits.

“Consolidated Cash Balance Limit” means $30,000,000.

“Consolidated Subsidiaries” means, for any Person, any Subsidiary or other
entity the accounts of which would be consolidated with those of such Person in
its consolidated financial statements 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.
“Controlling” and “Controlled” have meanings correlative thereto.

“Counterpart Agreement” means a Counterpart Agreement substantially in the form
of Exhibit B delivered by a Guarantor pursuant to Section 6.13.

 

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“Cove Key Lenders” has the meaning assigned to such term in Section 11.04(e).

“Credit Exposure” means, with respect to any Lender at any time, the sum of
(a) such Lender’s Revolver A Credit Exposure, plus (b) such Lender’s Revolver B
Credit Exposure.

“Credit Parties” means, collectively, Borrower, and each Guarantor and each
individually, a “Credit Party”.

“Crude Oil” means all crude oil and condensate.

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

“Defaulting Lender” means any Lender that (a) has failed, within three
(3) Business Days of the date required to be funded or paid, to (i) fund any
portion of its Loans, (ii) fund any portion of its participations in Letters of
Credit or (iii) pay over to the Administrative Agent, the Issuing Bank or any
Lender any other amount required to be paid by it hereunder, unless, in the case
of clauses (i) above, such Lender notifies the Administrative Agent in writing
that such failure is the result of such Lender’s good faith determination that a
condition precedent to funding (specifically identified and including the
particular Default, if any) has not been satisfied, (b) has notified the
Borrower, the Administrative Agent, the Issuing Bank or any Lender in writing,
or has made a public statement, to the effect that it does not intend or expect
to comply with any of its funding obligations under this Agreement (unless such
writing or public statement indicates that such position is based on such
Lender’s good faith determination that a condition precedent to funding
(specifically identified and including the particular Default, if any) cannot be
satisfied), (c) has failed, within three (3) Business Days after request by the
Administrative Agent or the Issuing Bank, acting in good faith, to provide a
certification in writing from an authorized officer of such Lender that it will
comply with its obligations to fund prospective Loans and participations in then
outstanding Letters of Credit under this Agreement, provided that such Lender
shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt
by the Administrative Agent or the Issuing Bank of such certification in form
and substance satisfactory to it and the Administrative Agent, or (d) has, or
has a Parent that has, on or after the Effective Date, become the subject of a
Bankruptcy Event or become the subject of a Bail-In Action; provided that a
Lender shall not be a Defaulting Lender solely by virtue of the ownership or
acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender.

“DIP Facilities” shall have the meaning assigned to such term in the recitals
hereto.

“DIP Order” shall mean the Interim DIP Order and, upon entry thereof, the Final
DIP Order, as applicable.

 

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“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 4.06.

“Disposition” or “Dispose” means the sale, transfer, conveyance, license, lease,
farm-out, exchange or other disposition (including any sale and leaseback
transaction) of any Property by any Person, including any sale, assignment,
transfer or other disposal, with or without recourse, of any notes or accounts
receivable or any rights and claims associated therewith.

“Disqualified Stock” means any Equity Interest, which, 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, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof (other than solely as a result of a
change of control or asset sale), in whole or in part, on or prior to the
Maturity Date.

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

“East Texas/North Louisiana Area” has the meaning assigned to such term in the
BG Joint Development Agreement as in effect on the Effective Date and as amended
or restated thereafter so long as the Administrative Agent receives an executed
copy of any agreement evidencing any amendment or restatement of such definition
(or any definition used in such definition).

“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority, (b) any entity established in an EEA Member Country
which is a parent of an institution described in clause (a) of this definition,
or (c) any financial institution established in an EEA Member Country which is a
subsidiary of an institution described in clauses (a) or (b) of this definition
and is subject to consolidated supervision with its parent;

“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any
person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

“Effective Date” means the date on which the conditions specified in
Section 5.01 are satisfied (or waived in accordance with Section 11.02).

“Eligible Assignee” means any Person that qualifies as an assignee pursuant to
Section 11.04(b)(i); provided that notwithstanding the foregoing, “Eligible
Assignee” shall not include (a) the Borrower or any of the Borrower’s Affiliates
or Subsidiaries, (b) any Defaulting Lender or (c) any natural person.

“Eligible Contract Participant” means an “eligible contract participant” as
defined in the Commodity Exchange Act and the regulations thereunder.

“Engineering Reports” has the meaning assigned to such term in Section 3.03.

 

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“Engineered Value” means the value attributed to the Borrowing Base Properties
for purposes of the most recent Redetermination of the Borrowing Base pursuant
to Article III (or for purposes of determining the Initial Borrowing Base in the
event no such Redetermination has occurred) based upon the discounted present
value of the estimated net cash flow to be realized from the production of
Hydrocarbons from the Borrowing Base Properties as set forth in the Reserve
Report.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any Credit Party directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

“EOC” means EXCO Operating Company, LP, a Delaware limited partnership and its
successors and permitted assigns.

“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
from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Benefit Plan (other
than an event for which the thirty (30) day notice period is waived); (b) the
existence with respect to any Benefit Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Benefit Plan; (d) the incurrence by any Credit
Party or any of its ERISA Affiliates of any liability under Title IV of ERISA
with respect to the termination of any Benefit Plan; (e) the receipt by any
Credit Party or any ERISA Affiliate from the PBGC or a plan

 

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administrator of any notice relating to an intention to terminate any Benefit
Plan or Benefit Plans or to appoint a trustee to administer any Benefit Plan;
(f) the incurrence by any Credit Party or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Benefit
Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

“ESAS” means Energy Strategic Advisory Services LLC, a Delaware limited
liability company.

“ESAS Agreement” means that certain Services and Investment Agreement, dated as
of March 31, 2015, by and among Borrower and Energy Strategic Advisory Services
LLC, a Delaware limited liability company.

“ESAS Lenders” has the meaning assigned to such term in Section 11.04(e).

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor person), as in effect
from time to time.

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

“Event of Default” has the meaning assigned to such term in Article IX.

“Excluded Hedges” means, collectively, Swap Agreements that (a) are basis
differential only swaps for volumes of Crude Oil or Natural Gas included under
other Swap Agreements permitted by Section 7.05 or (b) are a hedge of volumes of
Crude Oil or Natural Gas by means of a price “floor” for which there exists no
deferred obligation to pay the related premium or other purchase price or the
only deferred obligation is to either pay the premium or other purchase price on
each settlement date so long as such settlement date occurs at least monthly, or
pay the financing for such premium or other purchase price.

“Excluded Swap Obligation” means, with respect to any Guarantor individually
determined on a Guarantor by Guarantor basis, any Swap Obligation if, and to the
extent that, all or a portion of the Guarantee of such Guarantor of, or the
grant by such Guarantor of a security interest to secure, such Swap Obligation
(or any Guarantee thereof) is or becomes illegal under the Commodity Exchange
Act or any rule, regulation or order of the Commodity Futures Trading Commission
(or the application or official interpretation of any thereof) by virtue of such
Guarantor’s failure for any reason to constitute an Eligible Contract
Participant at the time the Guarantee of such Guarantor or the grant of such
security interest becomes effective with respect to such Swap Obligation. If a
Swap Obligation arises under a master agreement governing more than one swap,
such exclusion shall apply only to the portion of such Swap Obligation that is
attributable to swaps for which such Guarantee or security interest is or
becomes illegal.

 

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“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient: (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, any U.S.
federal withholding Taxes imposed on amounts payable to or for the account of
such Lender with respect to an applicable interest in a Loan or Commitment
pursuant to a law in effect on the date on which (i) such Lender acquires such
interest in the Loan or Commitment (other than pursuant to an assignment request
by the Borrower under Section 2.20(b)), or (ii) such Lender changes its lending
office, except in each case to the extent that, pursuant to Section 2.18,
amounts with respect to such Taxes were payable either to such Lender’s assignor
immediately before such Lender became a party hereto or to such Lender
immediately before it changed its lending office, (c) Taxes attributable to such
Recipient’s failure to comply with Section 2.18(f) or Section 2.18(g), and
(d) any U.S. federal withholding Taxes imposed under FATCA.

“EXCO PA” means EXCO Production Company (PA), LLC, a Delaware limited liability
company.

“EXCO WV” means EXCO Production Company (WV), LLC, a Delaware limited liability
company.

“Existing Letters of Credit” means the letters of credit issued under the
Existing RBL Facility and set forth on the attached Schedule 1.01.

“Existing RBL Facility” means the revolving credit facility evidenced by the
Existing RBL Facility Credit Agreement.

“Existing RBL Facility Credit Agreement” means that certain Amended and Restated
Credit Agreement, dated as of July 31, 2013, among the Borrower, certain of the
Guarantors, JPMorgan Chase Bank, National Association, as Administrative Agent,
and the lenders party thereto from time to time, as the same may be amended,
restated, amended and restated, supplemented or otherwise modified from time to
time prior to the date hereof.

“Existing RBL Facility Loan Documents” means the “Loan Documents” as defined in
the Existing RBL Facility Credit Agreement.

“Existing RBL LC Exposure” means, with respect to any Lender identified on
Schedule 2.01(B), such Lender’s LC Exposure under, and as defined in, the
Existing RBL Facility Credit Agreement and outstanding as of the Petition Date.

“Existing RBL Loans” means, with respect to any Lender identified on Schedule
2.01(B), such Lender’s Loans under, and as defined in, the Existing RBL Facility
Credit Agreement and outstanding as of the Petition Date.

“Existing Senior Notes” means the 7.50% Senior Notes due 2018 issued pursuant to
the Indenture and any supplements thereto and the 8.50% Senior Notes due 2022
issued pursuant to the same base Indenture governing the 7.50% Senior Notes due
2018 and the supplement thereto with respect to the 8.50% Senior Notes due 2022.

 

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“Fairfax” means Fairfax Financial Holdings Limited.

“Fairfax Lenders” has the meaning assigned to such term in Section 11.04(e).

“FASB” means Financial Accounting Standards Board.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to Section 1471(b)(1) of the Code (or any amended or successor version
described above) and any intergovernmental agreements and fiscal or regulatory
legislation, rules or official interpretations adopted pursuant to any
intergovernmental agreement implementing the foregoing.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the
FRBNY based on such day’s federal funds transactions by depository institutions
(as determined in such manner as the New York Fed shall set forth on its public
website from time to time) and published on the next succeeding Business Day by
the FRBNY as the federal funds effective rate.

“Final DIP Order” means a Final Order substantially in the form of the Interim
DIP Order entered by the Bankruptcy Court (i) authorizing the Debtors to
(a) obtain post-petition secured financing pursuant to this Agreement and
(b) use cash collateral during the pendency of the Bankruptcy Cases, and
(ii) granting certain related relief, as the same may be amended, modified or
supplemented from time to time with the prior written consent (such consent not
to be unreasonably withheld) of Fairfax and the Lenders party to this Agreement
on the Effective Date; provided that such Final Order shall be reasonably
satisfactory to the Administrative Agent and Fairfax and the Lenders party to
this Agreement on the Effective Date.

“Final Order” means, as applicable, an order or judgment of the Bankruptcy Court
or other court of competent jurisdiction with respect to the relevant subject
matter that has not been reversed, stayed, modified, or amended, and as to which
the time to appeal or seek certiorari has expired and no appeal or petition for
certiorari has been timely taken, or as to which any appeal that has been taken
or any petition for certiorari that has been or may be filed has been resolved
by the highest court to which the order or judgment could be appealed or from
which certiorari could be sought or the new trial, reargument, or rehearing
shall have been denied, resulted in no modification of such order, or has
otherwise been dismissed with prejudice.

“First-Day Orders” has the meaning assigned to such term in Section 5.01(t).

“First Scheduled Redetermination” has the meaning assigned to such term in
Section 3.02.

 

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“FRBNY” means the Federal Reserve Bank of New York.

“FRBNY Rate” means, for any day, the greater of (a) the Federal Funds Effective
Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on
such day; provided that if both such rates are not so published for any day that
is a Business Day, the term “FRBNY Rate” means the rate quoted for such day for
a federal funds transaction at 11:00 a.m. on such day received by the
Administrative Agent from a federal funds broker of recognized standing selected
by it; provided, further, that if any of the aforesaid rates shall be less than
zero, such rate shall be deemed to be zero for purposes of this Agreement.

“GAAP” means generally accepted accounting principles in the United States of
America.

“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 properly exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

“Governmental Requirement” means any law, statute, code, ordinance, order, rule,
regulation, judgment, decree, injunction, franchise, permit, license,
authorization or other directive or requirement, whether now or hereinafter in
effect, of any Governmental Authority.

“Guarantee” of or by any Person (in this definition, the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

“Guaranteed Liabilities” has the meaning assigned to such term in Section 8.01.

“Guarantor” means the Borrower (with respect to the Obligations of the other
Credit Parties) and each of EXCO Partners, GP, LLC, EXCO Partners OLP GP, LLC,
EXCO Operating Company, LP, EXCO GP Partners Old, LP, EXCO Land Company, LLC,
EXCO Services, Inc., EXCO Midcontinent MLP, LLC, EXCO Holding MLP, Inc., EXCO
Holding (PA), Inc., Raider Marketing GP, LLC, Raider Marketing, LP, EXCO
Resources (XA), LLC, EXCO PA and EXCO WV, and each Restricted Subsidiary that is
a party hereto or hereafter executes and delivers to the Administrative Agent
and the Lenders, a Counterpart Agreement pursuant to Section 6.13 or otherwise;
provided, however, that in no event shall EXCO Resources (PA), LLC, EXCO
Appalachia Midstream, LLC, BG Production, BG Production Company (PA), LLC, or BG
Production Company (WV), LLC become or otherwise be treated as Guarantors.

 

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“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hydrocarbons” means all Crude Oil and Natural Gas produced from or attributable
to the Oil and Gas Interests of the Credit Parties.

“Impacted Interest Period” has the meaning assigned to it in the definition of
“LIBO Rate”.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are paid (excluding accounts payable incurred in the ordinary course of
business), (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property acquired by such Person
(excluding accounts payable incurred in the ordinary course of business),
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding accounts payable incurred in the ordinary course
of business), (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (g) all Guarantees by
such Person of Indebtedness of others, (h) all Capital Lease Obligations of such
Person, (i) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and
(j) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances; provided that for the avoidance of doubt, Indebtedness
shall not include trade and other ordinary course payables and accrued expenses
arising in the ordinary course of business or otherwise arising under the
Midstream Contracts as in effect on the Effective Date. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of any
Credit Party under any Loan Document and (b) to the extent not otherwise
described in (a), Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 11.03.

 

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“Indenture” means that certain Indenture dated as of September 15, 2010, among
the Borrower and the Wilmington Trust Company, as trustee, with respect to the
issuance of the senior unsecured notes; as supplemented from time to time
provided that the terms and conditions of any supplement to the Indenture are
substantially similar to, and no less favorable to the Lenders than, those set
forth in the Indenture prior to such supplement.

“Information” has the meaning assigned to such term in Section 11.12.

“Initial Borrowing Base” has the meaning assigned to such term in Section 3.01.

“Initial Forecast” means the initial 13-Week Forecast delivered to the
Administrative Agent.

“Initial Reserve Report” means collectively, the Reserve Report prepared by the
Borrower’s internal engineering staff with respect to the Borrowing Base
Properties as of July 1, 2017, upon which the Lenders have relied upon in the
determination of the Initial Borrowing Base hereunder.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of
October 26, 2015 and amended as of March 15, 2017, among the Administrative
Agent, as Original Priority Lien Agent, Wilmington Trust, National Association,
as Second Lien Collateral Trustee and Wilmington Trust, National Association, as
Original Third Lien Collateral Trustee and acknowledged and agreed to by each
Credit Party, as the same may be amended, restated, amended and restated
supplemented or otherwise modified from time to time in accordance with the
terms therein and herein.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.09.

“Interest Payment Date” means:

(a) with respect to (i) any ABR Revolver A Loan, the last day of each calendar
quarter and the Maturity Date, and (ii) with respect to any Eurodollar Revolver
A Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Revolver A Loan Borrowing
with an Interest Period of more than three (3) months’ duration, each day prior
to the last day of such Interest Period that occurs at intervals of three
(3) months’ duration after the first day of such Interest Period and the
Maturity Date, and

(b) with respect to (i) any ABR Revolver B Loan, the last day of each calendar
quarter and the Maturity Date, and (ii) with respect to any Eurodollar Revolver
B Loan, the last day of the Interest Period applicable to the Revolver B Loan
Borrowing of which such Loan is a part and, in the case of a Eurodollar Revolver
B Loan Borrowing with an Interest Period of more than three (3) months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three (3) months’ duration after the first day of such Interest
Period and the Maturity Date.

“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 (i) if any Interest Period
would end on a day other than a Business Day, such

 

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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
(ii) any Interest Period 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 DIP Order” means the interim order entered by the Bankruptcy Court
(i) authorizing, on an interim basis, the Debtors to (a) obtain post-petition
secured financing pursuant to this Agreement and (b) use cash collateral during
the pendency of the Bankruptcy Cases, and (ii) granting certain related relief,
as the same may be amended, modified or supplemented from time to time with the
prior written consent (such consent not to be unreasonably withheld) of Fairfax
and the Lenders party to this Agreement on the Effective Date; provided that
such interim order shall be reasonably satisfactory to the Administrative Agent
and Fairfax and the Lenders party to this Agreement on the Effective Date.

“Interim Redetermination” has the meaning assigned such term in Section 3.02.

“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 3.04.

“Interpolated Rate” means, at any time, for any Interest Period, the rate per
annum (rounded to four decimal places) determined by the Administrative Agent
(which determination shall be conclusive and binding absent manifest error) to
be equal to the rate that results from interpolating on a linear basis between:
(a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate
is available) that is shorter than the Impacted Interest Period and (b) the LIBO
Screen Rate for the shortest period (for which the LIBO Screen Rate is
available) that exceeds the Impacted Interest Period, in each case, at such
time.

“IRS” means the United States Internal Revenue Service.

“Issuing Bank” means (i) as to the Existing Letters of Credit, the issuing
lender thereof on the Petition Date, (ii) JPMorgan Chase Bank, N.A. and any of
the other Lenders reasonably satisfactory to the Borrower, in such Lender’s
capacity as the issuer of Letters of Credit hereunder, and/or (iii) one or more
banks, trust companies or other Persons in each case expressly identified by the
Administrative Agent and approved by the Borrower from time to time, in its
reasonable discretion, as an Issuing Bank for purposes of issuing one or more
Letters of Credit hereunder, and, in each case, its successors in such capacity
as provided in Section 2.07(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term “Issuing Bank” shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.

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

 

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“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 under the Revolver A Facility of the total LC Exposure at
such time.

“Lender Counterparty” means any Lender or any Affiliate of a Lender (other than
a Defaulting Lender or an Affiliate of a Defaulting Lender) counterparty to a
Swap Agreement with any Credit Party; provided, that any Lender that becomes a
Defaulting Lender after entering into or becoming a party to a Swap Agreement
with any Credit Party shall continue to be a Lender Counterparty with respect to
any hedge transaction entered into (a) prior to such Lender becoming a
Defaulting Lender or (b) after such Lender is no longer a Defaulting Lender.

“Lender Hedging Obligations” means all obligations arising from time to time
under Swap Agreements permitted hereunder and entered into from time to time
between any Credit Party and a Lender Counterparty; provided that if such Lender
Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender
hereunder, Lender Hedging Obligations shall only include such obligations to the
extent arising from transactions entered into at the time such Lender
Counterparty was a Lender hereunder or an Affiliate of a Lender hereunder
pursuant to any Swap Agreement.

“Lenders” means the Persons listed on Schedule 2.01(A) and any other 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 the Existing Letters of Credit and any letter of credit
issued under the Revolver A Facility pursuant to this Agreement.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the LIBO Screen Rate (rounded upwards, if necessary, to the next 1/100
of 1%) at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period; provided that if the LIBO Screen Rate
shall not be available at such time for such Interest Period (an “Impacted
Interest Period”) then the LIBO Rate shall be the Interpolated Rate.

“LIBO Screen Rate” means, for any day and time, with respect to any Eurodollar
Borrowing for any Interest Period, the London interbank offered rate as
administered by ICE Benchmark Administration (or any other Person that takes
over the administration of such rate for U.S. Dollars) for a period equal in
length to such Interest Period as displayed on such day and time on pages
LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the
event such rate does not appear on a Reuters page or screen, on any successor or
substitute page on such screen that displays such rate, or on the appropriate
page of such other information service that publishes such rate from time to
time as selected by the Administrative Agent in its reasonable discretion);
provided that if the LIBO Screen Rate shall be less than zero, such rate shall
be deemed to be zero for the purposes of this Agreement.

 

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“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

“Loan Documents” means this Agreement, any promissory notes executed in
connection herewith, Security Instruments, the Letters of Credit (and any
applications therefore and reimbursement agreements related thereto), the DIP
Orders and all other agreements, instruments, documents and certificates now or
hereafter executed and delivered by a Credit Party to, or in favor of, the
Administrative Agent or any Lender in connection with this Agreement or the
transactions contemplated hereby.

“Loans” means the loans made (or deemed made) by the Lenders to the Borrower
pursuant to this Agreement.

“Majority Lenders” means, at any time, Lenders having Credit Exposures and
Unused Commitments representing more than fifty percent (50%) of the sum of the
Aggregate Credit Exposure and all Unused Commitments at such time or, if the
Commitments have been terminated, Lenders having Credit Exposures representing
more than fifty percent (50%) of the Aggregate Credit Exposure at such time. The
Credit Exposures and Unused Commitments of any Defaulting Lender shall be
disregarded in determining Majority Lenders at any time.

“Mandatory Prepayment Date” has the meaning assigned to such term in
Section 2.12(g).

“Marcellus Development Costs” means the costs and expenses incurred in the
conduct of development operations in the Appalachian Area pursuant to the
Marcellus JV Documents.

“Marcellus Holding Companies” means one or more Unrestricted Subsidiaries formed
in connection with the Marcellus Joint Venture to facilitate the transfer of an
undivided 49.75% interest in the Marcellus JV Oil and Gas Assets to the
Marcellus JV Partner.

“Marcellus Joint Development Agreement” means that certain Joint Development
Agreement dated as of June 1, 2010, among one or more of the Borrower’s
Subsidiaries, the Marcellus JV Partner, the Marcellus Holding Companies and the
Marcellus JV Operator with respect to the Marcellus Joint Venture.

“Marcellus Joint Venture” means that certain joint venture arrangement between
the Borrower and one or more of its Subsidiaries and an unrelated third party
(the “Marcellus JV Partner”) and one or more of its Subsidiaries to develop and
operate the Marcellus JV Oil and Gas Assets.

“Marcellus JV Closing Date” means June 1, 2010.

“Marcellus JV Documents” means the Marcellus Joint Development Agreement, the
Marcellus Operator LLC Agreement, the Marcellus Transfer Agreement and any other
documents, instruments, agreements or certificates contemplated by, or executed
in connection with, the Marcellus Joint Venture.

 

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“Marcellus JV Oil and Gas Assets” has the meaning assigned to the term “Subject
Oil and Gas Assets” in the Marcellus Joint Development Agreement as in effect on
the Marcellus JV Closing Date and as amended or restated thereafter so long as
the Administrative Agent receives an executed copy of any agreement evidencing
any amendment or restatement of such definition (or any definition used in such
definition).

“Marcellus JV Operator” means the operator of the Marcellus JV Oil and Gas
Assets located in the Appalachian Area.

“Marcellus JV Partner” has the meaning assigned to such term in the definition
of “Marcellus Joint Venture”.

“Marcellus Midstream Assets” means the gas gathering and pipeline systems and
related facilities associated with the Marcellus Shale portion of the Marcellus
JV Oil and Gas Assets.

“Marcellus Midstream Owner” means the direct or indirect owner of the Marcellus
Midstream Assets.

“Marcellus Operator LLC Agreement” means that certain Second Amended and
Restated Limited Liability Company Agreement of the Marcellus JV Operator dated
as of June 1, 2010.

“Marcellus Shale” means (a) with respect to the Commonwealth of Pennsylvania,
those subsurface depths that are below the base of (but excluding) the Haskill
Sandstone Formation (Base of Elk Sequence) formation at a measured depth of
2,758’, as identified by the Litho Density Compensated Neutron Array Induction
Temperature Log dated June 7, 2005 of the Seneca Resources operated Fee PGS SGL
No. 44 (API 37-047-23649) located in Elk County, Pennsylvania, (b) with respect
to the State of West Virginia, those subsurface depths that are below the base
of (but excluding) the Brallier Formation (Base of Elk Sequence) formation at a
measured depth of 6,612’, as identified by the Litho Density Compensated Neutron
Array Induction Temperature Log dated October 8, 2008 of the EXCO – North Coast
Energy, Inc. operated Wentz 4HS (API 47-001-02982) located in Barbour County,
West Virginia, recognizing that actual depths may vary, and (c) with respect to
the State of New York, those subsurface depths that are below the base of (but
excluding) the Genesee Formation at a measured depth of 2,548’, as identified by
the Density/Neutron, Gamma/Temperature Log dated May 6, 2005 of the Fortuna
Energy, Inc. operated Cotton-Hanlon #1 well (API 31-107-23185) located in Tioga
County, New York.

“Marcellus Transfer Agreement” means that certain Membership Interest Transfer
Agreement dated as of June 1, 2010, among the Borrower or one or more of its
Restricted Subsidiaries and the Marcellus JV Partner pursuant to which the
Borrower or one or more of its Restricted Subsidiaries transfers to the
Marcellus JV Partner (a) 100% of the Equity Interests of the Marcellus Holding
Companies and (b) 50% of the Equity Interests of each of the Marcellus JV
Operator and the Marcellus Midstream Owner.

“Material Adverse Effect” means, excluding results from (i) general changes in
hydrocarbon prices, (ii) general changes in industry or economic conditions,
(iii) general changes in political conditions, including any engagements of
hostilities, acts of war or terrorist activities or changes imposed by any
Governmental Authority associated with additional security and (iv)

 

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the filing and administration of the Bankruptcy Cases, any event, development or
circumstance that has had or could reasonably be expected to have a material
adverse effect on (a) the business, operations, property or condition (financial
or otherwise) of the Credit Parties taken as a whole, (b) the ability of the
Credit Parties (taken as a whole) to perform their obligations under the Loan
Documents, (c) the validity or enforceability of the Loan Documents, or (d) the
rights and remedies of or benefits available to the Administrative Agent, the
Issuing Bank or any Lender under the Loan Documents.

“Material Indebtedness” means Indebtedness under the Existing Senior Notes, the
1.5 Lien Notes, 1.75 Lien Debt, and Second Lien Debt and any other Indebtedness
(other than the Loans and Letters of Credit), or obligations in respect of one
or more Swap Agreements, of the Borrower or any one or more of the Restricted
Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes
of determining Material Indebtedness, the “principal amount” of the obligations
of the Borrower or any Guarantor 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 Guarantor would be required to pay if such Swap
Agreement were terminated at such time.

“Material Sales Contract” means, as of any date of determination, any agreement
for the sale of Hydrocarbons from the Borrowing Base Properties to which the
Borrower or any Restricted Subsidiary is a party if the aggregate volume of
Hydrocarbons sold pursuant to such agreement during the twelve (12) months
immediately preceding such date equals or exceeds ten percent (10%) of the
aggregate volume of Hydrocarbons sold by the Borrower and the Restricted
Subsidiaries, on a consolidated basis, from the Borrowing Base Properties during
the twelve (12) months immediately preceding such date.

“Maturity Date” means the earliest to occur of (i) the date that is 12 months
after the Effective Date, subject to the Maturity Extension Option, (ii) the
effective date of a plan of reorganization in any of the Bankruptcy Cases,
(iii) the consummation of the sale of all or substantially all of the Debtors’
Properties and (iv) the date of termination of the Commitments and the
acceleration of any Loans under the DIP Facilities in accordance with Article
IX.

“Maturity Extension Option” has the meaning assigned to such term in
Section 2.10(g).

“Maximum Liability” has the meaning assigned to such term in Section 8.10.

“Maximum Rate” has the meaning assigned to such term in Section 11.13.

“Midstream Contracts” means those certain midstream contracts set forth on
Schedule 3.03.

“Minimum Mortgaged Value” has the meaning assigned to such term in Section 6.11.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgaged Properties” means the Oil and Gas Interests described in one or more
duly executed, delivered and filed Mortgages or in the DIP Orders evidencing a
Lien prior and superior in right to any other Person in favor of the
Administrative Agent for the benefit of the Secured Parties and subject only to
the Liens permitted pursuant to Section 7.02 and the DIP Orders.

 

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“Mortgages” means each mortgage or deed of trust executed and delivered by any
Credit Party pursuant to this Agreement, the DIP Orders or otherwise and each
mortgage supplement after execution and delivery of such mortgage supplement, in
each case, as amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms of this Agreement and the other Loan
Documents.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“Natural Gas” means all natural gas, distillate or sulphur, natural gas liquids
and all products recovered in the processing of natural gas (other than
condensate) including, without limitation, natural gasoline, coalbed methane
gas, casinghead gas, iso-butane, normal butane, propane and ethane (including
such methane allowable in commercial ethane).

“Net Cash Proceeds” means, (A) with respect to any sale, transfer, assignment or
other disposition of any Borrowing Base Properties (whether pursuant to a sale,
transfer, assignment or other disposition of Equity Interests of a Restricted
Subsidiary or otherwise) by the Borrower or any Restricted Subsidiary, the
excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so received, over (b) the sum of
(i) the principal amount of any Indebtedness that is secured by Liens on such
assets senior to Liens securing the Obligations and that is required to be
repaid prior to any repayment of the Obligations in connection with the sale
thereof (other than the Loans), (ii) the out-of-pocket expenses incurred by the
Borrower or such Restricted Subsidiary in connection with such sale, (iii) all
legal, title and recording tax expense and all federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP as a
consequence of such sale, (iv) all distributions and other payments required to
be made to minority interest holders in Restricted Subsidiaries as a result of
such sale or other disposition, (v) the deduction of appropriate amounts
provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets disposed of in such
sale and retained by the Borrower or any Restricted Subsidiary after such sale
or other disposition, (vi) cash payments made to satisfy obligations resulting
from Swap Modifications or the early termination of any Swap Agreements in
connection with or as a result of any such sale or other disposition of
Borrowing Base Properties, and (vii) any portion of the purchase price from such
sale placed in escrow, whether as a reserve for adjustment of the purchase
price, for satisfaction of indemnities in respect of such sale or otherwise in
connection with such sale or other disposition; provided, however, that upon the
termination of that escrow, Net Cash Proceeds will be increased by any portion
of funds in the escrow that are released to the Borrower or any Restricted
Subsidiary, (B) with respect to any Swap Modification by the Borrower or any
Restricted Subsidiary, the excess, if any, of (i) the sum of cash and cash
equivalents received in connection with such Swap Modification (after giving
effect to any netting arrangements), over (ii) the out-of-pocket expenses
incurred by the Borrower or such Restricted Subsidiary in connection with such
Swap Modification, and (C) with respect to the issuance of Equity Interests by
any Credit Party to any Person (other than another Credit Party), (a) the sum of
cash and cash equivalents received in connection with such sale, but only as and
when so received, net of underwriting discounts over (b) reasonable
out-of-pocket costs, fees and expenses paid or incurred in connection therewith
in favor of any Person not an Affiliate of any Credit Party.

 

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“New Borrowing Base Notice” has the meaning assigned to such term in
Section 3.04.

“Non-Consenting Lender” has the meaning assigned to such term in
Section 2.20(c).

“Non-U.S. Lender” means a Lender that is not a U.S. Person.

“Obligations” means (a) any and all obligations of every nature, contingent or
otherwise, whether now existing or hereafter arising, of any Credit Party from
time to time owed to the Administrative Agent, the Issuing Bank, the Lenders or
any of them under any Loan Document, whether for principal, interest,
reimbursement of amounts drawn under any Letter of Credit, funding
indemnification amounts, fees, expenses, indemnification or otherwise and
(b) Lender Hedging Obligations and (c) Cash Management Obligations; provided;
however, that Obligations of a Credit Party shall not include any Excluded Swap
Obligations of such Credit Party.

“OFAC” means the Office of Foreign Assets Control of the United States
Department of Treasury.

“Off-Balance Sheet Liability” of a Person means (i) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (ii) any liability under any Sale and Leaseback Transaction which
is not a Capital Lease Obligation, (iii) any liability under any so-called
“synthetic lease” transaction entered into by such Person, (iv) any material gas
imbalance, (v) any Advance Payment Contract, or (vi) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the balance
sheets of such Person, but excluding from the foregoing clauses (iii) through
(vi) operating leases and usual and customary oil, gas and mineral leases.

“Oil and Gas Interest(s)” means: (a) direct and indirect interests in and rights
with respect to oil, gas, mineral and related properties and assets of any kind
and nature, direct or indirect, including, without limitation, wellbore
interests, working, royalty and overriding royalty interests, mineral interests,
leasehold interests, production payments, operating rights, net profits
interests, other non-working interests, contractual interests, non-operating
interests and rights in any pooled, unitized or communitized acreage by virtue
of such interest being a part thereof; (b) interests in and rights with respect
to Hydrocarbons other minerals or revenues therefrom and contracts and
agreements in connection therewith and claims and rights thereto (including oil
and gas leases, operating agreements, unitization, communitization and pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and agreements and,
in each case, interests thereunder), and surface interests, fee interests,
reversionary interests, reservations and concessions related to any of the
foregoing; (c) easements, rights-of-way, licenses, permits, leases, and other
interests associated with, appurtenant to, or necessary for the operation of any
of the foregoing; (d) interests in oil, gas, water, disposal and injection
wells, equipment and machinery (including well equipment and machinery), oil and
gas production, gathering, transmission, compression, treating,

 

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processing and storage facilities (including tanks, tank batteries, pipelines
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible or intangible, movable or
immovable, real or personal property and fixtures located on, associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and
(e) all seismic, geological, geophysical and engineering records, data,
information, maps, licenses and interpretations.

“Organizational Documents” means (a) with respect to any corporation, its
certificate or articles of incorporation or organization, as amended, and its
by-laws, as amended, (b) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (c) with respect to any general partnership, its partnership
agreement, as amended, (d) with respect to any limited liability company, its
certificate of formation or articles of organization, as amended, and its
limited liability company agreement or operating agreement, as amended, and
(e) with respect to any other type of Person, any certificate, document or
agreement comparable to the foregoing.

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

“Other Taxes” means any present or future stamp, court, documentary, intangible,
recording, filing or similar excise or property Taxes that arise from any
payment made under, from the execution, delivery, performance, enforcement or
registration of, or from the registration, receipt or perfection of a security
interest under, or otherwise with respect to, any Loan Document, except any such
Taxes that are Other Connection Taxes imposed with respect to an assignment
(other than an assignment made pursuant to Section 2.18(b)).

“Overnight Bank Funding Rate” means, for any day, the rate comprised of both
overnight federal funds and overnight Eurodollar Borrowings by U.S.–managed
banking offices of depository institutions (as such composite rate shall be
determined by the FRBNY as set forth on its public website from time to time)
and published on the next succeeding Business Day by the FRBNY as an overnight
bank funding rate (from and after such date as the New York Fed shall commence
to publish such composite rate).

“Parent” means, with respect to any Lender, the Person as to which such Lender
is, directly or indirectly, a Subsidiary.

“Participant” has the meaning assigned to such term in Section 11.04.

“Participant Register” has the meaning assigned to such term in
Section 11.04(c).

“Payment Currency” has the meaning assigned to such term in Section 8.07.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

 

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“PDP Reserves” means “proved developed producing oil and gas reserves” as such
term is defined by the SPE in its standards and guidelines.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or (if foreclosure,
distraint, sale or other similar proceedings shall not have been initiated or,
if such proceedings have been initiated, such proceedings have been stayed by
the Bankruptcy Cases) are being contested in compliance with Section 6.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, and contractual Liens granted to operators and
non-operators under oil and gas operating agreements, in each case, (A) (i)
arising in the ordinary course of business or (ii) incident to the exploration,
development, operation and maintenance of Oil and Gas Interests and (B) (i)
securing obligations that are not overdue by more than thirty (30) days or (ii)
(if foreclosure, distraint, sale or other similar proceedings shall not have
been initiated or, if such proceedings have been initiated, such proceedings
have been stayed by the Bankruptcy Cases) are being contested in compliance with
Section 6.04; provided that any such Liens that are imposed under the BG JV
Documents and the Marcellus JV Documents on a unit-by-unit basis shall cover
only the assets and properties located in the drilling and production unit in
which unpaid obligations are outstanding and not any other drilling or
production unit;

(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that (if foreclosure, distraint, sale
or other similar proceedings shall not have been initiated or, if such
proceedings have been initiated, such proceedings have been stayed by the
Bankruptcy Cases) do not constitute an Event of Default under clause (k) of
Article IX;

(f) easements, zoning restrictions, rights-of-way, servitudes, permits, surface
leases, and similar encumbrances on real property imposed by law or arising in
the ordinary course of business that do not secure any monetary obligations and
do not materially detract from the value of the affected property or interfere
with the ordinary conduct of business of any Credit Party;

(g) royalties, overriding royalties, reversionary interests and similar burdens
with respect to the Oil and Gas Interests owned by the Borrower or such
Restricted Subsidiary, as the case may be, if the net cumulative effect of such
burdens does not operate to deprive the Borrower or any Restricted Subsidiary of
any material right in respect of its assets or properties (except for rights
customarily granted with respect to such interests);

(h) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Borrower or any Restricted
Subsidiary in the ordinary course of business covering the property under the
lease; and

 

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(i) preferential rights to purchase, and provisions requiring a third party’s
consent prior to assignment and similar restraints on alienation, in each case,
granted pursuant to an oil and gas operating agreement and arising in the
ordinary course of business or incident to the exploration, development,
operation and maintenance of Oil and Gas Interests; provided such right,
requirement or restraint does not materially affect the value of such Oil and
Gas Interests;

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness (other than contractual Liens described in the foregoing
clause (b) granted to operators and non-operators under oil and gas operating
agreements to the extent the obligations secured by such Liens constitute
Indebtedness) or that arise under applicable state law.

“Permitted Investments” means:

(a) U.S. Government Securities;

(b) investments in demand and time deposit accounts, certificates of deposit and
money market deposits maturing within one hundred eighty (180) days of the date
of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any State thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) and has outstanding
debt which is rated “A” (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act of 1933, as amended) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor;

(c) investments in deposits available for withdrawal on demand with any
commercial bank that is organized under the laws of any country in which the
Borrower or any Restricted Subsidiary maintains an office or is engaged in the
oil and gas business; provided, however, that (i) all such deposits have been
made in such accounts in the ordinary course of business and (ii) such deposits
do not at any one time exceed $10,000,000 in the aggregate;

(d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with a bank meeting the qualifications described in clause (b) above;

(e) investments in commercial paper, maturing not more than ninety (90) days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Borrower) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of “P-1”
(or higher) according to Moody’s or “A-l” (or higher) according to S&P;

(f) investments in securities with maturities of six (6) months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least “A” by S&P or “A” by Moody’s; and

 

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(g) investments in money market funds that invest substantially all their assets
in securities of the types described in clauses (a) through (f) above.

“Permitted Investors” means (a) ESAS, (b) C. John Wilder and any Affiliate of C.
John Wilder, (c) any spouse or lineal descendants (whether natural or adopted)
of C. John Wilder and any trust solely for the benefit of C. John Wilder and/or
his spouse and/or lineal descendants, (d) Fairfax Financial Holdings Limited and
its Affiliates, (e) Gen IV Investment Opportunities, LLC and its Affiliate Vega
Asset Partners, LP, (f) OCM EXCO Holdings LLC and (g) any group (as such term is
used in clause (a) of the definition of “Change of Control”) with respect to
which Persons described in clauses (a), (b), (c), (d), (e) and (f) of this
definition own the majority of the aggregate ordinary voting power represented
by the issued and outstanding Equity Interests of Borrower that is owned by such
group.

“Permitted Non-JPMorgan Accounts” means deposit accounts maintained at financial
institutions other than JPMorgan Chase Bank, N.A. or one or more of its
Affiliates the aggregate balance of which does not exceed $1,000,000 at any time
for all such deposit accounts taken as a whole.

“Permitted Variances” shall have the meaning assigned to such term in
Section 7.15.

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

“Petition Date” shall have the meaning assigned to such term in the recitals
hereto.

“Plan of Reorganization” means a joint chapter 11 plan of reorganization of the
Borrower and its Debtor Affiliates, including all exhibits and schedules
thereto, that is prepared and distributed in accordance with the Bankruptcy
Code, and any other applicable law, in any event, in form and substance
reasonably satisfactory to Fairfax, and which, in any event, unless otherwise
consented to by all of the Lenders, shall provide for the payment in full of the
DIP Facilities in cash.

“Pledge Agreement” means a Pledge and Security Agreement in favor of the
Administrative Agent for the benefit of the Secured Parties covering, among
other things, the rights and interests of Borrower or any Restricted Subsidiary
in the Equity Interest of each Restricted Subsidiary and of each Affiliate that
is an operator of any Borrowing Base Properties (other than the Equity Interests
of the Borrower) and otherwise in form and substance satisfactory to the
Administrative Agent.

“Prepayment Option Notice” has the meaning assigned to such term in
Section 2.12(g).

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York, New York, each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

 

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“Projections” means the Borrower’s forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a basis
consistent with the historical financial statements described in Section 4.04
and after giving effect to the Transactions, together with appropriate
supporting details and a statement of underlying assumptions, in each case in
form and substance satisfactory to the Lenders and for the period from the
Effective Date through December 31, 2018.

“Proved Oil and Gas Properties” means Hydrocarbon Interests to which Proved
Reserves are attributed.

“Proved Reserves” or “Proved” means collectively, “proved oil and gas reserves,”
“proved developed producing oil and gas reserves,” “proved developed
non-producing oil and gas reserves” (consisting of proved developed shut-in oil
and gas reserves and proved developed behind pipe oil and gas reserves), and
“proved undeveloped oil and gas reserves,” as such terms are defined by the SPE
in its standards and guidelines.

“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 3.03.

“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 3.03.

“Purchaser” has the meaning assigned to such term in Section 11.04(e).

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Credit
Party that has total assets exceeding $10,000,000 at the time the relevant
Guarantee or grant of the relevant security interest becomes effective with
respect to such Swap Obligation or such other person as constitutes an Eligible
Contract Participant and can cause another person to qualify as an Eligible
Contract Participant at such time by entering into a keepwell under
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Lender
and (c) the Issuing Bank.

“Redetermination” means any Scheduled Redetermination or Interim
Redetermination.

“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 3.04.

“Register” has the meaning assigned to such term in Section 11.04.

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

 

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“Reporting Date” has the meaning assigned to such term in Section 6.26(a).

“Required Lenders” means, at any time, Lenders (other than Defaulting Lenders)
having Aggregate Credit Exposures and Unused Commitments representing at least
sixty-six two-thirds percent (66-2/3%) of the sum of the Aggregate Credit
Exposure and Unused Commitments at such time.

“Required Marcellus Assignments” has the meaning assigned to such term in
Section 7.03(a)(xiv).

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of September 30, 2018, and each
December 31st or June 30th thereafter (or such other date in the event of an
Interim Redetermination), the oil and gas reserves attributable to the Oil and
Gas Interests of the Borrower and the Restricted Subsidiaries, together with a
projection of the rate of production and future net income, taxes, operating
expenses and capital expenditures with respect thereto as of such date, based
upon the economic assumptions consistent with the Administrative Agent’s lending
requirements at the time.

“Responsible Officer” means the chief executive officer, president, vice
president, chief financial officer, principal accounting officer, treasurer or
assistant treasurer of a Credit Party. Any document delivered hereunder that is
signed by a Responsible Officer of a Credit Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Credit Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Credit Party.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in any Credit
Party, 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 any Credit Party or any option, warrant or other right to acquire
any such Equity Interests in any Credit Party.

“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an
Unrestricted Subsidiary; provided, however, that in no event shall EXCO
Resources (PA), LLC, EXCO Appalachia Midstream, LLC, BG Production, BG
Production Company (PA), LLC, or BG Production Company (WV), LLC become or
otherwise be treated as Restricted Subsidiaries.

“Revolver A Commitment” means, with respect to each Lender, the commitment, if
any, of such Lender to make Revolver A Loans and to acquire participations in
Letters of Credit hereunder in an aggregate principal amount at any one time
outstanding not to exceed the amount set forth opposite such Lender’s name on
Schedule 2.01(A), or in the Assignment and Assumption pursuant to which such
Lender shall have assumed or agreed to provide its Revolver A Commitment, as
applicable, as such commitment may be (a) reduced from time to time pursuant to
Section 2.02 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04; provided that any
Lender’s Revolver A Commitment shall not at any time exceed such Lender’s
Applicable Percentage of the Borrowing Base then in effect. The amount of each
Lender’s Revolver A Commitment as of the Effective Date is set forth on the
Schedule 2.01(A), or in the Assignment and Assumption pursuant to which such
Lender shall have assumed its Revolver A Commitment, as applicable. The
aggregate amount of the Lenders’ Revolver A Commitments as of the Effective Date
is $125,000,000.

 

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

“Revolver A Facility” shall have the meaning set forth in the second recital of
this Agreement.

“Revolver A Lender” means, as of any date of determination, a Lender with a
Revolver A Commitment or, if the Revolver A Commitments have terminated or
expired, a Lender with Revolver A Credit Exposure.

“Revolver A Loan” means a Loan made pursuant to Section 2.01(a).

“Revolver B Commitment” means, with respect to each Lender, the commitment, if
any, of such Lender to make Revolver B Loans in an aggregate principal amount at
any one time outstanding not to exceed the amount set forth opposite such
Lender’s name on Schedule 2.01(A), or in the Assignment and Assumption pursuant
to which such Lender shall have assumed or agreed to provide its Revolver B
Commitment, as applicable, as such commitment may be (a) reduced from time to
time pursuant to Section 2.02 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.04; provided
that any Lender’s Revolver B Commitment shall not at any time exceed such
Lender’s Applicable Percentage of the Borrowing Base then in effect. The amount
of each Lender’s Revolver B Commitment as of the Effective Date is set forth on
the Schedule 2.01(A), or in the Assignment and Assumption pursuant to which such
Lender shall have assumed its Revolver B Commitment, as applicable. The
aggregate amount of the Lenders’ Revolver B Commitments as of the Effective Date
is $125,000,000.

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

“Revolver B Facility” shall have the meaning set forth in the second recital of
this Agreement.

“Revolver B Lender” means, as of any date of determination, a Lender with a
Revolver B Commitment or, if the Revolver B Commitments have terminated or
expired, a Lender with Revolver B Credit Exposure.

“Revolver B Loan” means a Loan made (or deemed made) pursuant to
Section 2.01(a).

“Revolver B Loan Prepayment Amount” has the meaning assigned to such term in
Section 2.12(g).

 

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“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill
Corporation.

“Sale and Leaseback Transaction” means any sale or other transfer of any
property by any Person with the intent to lease such property as lessee.

“Sale Milestone” has the meaning assigned to such term in Section 6.19.

“Sanctions” means general trade, economic or financial restrictions, sanctions
or embargoes imposed, administered or enforced from time to time by the
government of the United States of America, including OFAC, the United Nations
Security Council, or the European Union, each as amended, supplemented or
substituted from time to time.

“Sanctioned Country” means, at any time, a country, region or territory which is
itself the subject or target of any Sanctions (at the time of this Agreement,
Crimea, Cuba, Iran, North Korea, Sudan and Syria).

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC or the U.S.
Department of State, (b) any Person operating, organized or resident in a
Sanctioned Country or (c) any Person owned or controlled by any such Person or
Persons.

“Scheduled Redetermination” has the meaning assigned to such term in
Section 3.02.

“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been determined pursuant to a Scheduled Redetermination becomes effective as
provided in Section 3.04.

“Second Lien Debt” means Indebtedness for borrowed money and secured by Liens on
substantially the same Collateral securing the Obligations but expressly
subordinate (such subordination shall be on terms and conditions reasonably
satisfactory to the Administrative Agent and the Majority Lenders) to the Liens
securing the Obligations.

“Second Lien Debt Documents” means the Intercreditor Agreement, promissory
notes, security documents, second lien credit agreement, guarantees and all
other documents or instruments executed and delivered by any Credit Party in
connection with and pursuant to, the incurrence of Second Lien Debt.

“Secured Parties” means collectively, the Administrative Agent, the Issuing
Banks, the Lenders, the Lender Counterparties and any other holders of
Obligations including any Cash Management Obligations, Lender Hedging
Obligations.

“Security Instruments” means collectively, all Guarantees of the Obligations
evidenced by the Loan Documents, the DIP Orders and all mortgages, security
agreements, pledge agreements, collateral assignments and other collateral
documents covering the Oil and Gas Interests of the Borrower and the Restricted
Subsidiaries and the Equity Interests of the Restricted Subsidiaries and other
personal property, equipment, oil and gas inventory and proceeds of the
foregoing, all such documents to be in form and substance reasonably
satisfactory to the Administrative Agent, and in each case, as may be amended,
supplemented or restated from time to time.

 

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“Senior Note Documents” means the Existing Senior Notes, the Indenture, the
Senior Notes Guaranty, collectively, or each of such documents singularly, and
any documents or instruments contemplated by or executed in connection with any
of them, in each case, as amended, modified, supplemented or restated from time
to time as of the Petition Date, and as further amended, restated, or otherwise
modified from time to time as permitted by this Agreement.

“Senior Notes Guaranty” means the supplemental indentures, dated as of
September 15, 2010 and April 16, 2014, pursuant to which certain Subsidiaries of
the Borrower have guaranteed the Borrower’s obligations with respect to the
Existing Senior Notes on the terms provided for in the Indenture.

“SPE” means the Society of Petroleum Engineers.

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

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than
fifty percent (50%) of the equity or more than fifty percent (50%) of the
ordinary voting power or, in the case of a partnership, more than fifty percent
(50%) of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent. Unless the context otherwise clearly requires,
references herein to a “Subsidiary” refer to a Subsidiary of the Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement 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

 

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similar transaction or any combination of these transactions; provided that in
no event shall any (a) phantom stock or similar plan providing for payments only
on account of services provided by current or former directors, officers,
employees or consultants of any Credit Party or any Restricted Subsidiary or
(b) near term spot market purchase and sale of a commodity in the ordinary
course of business based on a price determined by a rate quoted on an organized
exchange for actual physical delivery, be a Swap Agreement.

“Swap Modification” means the amendment, modification, cancellation,
monetization, sale, transfer, assignment, early termination or other disposition
of any Swap Agreement for Crude Oil or Natural Gas.

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

“Taxes” means any present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

“Testing Date” has the meaning assigned to such term in Section 6.26(b).

“Transactions” means, collectively, (a) the execution, delivery and performance
by each Credit Party of the Loan Documents to which it is to be a party, the
borrowing of Loans and the use of the proceeds thereof, (b) the Bankruptcy Cases
and (c) the payment of any fees, costs or expenses incurred or payable by any
Credit Party or its Subsidiaries in connection with the Transactions
contemplated in the foregoing clauses (a) and (b), this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby.

“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 Adjusted LIBO Rate or the Alternate Base Rate.

“Unrestricted Cash” means cash or cash equivalents of the Borrower or any of its
Restricted Subsidiaries that would not appear as “restricted” on a consolidated
balance sheet of the Borrower or any of its Restricted Subsidiaries; provided
that cash or cash equivalents that would appear as “restricted” on a
consolidated balance sheet of Borrower or any of its Restricted Subsidiaries
solely because such cash or cash equivalents are subject to a control agreement
(including the Cash Collateral Account) for the benefit of one or more Secured
Parties shall constitute Unrestricted Cash hereunder.

“Unrestricted Subsidiary” means (a) EBG Resources, LLC, a Delaware limited
liability company, (b) Bonchasse Land Company, LLC, a Louisiana limited
liability company, (c) EXCO Resources (PA), LLC, a Delaware limited liability
company, (d) EXCO Appalachia Midstream, LLC, a Delaware limited liability
company, (e) PCMWL, LLC, a Louisiana limited liability company, Moran Minerals,
LLC, a Louisiana limited liability company and Moran Land Company, LLC, a
Louisiana limited liability company, and (f) any Subsidiary of an Unrestricted
Subsidiary.

 

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“Unused Commitment” means, with respect to each Lender at any time, such
Lender’s Commitment at such time minus such Lender’s Aggregate Credit Exposure
at such time.

“Unused Commitment Fee” has the meaning assigned to such term in
Section 2.13(a).

“U.S. Government Securities” means direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency or instrumentality thereof to the extent
such obligations are entitled to the full faith and credit of the United States
of America), in each case maturing within one year from the date of acquisition
thereof.

“U.S. Person” means a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 2.18(f).

“Variance Limit” has the meaning assigned to such term in Section 7.15.

“Variance Report” has the meaning assigned to such term in Section 6.26(b).

“Variance Testing Date” has the meaning assigned to such term in
Section 6.26(b).

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means the Borrower, any other Credit Party and the
Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

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

Section 1.03. 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,

 

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instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended, restated,
amended and restated, supplemented or otherwise modified (subject to any
restrictions on such amendments restatements, amendments and restatements,
supplements or modifications set forth herein or in any other Loan Document),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) 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, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words “asset” and “property” or “Property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights, and (f) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time.    No provision of this Agreement or any other
Loan Document shall be construed or interpreted to the disadvantage of any party
hereto by reason of such party’s having, or being deemed to have, drafted,
structured, or dictated such provision.

Section 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
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.

Section 1.05. Oil and Gas Definitions. For purposes of this Agreement and the
other Loan Documents, the terms “proved reserves,” “proved developed reserves,”
“proved undeveloped reserves,” “proved developed nonproducing reserves” and
“proved developed producing reserves,” have the meaning given such terms from
time to time and at the time in question by the Society of Petroleum Engineers
of the American Institute of Mining Engineers.

Section 1.06. Time of Day. Unless otherwise specified, all references to times
of day shall be references to prevailing Central time.

Article II

The Credits

Section 2.01. Commitments. Subject to the terms and conditions set forth herein
and in the DIP Orders, (a) each Revolver A Lender severally (and not jointly)
agrees (x) in the case of each Lender identified on Schedule 2.01(B) that such
Lender is providing Revolver A

 

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Commitments hereunder on the Effective Date in exchange for its Existing RBL LC
Exposure, and such Existing RBL LC Exposure being deemed satisfied, in full in
the amount set forth on Schedule 2.01(B) and (y) to make Revolver A Loans to the
Borrower from time to time during the Availability Period in an aggregate
principal amount that will not result in (i) such Lender’s Revolver A Credit
Exposure exceeding such Lender’s Revolver A Commitment (which in the case of any
Lender referred to in the preceding clause (x), shall include the amount of such
Lender’s Revolving A Commitment referred to in the preceding clause (x)) or
(ii) the Aggregate Credit Exposure exceeding the Commitment (which in the case
of any Lender referred to in the preceding clause (x), shall include the amount
of such Lender’s Revolving A Commitment referred to in the preceding clause (x))
or (iii) the Aggregate Revolver A Credit Exposure exceeding, prior to the date
of entry of the Final DIP Order, $55,400,000 and (b) each Revolver B Lender
severally (and not jointly) agrees (x) in the case of each Lender identified on
Schedule 2.01(B) that such Lender (A) shall be deemed to have made a Revolver B
Loan to the Borrower on the Effective Date in exchange for its Existing RBL
Loan, and such Existing RBL Loan shall be deemed satisfied, in the amount set
forth on Schedule 2.01(B) and (B) thereafter shall make Revolver B Loans to the
Borrower from time to time during the Availability Period in an aggregate
principal amount that will not result in (i) such Lender’s Revolver B Credit
Exposure exceeding such Lender’s Revolver B Commitment (which in the case of any
Lender referred to in the preceding clause (x), shall include the amount of such
Lender’s Revolving B Commitment referred to in the preceding clause (x)) or
(ii) the Aggregate Credit Exposure exceeding the Commitment (which in the case
of any Lender referred to in the preceding clause (x), shall include the amount
of such Lender’s Revolving B Commitment referred to in the preceding clause
(x)). Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrower may borrow, prepay and reborrow the Loans. On the
Effective Date, Revolver A Loans shall be made in an aggregate principal amount
not to exceed $31,406,029.50 and Revolver B Loans shall be made (including such
Revolver B Loans deemed made pursuant to this Section) in an aggregate principal
amount equal to $125,000,000.

Section 2.02. Termination and Reduction of the Commitments.

(a) Unless previously terminated, all Commitments shall terminate on the
Maturity Date. If at any time the Commitments are terminated or reduced to zero,
then the Commitments shall terminate on the effective date of such termination
or reduction.

(b) The Borrower may at any time terminate, or from time to time reduce, the
Commitment; provided that (i) each reduction of the Commitment shall be in an
amount that is an integral multiple of $5,000,000 and not less than $10,000,000
and shall be applied ratably to each Lender’s Commitment, (ii) the Borrower
shall not terminate or reduce the Commitment if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11 and
Section 2.12, the Aggregate Credit Exposure would exceed the Commitment and
(iii) any such reduction of the Commitments shall be made, first, to the
Revolver A Commitments and, second, to the Revolver B Commitments.

(c) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitment under paragraph (b) of this Section 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

 

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Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
the Commitment delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination of the Commitment shall be permanent. Each reduction
of the Commitment shall be made ratably among the Lenders in accordance with
their respective Commitment.

Section 2.03. [Reserved].

Section 2.04. Loans and Borrowings.

(a) Each Loan shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. 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 of the Lenders are
several and no Lender shall be responsible for any other Lender’s failure to
make Loans as required.

(b) Subject to Section 2.15, each Revolver A Loan Borrowing and Revolver B Loan
Borrowing and shall be comprised entirely of ABR Loans or Eurodollar Loans as
the Borrower may request in accordance herewith. Each Lender at its option may
make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate
of such Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in accordance
with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $1,000,000. At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $1,000,000; provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the Commitment or that is required to finance the reimbursement of an
LC Disbursement as contemplated by Section 2.07(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 eight (8) Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Eurodollar
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

Section 2.05. 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., three (3) Business
Days before the date of the proposed Eurodollar Borrowing or (b) in the case of
a Eurodollar Borrowing on the Effective Date or an ABR Borrowing, not later than
11:00 a.m., one (1) Business Day before the date of the proposed Borrowing;
provided that any such notice of an ABR Borrowing to finance the reimbursement
of an LC Disbursement as contemplated by Section 2.07(e) may be given not later
than 10:00 a.m.,

 

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on the date of the proposed Borrowing. Each such telephonic Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery, telecopy
or electronic mail to the Administrative Agent of a written Borrowing Request in
a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.04:

(i) the aggregate amount of the requested Borrowing;

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

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

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

(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.08.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one (1) month’s duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, 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 2.06. Reserved.

Section 2.07. Letters of Credit.

(a) General. On the Effective Date, the Existing Letters of Credit shall be
deemed to have been issued under the Revolver A Facility pursuant to, and shall
constitute Letters of Credit for all purposes under, this Agreement. Subject to
the terms and conditions set forth herein, the Borrower may on and after the
Effective Date request the issuance of Letters of Credit for its own or the
account of any Restricted Subsidiary in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Availability Period and, in the case of any Letters of Credit issued
after the Effective Date, shall be subject to (x) such credit requirements with
respect to each Lender (including any such Lender party to this Agreement on the
Effective Date) as may be required by the Issuing Bank pursuant to its internal
procedures (it being understood and agreed that, as of the Effective Date, the
Revolver A Lenders (other than JPMorgan Chase Bank, N.A. and its Affiliates)
satisfy the credit requirements of JPMorgan Chase Bank, N.A., in its capacity as
Issuing Bank, for participations in an amount not to exceed $40,000,000 with
respect to Letters of Credit issued by JPMorgan Chase Bank, N.A.) or (y) the
Borrower providing cash collateral in the manner provided in Section 2.07(j). 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
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control. Letters of Credit shall only be
issued under the Revolver A Facility.

 

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(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, 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. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank’s standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed, when combined with indebtedness
incurred pursuant to Section 7.01(p), $50,000,000, (ii) the Aggregate Revolver A
Credit Exposure shall not exceed the Revolver A Commitments of all Lenders and
(iii) the Aggregate Credit Exposure shall not exceed the Commitments.

(c) Expiration Date. Except to the extent cash collateralized or backstopped on
the Maturity Date pursuant to arrangements reasonably acceptable to the Issuing
Bank, each Letter of Credit shall expire at or prior to the close of business on
the earlier of (i) the date fifteen (15) months after the date of the issuance
of such Letter of Credit (or, in the case of any renewal or extension thereof,
the earlier of (x) one (1) year after such renewal or extension and (y) the date
that is five (5) Business Days prior to the Maturity Date (as defined in clause
(i) of the definition of “Maturity Date”)) and (ii) the date that is five
(5) Business Days prior to the Maturity Date (as defined in clause (i) of the
definition of “Maturity Date”), except to the extent cash collateralized or
backstopped on the Maturity Date pursuant to arrangements reasonably acceptable
to the Issuing Bank.

(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 or the Revolver A Lenders, the Issuing Bank
hereby grants to each Revolver A Lender, and each Revolver A Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Revolver A 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 Revolver A Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Issuing Bank, such Revolver A Lender’s Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Revolver A
Lender acknowledges and agrees that its obligation to acquire participations
pursuant to this paragraph

 

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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
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 the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not
later than 12:00 noon on the date that such LC Disbursement is made, if the
Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m.
on such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 12:00 noon on the Business Day
immediately following the day that the Borrower receives such notice; provided
that the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.05 that such payment be financed with an
ABR Revolver A Loan Borrowing in an equivalent amount and, to the extent so
financed, the Borrower’s obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolver A Loan Borrowing. If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each
Revolver A Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Revolver A Lender’s Applicable
Percentage thereof. Promptly following receipt of such notice, each Revolver A
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 2.08 with respect to Loans made by such Revolver A Lender (and
Section 2.08 shall apply, mutatis mutandis, to the payment obligations of the
Revolver A Lenders), and the Administrative Agent shall promptly pay to the
Issuing Bank the amounts so received by it from the Revolver A Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Revolver A Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Revolver A Lenders and the Issuing Bank as their interests may appear. Any
payment made by a Revolver A Lender pursuant to this paragraph to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Revolver A
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section 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 or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, 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, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Revolver A Lenders nor the Issuing Bank, nor any
of their Related Parties, shall have any liability or responsibility by

 

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reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not be
construed to excuse the 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 the Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised 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 may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.

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

(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, 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 Revolver A Loans; provided that, if the
Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 2.14(c) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Revolver A
Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Revolver A Lender to the extent of such
payment.

(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Revolver A Lenders of any such replacement of the Issuing Bank.
At the time any such replacement shall become effective, the Borrower shall pay
all unpaid fees accrued for the account of the replaced Issuing

 

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Bank pursuant to Section 2.13(b). From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require. After the replacement of an Issuing Bank hereunder, the replaced
Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement with respect to
Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.

(j) Cash Collateralization.

(i) If any Event of Default shall occur and be continuing, on the Business Day
that the Borrower receives notice from the Administrative Agent, the Issuing
Bank or the Required Lenders (or, if the maturity of the Loans has been
accelerated, any Issuing Bank as to Letters of Credit issued by such Issuing
Bank or Lenders with LC Exposure representing at least sixty-six and two-thirds
percent (66 2⁄3%) of the total LC Exposure) demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in the Cash
Collateral Account an amount in cash equal to 105% of the total LC Exposure as
of such date; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clauses (l) through
(q) of Article IX.

(ii) All cash collateral provided by Borrower or any other Credit Party pursuant
to the request of the Administrative Agent in accordance with Section 2.21(c)
shall be deposited in the Cash Collateral Account.

(iii) Deposits in the Cash Collateral Account made pursuant to Section 2.07(a),
the foregoing paragraph (i) of this Section 2.07(j) or Section 2.21(c) shall be
held by the Issuing Bank as collateral for the payment and performance of the
Obligations under this Agreement and Borrower hereby grants a security interest
in such cash and each deposit account into which such cash is deposited to
secure the Obligations under this Agreement. The Issuing Bank shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over the Cash Collateral Account. Other than interest at the rate per annum in
effect for accounts of the same type maintained with the Issuing Bank at such
time and any interest earned on the investment of such deposits, which
investments shall be of the type described in clause (b) of the definition of
Permitted Investments and shall be made by the Issuing Bank in consultation with
the Borrower (unless an Event of Default shall have occurred and be continuing,
in which case, such investments shall be made at the option and sole discretion
of the Issuing Bank) and at the Borrower’s risk and expense, such deposits shall
not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in the Cash Collateral Account shall be
applied by the Issuing Bank to reimburse the Issuing Bank for LC Disbursements
(x) in the case of any cash collateral provided pursuant to Section 2.07(a),
immediately upon any draw on the applicable Letter of Credit and to the extent
not so applied, shall be held for the satisfaction of the reimbursement
obligations of the

 

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Borrower for the applicable LC Exposure or (y) otherwise, 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 (but
subject to the consent of the applicable Issuing Banks and the Lenders with LC
Exposure representing sixty-six and two-thirds percent (66 2⁄3%) or more of the
total LC Exposure), be applied by the Administrative Agent to satisfy other
Obligations under this Agreement.

(iv) If the Borrower provides cash collateral pursuant to Section 2.07(a) or is
required to provide cash collateral pursuant to either paragraph (i) of this
Section 2.07(j) or Section 2.21(c), the amount of such cash collateral (to the
extent not applied as aforesaid) shall be returned to the Borrower within three
(3) Business Days after (x) in the case of Section 2.07(a), the applicable
Letter of Credit or Letters of Credit shall have been returned undrawn and no
Event of Default shall have occurred and be continuing, (y) in the case of cash
collateral provided pursuant to paragraph (i) above, all Events of Default have
been cured or waived and (z) in the case of cash collateral provided pursuant to
Section 2.21(c), the date on which such cash collateral is no longer required
pursuant to Section 2.21(c).

Section 2.08. Funding of Borrowings.

(a) 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 12:00 noon to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that, Revolver B Loans shall be made
as provided in Section 2.01(a). The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower designated by the Borrower in the
applicable Borrowing Request; provided that ABR Revolver A Loans made to finance
the reimbursement of an LC Disbursement as provided in Section 2.07(e) shall be
remitted by the Administrative Agent to the Issuing Bank.

(b) 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 paragraph (a) of this Section 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.

 

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Section 2.09. Interest Elections.

(a) 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; provided that
all Borrowings on the Effective Date shall be ABR Borrowings. 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. 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) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.05 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, telecopy or
electronic mail to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.03:

(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 clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

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

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

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

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

(d) 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.

 

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(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Majority Lenders, so notifies the Borrower, then, so long as an Event of
Default is continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

Section 2.10. Repayment of Loans; Evidence of Debt.

(a) The Borrower hereby unconditionally promises to pay to the Administrative
Agent for the account of each Revolver A Lender all Obligations outstanding
under each Revolver A Loan on the Maturity Date other than contingent
obligations under the Loan Documents for which no claim has been made and
liquidated and that by the express terms of the Loan Documents survive
termination thereof and/or payment in full of the Obligations. The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Revolver B Lender all Obligations outstanding under each
Revolver B Loan on the Maturity Date other than contingent obligations under the
Loan Documents for which no claim has been made and liquidated and that by the
express terms of the Loan Documents survive termination thereof and/or payment
in full of the Obligations.

(b) Borrower and each surety, endorser, guarantor and other party ever liable
for payment of any sums of money payable under this Agreement, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, protest, notice of protest and nonpayment, as to the
payments due under this Agreement or any other Loan Document, and agree that
their liability under this Agreement or any other Loan Document shall not be
affected by any renewal or extension in the time of payment hereof, or in any
indulgences, or by any release or change in any security for the payment of the
Obligations, and hereby consent to any and all such renewals, extensions,
indulgences, releases or changes.

(c) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

(d) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

(e) The entries made in the accounts maintained pursuant to paragraph (c) or (d)
of this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

 

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(f) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in the form
attached hereto as Exhibit C. Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 11.04) be represented by one or more promissory notes in
such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

(g) Subject to the satisfaction of the following conditions and at the
Borrower’s option (the “Maturity Extension Option”), the Maturity Date shall be
extended to the date that is 18 months after the Effective Date:

(i) The Borrower has provided written notice to the Administrative Agent not
more than 90 days prior to the date that is 12 months after the Effective Date
and not less than 45 days prior to the date that is 12 months after the
Effective Date;

(ii) None of the events described in clause (ii), (iii) or (iv) of the
definition of “Maturity Date” has occurred;

(iii) The Administrative Agent shall have received a certificate signed by a
Responsible Officer of the Borrower, certifying that (A) the representations and
warranties of each Credit Party set forth in the Loan Documents are true and
correct in all material respects (without duplication of any materiality
qualifier contained therein) on and as of the date of such request, except to
the extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date and (B) at the time of and immediately after giving effect to such Maturity
Extension Option, no Default, Event of Default, or Material Adverse Effect shall
have occurred;

(iv) The Credit Parties shall have either (x) filed with the Bankruptcy Court a
Plan of Reorganization in the Bankruptcy Cases no later than July 1, 2018, which
Plan of Reorganization shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Lenders as of the Effective Date with respect
to the treatment of the DIP Facilities, or (y) satisfied the Sale Milestone
(without giving effect to any waiver thereof by less than all of the Lenders
that would permit satisfaction of this clause (iv) to occur after the date that
is 12 months after the Effective Date); and

(v) No Borrowing Base Deficiency shall exist at the time of, or after giving
effect to, the Maturity Extension Option.

 

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Section 2.11. Optional Prepayment of Loans.

(a) The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole and or in part, subject to prior notice in
accordance with paragraph (b) of this Section; provided that (i) any prepayment
made at any time a Borrowing Base Deficiency exists shall be applied ratably to
the prepayment of Borrowings to the extent required to eliminate such Borrowing
Base Deficiency, (ii) any prepayment of a Revolver B Loan Borrowings shall be in
minimum principal amounts of $5,000,000.00 and increments of $1,000,000.00 in
excess thereof and (iii) any prepayment shall be made, first, to the Revolver A
Loans and, second, to the Revolver B Loans.

(b) The Borrower shall notify the Administrative Agent by telephone (confirmed
by telecopy or electronic mail) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m. three
(3) Business Days before the date of prepayment or (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m. one (1) 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; provided that, if a notice of prepayment is given
in connection with a conditional notice of termination or reduction of the
Commitment as contemplated by Section 2.02, then such notice of prepayment may
be revoked if such notice of termination or reduction is revoked in accordance
with Section 2.02. 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 2.03. Subject to Section 2.11(a) above, 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 2.14.

Section 2.12. Mandatory Prepayment of Loans.

(a) Except as otherwise provided in Section 2.12(b) and 2.12(c), in the event a
Borrowing Base Deficiency exists, the Borrower shall prepay, subject to the
payment of any funding indemnification amounts required by Section 2.17, but
without premium or penalty, the principal amount of such Borrowing Base
Deficiency in not more than three (3) equal monthly consecutive installments
plus accrued interest thereon with the first such monthly payment being due upon
the thirtieth (30th) day after the Borrower’s receipt of notice of such
Borrowing Base Deficiency. Amounts applied to pay the Loans pursuant to this
Section 2.12(a) shall be applied ratably to pay the then outstanding Loans (both
Revolver A Loans (and cash collateralization of the outstanding Letters of
Credit to the extent the Revolver A Loans have been repaid in full) and Revolver
B Loans). With respect to the portion of such payments applied to pay the
Revolver A Loans, such payments shall be applied to the Borrowings in the order
specified in Section 2.12(e) and with respect to the portion of such payments
applied to pay the Revolver B Loans, such payments shall be applied to the
Revolver B Loan Borrowings in the order specified in Section 2.12(f).

(b) If the Borrower or any Restricted Subsidiary Disposes of any Borrowing Base
Properties at any time (whether pursuant to a Disposition of Equity Interests of
a Restricted Subsidiary permitted pursuant to Section 7.03 or otherwise) or a
Borrowing Base Deficiency occurs as a result of any other event described in
Section 3.06, the Borrower shall prepay on a pro rata basis (i) Revolver A Loans
(and cash collateralization of the outstanding Letters of Credit to the extent
the Revolver A Loans have been repaid in full) and (ii) Revolver B Loans, to

 

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the extent necessary to eliminate any Borrowing Base Deficiency that may exist
or that may have occurred as a result of such Disposition or other event
described in Section 3.06 on or within one (1) Business Day of the date it or
any Restricted Subsidiary receives the Net Cash Proceeds from such Disposition
or any other event described in Section 3.06. Notwithstanding the foregoing, if
at any time, the sum of (x) the fair market value (as determined by the
Administrative Agent in its reasonable discretion) of the assets Disposed of and
(y) Swap Agreements terminated, liquidated or otherwise monetized since the
Effective Date, individually or in the aggregate when combined with all such
other terminated, liquidated or monetized Swap Agreements and Disposed assets
since the Effective Date, exceeds $10,000,000, and as a result of such
dispositions and liquidations, a Borrowing Base Deficiency occurs, the Borrower
shall immediately prepay on a pro rata basis (A) Revolver A Loans (and cash
collateralization of the outstanding Letters of Credit to the extent the
Revolver A Loans have been repaid in full) and (B) Revolver B Loans in an amount
equal to such deficiency.

(c) If, after giving effect to any termination or reduction of the Commitment
pursuant to Section 2.02(b), the Aggregate Credit Exposure exceeds the Borrowing
Base, then the Borrower shall immediately (and in any event on the Business Day
of such termination or reduction) (i) prepay the Borrowings on the date of such
termination or reduction in an aggregate principal amount equal to such excess,
and (ii) 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 2.07(j).

(d) [Reserved].

(e) Amounts applied to the prepayment of Revolver A Loan Borrowings pursuant to
Section 2.12(b) and 2.12(c) shall be first applied ratably to ABR Revolver A
Loan Borrowings then outstanding and, upon payment in full of all outstanding
ABR Revolver A Loan Borrowings, second, to Eurodollar Revolver A Loan Borrowings
then outstanding, and if more than one Eurodollar Revolver A Loan Borrowing is
then outstanding, to each such Eurodollar Revolver A Loan Borrowing beginning
with the Eurodollar Borrowing with the least number of days remaining in the
Interest Period applicable thereto and ending with the Eurodollar Revolver A
Loan Borrowing with the most number of days remaining in the Interest Period
applicable thereto. Any prepayments pursuant to this Section shall be without
penalty or premium but otherwise accompanied by accrued interest to the extent
required by Section 2.14 and any funding indemnification amounts required by
Section 2.17. Amounts applied to the payment of Revolver B Loan Borrowings
pursuant to this Section may be reborrowed subject to and in accordance with the
terms of this Agreement.

(f) Amounts applied to the prepayment of Revolver B Loan Borrowings pursuant to
Section 2.12(b) and 2.12(c) shall be first applied ratably to ABR Revolver B
Loan Borrowings then outstanding and, upon payment in full of all outstanding
ABR Revolver B Loan Borrowings, second, to Eurodollar Revolver AB Loan
Borrowings then outstanding, and if more than one Eurodollar Revolver B Loan
Borrowing is then outstanding, to each such Eurodollar Revolver B Loan Borrowing
beginning with the Eurodollar Revolver B Loan Borrowing with the least number of
days remaining in the Interest Period applicable thereto and ending with the
Eurodollar Revolver B Loan Borrowing with the most number of days remaining in
the Interest

 

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Period applicable thereto. Any prepayments pursuant to this Section shall be
without penalty or premium but otherwise accompanied by accrued interest to the
extent required by Section 2.14 and any funding indemnification amounts required
by Section 2.17. Amounts applied to the payment of Revolver B Loan Borrowings
pursuant to this Section may not be reborrowed.

(g) Notwithstanding anything to the contrary in Section 2.12 or 2.19, with
respect to the amount of any mandatory prepayment described in Section 2.19 that
is allocated to Revolver B Loans (such amount, the “Revolver B Loan Prepayment
Amount”), the Borrower will, in lieu of applying such amount to the prepaying of
Revolver B Loans as provided in paragraphs (b) or (c) above, on the date
specified in Section 2.12 for such prepayment, give the Administrative Agent
telephone notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Revolver B Lender a notice
(each, a “Prepayment Option Notice”) as described below. As promptly as
practicable after receiving such notice from the Borrower, the Administrative
Agent will send to each Revolver B Lender a Prepayment Option Notice, which
shall be in the form of Exhibit E, and shall include an offer by the Borrower to
prepay on the date (each a “Mandatory Prepayment Date”) that is also 10 Business
Days after the date of the Prepayment Option Notice, the relevant Revolver B
Loans of such Lender by an amount equal to the portion of the Revolver B
Prepayment Amount indicated in such Lender’s Prepayment Option Notice as being
applicable to such Lender’s Revolver B Loans. On the Mandatory Prepayment Date
(i) the Borrower shall pay to the relevant Revolver B Lenders the aggregate
amount necessary to prepay that portion of the outstanding relevant Revolver B
Loans in respect of which such Lenders have accepted prepayment as described
above, and (ii) the Borrower shall be entitled to retain the Revolver B Loan
Prepayment Amount not accepted by the relevant Lenders.

Section 2.13. Fees.

(a) The Borrower agrees to pay to the Administrative Agent, for the account of
each Lender, an unused commitment fee (the “Unused Commitment Fee”) equivalent
to the Applicable Rate times the average daily amount of the Aggregate Unused
Commitments. Such Unused Commitment Fee shall be calculated on the basis of a
year consisting of 360 days. The Unused Commitment Fee shall be payable in
arrears on the last day of March, June, September and December of each year,
commencing with the first such date to occur after the Effective Date, and on
the Maturity Date for any period then ending for which the Unused Commitment Fee
shall not have been theretofore paid. In the event the Commitments terminate on
any date other than the last day of March, June, September or December of any
year, the Borrower agrees to pay to the Administrative Agent, for the account of
each Lender, on the date of such termination, the total Unused Commitment Fee
due for the period from the last day of the immediately preceding March, June,
September or December, as the case may be, to the date such termination occurs.

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account
of each Revolver A Lender a participation fee with respect to its participations
in Letters of Credit, which shall accrue at the same Applicable Rate used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Revolver A Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which
such

 

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Revolver A Lender’s Commitment terminates and the date on which such Revolver A
Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting
fee equal to the greater of (x) $500 and (y) the rate equal to 0.50% per annum
on the average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Revolver A Commitments and the date on which there ceases to
be any LC Exposure, as well as the Issuing Bank’s standard fees with respect to
the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Revolver A
Commitments terminate and any such fees accruing after the date on which the
Revolver A Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
ten (10) days after demand. All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

(c) [Reserved].

(d) [Reserved].

(e) The Borrower agrees to pay the Administrative Agent for the account of
(i) Fairfax Financial Holdings Limited and certain of its Affiliates, and
(ii) Energy Strategic Advisory Services, LLC and certain of its Affiliates an
arrangement fee in an aggregate amount equal to one percent (1%) of the Initial
Borrowing Base, such fee to be earned and due and payable on the Effective Date.

(f) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the
case of fees payable to it) for distribution, in the case of Unused Commitment
Fees and participation fees, to the Revolver A Lenders. Subject to
Section 11.13, fees paid shall not be refundable under any circumstances.

Section 2.14. Interest.

(a) The Revolver A Loans comprising each ABR Revolver A Loan Borrowing shall
bear interest at the Alternate Base Rate plus the Applicable Rate. The Revolver
B Loans comprising each ABR Revolver B Loan Borrowing shall bear interest at the
Alternate Base Rate plus 3.00%.

(b) The Revolver A Loans comprising each Eurodollar Revolver A Loan Borrowing
shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect
for such Borrowing plus the Applicable Rate. The Revolver B Loans comprising
each Eurodollar Revolver B Loan Borrowing shall bear interest at the Adjusted
LIBO Rate for the Interest Period in effect for such Borrowing plus 4.00%.

 

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(c) Notwithstanding the foregoing, if (i) any Event of Default of the type
described in clauses (a), (b), or (l) through (q) of Article IX, or (ii) any
other Event of Default occurs and the Administrative Agent has delivered written
notice of such Event of Default to the Borrower, then all outstanding principal,
interest, fees, and other Obligations shall bear interest at two percent (2.00%)
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section. After any event occurs that results in a Borrowing Base Deficiency, the
amount of such Borrowing Base Deficiency shall bear interest at two percent
(2.00%) plus the rate applicable to ABR Loans as provided in paragraph (a) of
this Section.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and upon termination of the Commitments and the
Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of
this Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end
of the Availability Period at a time when no Borrowing Base Deficiency exists),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

Section 2.15. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

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

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

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone, telecopy or electronic mail 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.

 

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Section 2.16. Increased Costs.

(a) If any Change in Law shall:

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

(ii) impose on any Lender or the Issuing Bank or the London interbank market any
other condition, costs or expense affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein; or

(iii) subject any Recipient to any Taxes on its loans, loan principal, letters
of credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto (other than (A) Indemnified Taxes,
(B) Taxes described in clauses (b) through (d) of the definition of Excluded
Taxes, and (C) Connection Income Taxes);

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Recipient of making, converting to, continuing or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any
such Eurodollar Loan) or to increase the cost to such Lender, the Issuing Bank
or such other Recipient of participating in, issuing or maintaining any Letter
of Credit or to reduce the amount of any sum received or receivable by such
Lender, the Issuing Bank or such other Recipient hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender,
the Issuing Bank or such other Recipient, as the case may be, such additional
amount or amounts as will compensate such Lender, the Issuing Bank or such other
Recipient, as the case may be, for such additional costs incurred or reduction
suffered.

(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital or liquidity requirements has or would have the effect of
reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on
the capital of such Lender’s or the 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 the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender’s or the Issuing Bank’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s or the Issuing Bank’s
policies and the policies of such Lender’s or the Issuing Bank’s holding company
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender’s
or the Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth (i) the amount
or amounts reasonably necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in clause (a) or (b) of
this Section, (ii) the factual basis for such compensation, and (iii) the manner
in which such amount or amounts were calculated, shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

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(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation; provided that
the Borrower shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than one hundred eighty (180) days prior to the date that such Lender or the
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 the
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.

Section 2.17. 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 other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under
Section 2.11(b) and is revoked in accordance therewith), (d) the assignment of
any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.20, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the Eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower within one hundred eighty (180) days after such Lender incurs such
loss, cost or expense and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.

Section 2.18. Taxes.

(a) Withholding of Taxes; Gross-Up. Each payment by or on account of any
obligation of any Credit Party under any Loan Document shall be made without
deduction or withholding for any Taxes, unless required by any applicable law.
If any applicable law (as determined by an applicable Withholding Agent in its
sole discretion exercised in good faith) requires the deduction or withholding
of any such payment by a Withholding Agent, then the applicable Withholding
Agent may so deduct or withhold and shall timely pay the full amount of

 

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deducted or withheld Taxes to the relevant Governmental Authority in accordance
with applicable law. If such Taxes are Indemnified Taxes, then the amount
payable by the applicable Credit Party shall be increased as necessary so that,
net of such deduction or withholding (including such deduction or withholding
applicable to additional amounts payable under this Section), the applicable
Recipient receives the amount it would have received had no such deduction or
withholding been made.

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

(c) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes by any Credit Party to a Governmental Authority, such Credit
Party 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.

(d) Indemnification by the Borrower. The Credit Parties shall jointly and
severally indemnify each Recipient for any Indemnified Taxes (including
Indemnified Taxes imposed or asserted on or attributable to amounts paid or
payable under this Section 2.18(d)) that are paid or payable by such Recipient
or required to be withheld or deducted from a payment to such Recipient and any
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. The indemnity under this Section 2.18(d) shall
be paid within 10 days after the Recipient delivers to the Borrower a
certificate stating the amount of such payment or liability. Such certificate
shall be conclusive absent manifest error. Such Recipient shall deliver a copy
of such certificate to the Administrative Agent.

(e) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent for (i) any Indemnified Taxes (but only to the extent that
any Credit Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Credit Parties to
do so) attributable to such Lender that are paid or payable by the
Administrative Agent in connection with any Loan Document, (ii) any Taxes
attributable to such Lender’s failure to comply with the provisions of
Section 11.04(c) relating to the maintenance of a Participant Register and
(iii) any Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any Loan
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. The indemnity under this Section 2.18(e) shall
be paid within 10 days after the Administrative Agent delivers to the applicable
Lender a certificate stating the amount of such payment or liability. Such
certificate shall be conclusive absent manifest error.

 

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(f) Status of Lenders.

(i) Any Lender that is entitled to an exemption from, or reduction of, any
applicable withholding Tax with respect to any payments under any Loan Document
shall deliver to the Borrower and the Administrative Agent, at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without, or at a
reduced rate of, withholding. In addition, any Lender, if reasonably requested
by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by law or reasonably requested by the Borrower or the
Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to any backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in
Section 2.18(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in
the Lender’s judgment such completion, execution or submission would subject
such Lender to any material unreimbursed cost or expense or would materially
prejudice the legal or commercial position of such Lender. If any form or
certification previously delivered pursuant to this Section expires or becomes
obsolete or inaccurate in any respect with respect to a Lender, such Lender
shall update such form or certificate or promptly notify the Borrower and the
Administrative Agent in writing of its legal inability to do so.

(ii) Without limiting the generality of the foregoing,

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

(B) any Non-U.S. Lender shall, if it is legally eligible to do so, deliver to
the Borrower and the Administrative Agent (in such number of copies reasonably
requested by the Borrower and the Administrative Agent or, if available, an
original signed form) on or prior to the date on which such Lender becomes a
party under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower or the Administrative Agent), duly completed and
executed copies (or, if available, an original signed form) of whichever of the
following is applicable:

(1) in the case of a Non-U.S. Lender claiming the benefits of an income tax
treaty to which the United States of America is a party (x) with respect to
payments of interest under any Loan Document, IRS Form W-8BEN or IRS Form
W-8BEN-E establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “interest” article of such tax treaty and
(y) with respect to any other applicable payments under this Agreement, IRS Form
W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of,
U.S. federal withholding Tax pursuant to the “business profits” or “other
income” article of such tax treaty;

 

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(2) in the case of a Non-U.S. Lender for whom payments under this Agreement
constitute income that is effectively connected with such Lender’s conduct of a
trade or business in the United States of America, IRS Form W-8ECI;

(3) in the case of a Non-U.S. Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code both (x) IRS Form W-8BEN or
IRS Form W-8BEN-E and (y) a tax certificate substantially in the form of Exhibit
D-1 to the effect that such Lender is not (a) a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (b) a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or (c) a “controlled
foreign corporation” described in Section 881(c)(3)(C) of the Code(a “U.S. Tax
Compliance Certificate”); or

(4) in the case of a Non-U.S. Lender that is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or
IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form
of Exhibit D-1 or D-2, IRS Form W-9, and/or other certification documents from
each beneficial owner, as applicable; provided that if the Non-U.S. Lender is a
partnership and one or more direct or indirect partners of such Non-U.S. Lender
are claiming the portfolio interest exemption, such Non-U.S. Lender may provide
a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 on
behalf of each such direct and indirect partner.

(C) any Non-U.S. Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Non-U.S. Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by law as a basis for
claiming exemption from, or a reduction of, U.S. federal withholding Tax
together with such supplementary documentation necessary to enable the Borrower
or the Administrative Agent to determine the withholding or deduction required
by law to be made.

(D) If a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent, at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent, such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and

 

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the Administrative Agent to comply with their obligations under FATCA, to
determine that such Lender has or has not complied with such Lender’s
obligations under FATCA and, as necessary, to determine the amount to deduct and
withhold from such payment. Solely for purposes of this Section 2.18(f)(ii)(D),
“FATCA” shall include any amendments made to FATCA after the date of this
Agreement.

(g) Status of Administrative Agent. On or prior to the date on which the
Administrative Agent becomes the Administrative Agent under this Agreement, the
Administrative Agent shall deliver to the Borrower two duly completed original
copies of, if it is not a United States person (as defined in
Section 7701(a)(30) of the Code), IRS Form W-8ECI or W-8BEN-E with respect to
payments to be received by it as a beneficial owner and IRS Form W-8IMY
(together with required accompanying documentation) with respect to payments to
be received by it on behalf of the Lenders. If the Administrative Agent is a
United States Person (as defined in Section 7701(a)(30) of the Code), the
Administrative Agent shall deliver to the Borrower two duly completed original
copies of IRS Form W-9. The Administrative Agent shall deliver such
documentation on or before any date on which such documentation expires or
becomes obsolete or invalid, after the occurrence of any change in the
Administrative Agent’s circumstances requiring a change in the most recent
documentation previously delivered by it to the Borrower, and from time to time
thereafter if reasonably requested by the Borrower, and shall promptly notify
the Borrower in writing if it is no longer legally eligible to provide any
documentation previously provided.

(h) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 2.18 (including
additional amounts paid pursuant to this Section 2.18), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section with respect to the Taxes giving rise
to such refund), net of all out-of-pocket expenses (including any Taxes) of such
indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid to such indemnified party pursuant to the
previous sentence (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event such indemnified party is required
to repay such refund to such Governmental Authority. Notwithstanding anything to
the contrary in this Section 2.18(h), in no event will any indemnified party be
required to pay any amount to any indemnifying party pursuant to this
Section 2.18(h) if such payment would place such indemnified party in a less
favorable position (on a net after-Tax basis) than such indemnified party would
have been in if the indemnification payments or additional amounts giving rise
to such refund had never been paid. This Section 2.18(h) shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes which it deems confidential) to the
indemnifying party or any other Person.

(i) Issuing Bank. For purposes of Section 2.18(e) and (f), the term “Lender”
includes any Issuing Bank.

 

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(j) Survival. Each party’s obligations under this Section 2.18 shall survive the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under any Loan
Document.

Section 2.19. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Each Borrowing by the Borrower from the Lenders hereunder, each payment by
the Borrower on account of any commitment fee and any reduction of the
Commitments of the Lenders shall be made pro rata according to the respective
Applicable Percentages of the relevant Lenders. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the Loans
shall be made pro rata according to the respective Applicable Percentages of the
relevant Lenders. 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 2.16, Section 2.17 or
Section 2.18, or otherwise) prior to 12:00 noon on the date when due, in
immediately available funds, without set-off or counterclaim. 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 at Hamblin Watsa
Investment Counsel Ltd., 95 Wellington Street West, Suite 802, Toronto, Ontario,
M5J 2N7, Canada, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Section 2.16,
Section 2.17, Section 2.18 and Section 11.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in Dollars.

(b) Any proceeds of Collateral received by the Administrative Agent (i) not
constituting either (A) a specific payment of principal, interest, fees or other
sum payable under the Loan Documents (which shall be applied as specified by the
Borrower), or (B) a mandatory prepayment (which shall be applied in accordance
with Section 2.12) or (ii) after an Event of Default has occurred and is
continuing, shall be applied ratably first, to pay any fees, indemnities, or
expense reimbursements including amounts then due to the Administrative Agent
and the Issuing Bank from the Borrower or any other Credit Party (other than in
connection with Cash Management Obligations or Lender Hedging Obligations),
second, to pay any fees or expense reimbursements then due to the Lenders from
the Borrower or any other Credit Party (other than in connection with Cash
Management Obligations or Lender Hedging Obligations), third, to pay interest
then due and payable on the Loans and unreimbursed LC Disbursements ratably,
fourth, to pay the portion of the Obligations constituting unpaid principal of
the Loans, unreimbursed LC Disbursements and payment obligations then owing with
respect to Cash Management Obligations, Lender Hedging Obligations and to pay an
amount to the Issuing Bank equal to one hundred five percent (105%) of the
aggregate LC Exposure to be held as cash collateral for such Obligations (to the
extent not otherwise cash collateralized by the Borrower pursuant to this
Agreement), in each case, ratably among the Administrative Agent, the Lenders,

 

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the Issuing Bank, the Lender Counterparties and the holders of any Cash
Management Obligations, and fifth, to the payment of any other Obligations due
to the Administrative Agent, any Lender or any other Secured Party by any Credit
Party or any Restricted Subsidiary. Notwithstanding the foregoing, amounts
received from any Credit Party that is not an Eligible Contract Participant
shall not be applied to any Excluded Swap Obligations owing to a Lender
Counterparty (it being understood, that in the event that any amount is applied
to Obligations other than Excluded Swap Obligations as a result of this clause,
the Administrative Agent shall make such adjustments as it determines are
appropriate to distributions pursuant to the foregoing clause fourth above from
amounts received from Eligible Contract Participants to ensure, as nearly as
possible, that the proportional aggregate recoveries with respect to Obligations
described in the foregoing clause fourth above by Lender Counterparties that are
the holders of any Excluded Swap Obligations are the same as the proportional
aggregate recoveries with respect to other Obligations pursuant to the foregoing
clause fourth above). Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event of Default is
in existence, neither the Administrative Agent nor any Lender shall apply any
payment which it receives to any Eurodollar Loan of a Class, except (a) on the
expiration date of the Interest Period applicable thereto or (b) in the event,
and only to the extent, that there are no outstanding ABR Loans of the same
Class and, in any such event, the Borrower shall pay the break funding payment
required in accordance with Section 2.16. The Administrative Agent and the
Lenders shall have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of the
Obligations.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise (including any right of set-off exercised with respect to a Swap
Agreement), 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 paragraph 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 paragraph 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.

 

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(d) 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 the Issuing Bank hereunder that the Borrower will
not make such payment, the Administrative Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders or the Issuing Bank, as the case may
be, the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders or the 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 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.

(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.07(d), Section 2.07(e), Section 2.08(b), Section 2.19(d)
or Section 11.03(c), then the Administrative Agent may, in its discretion and
notwithstanding any contrary provision hereof (i) apply any amounts thereafter
received by the Administrative Agent for the account of such Lender and for the
benefit of the Administrative Agent or the Issuing Bank to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid, and/or (ii) hold any such amounts in a segregated account as cash
collateral for, and application to, any future funding obligations of such
Lender under such Sections, in the case of each of (i) and (ii) above, in any
order as determined by the Administrative Agent in its discretion.

Section 2.20. Mitigation Obligations; Replacement of Lenders; Illegality.

(a) If any Lender requests compensation under Section 2.16, 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 2.18, 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 2.16 or Section 2.18, 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) If any Lender requests compensation under Section 2.16, 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 2.18, 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, and
consents required by, Section 11.04), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent (and if a Commitment is being assigned, the Issuing Bank),
which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans,
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

 

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fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under
Section 2.16 or payments required to be made pursuant to Section 2.18, 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.

(c) If (i) in connection with (x) any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of this
Agreement or any other Loan Document that requires approval of all of the
Lenders under Section 11.02, (y) any proposed amendment, modification, waiver or
consent with respect to Section 7.11 or (z) any proposed amendment,
modification, termination, waiver or consent with respect to any of the
provisions of this Agreement or any other Loan Document that requires approval
of all of the Lenders as of the Effective Date, but in any such case the consent
of one or more Lenders (each a “Non-Consenting Lender”) has not been obtained or
(ii) a Lender is a Defaulting Lender; then, in each case, the Borrower may, at
its sole expense and effort, upon notice to such Lender and the Administrative
Agent, elect to replace such Non-Consenting Lender or Defaulting Lender, as the
case may be, as a Lender party to this Agreement in accordance with and subject
to the restrictions contained in, and consents required by Section 11.04;
provided that (x) the Borrower shall have received the prior written consent of
the Administrative Agent (and if a Commitment is being assigned, the Issuing
Bank), which consent shall not unreasonably be withheld, (y) 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 (z) if such Lender is also an
Issuing Bank, it shall have been replaced in such capacity as Issuing Bank
pursuant to Section 2.07(i). A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a consent by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply or, in the case of a Defaulting Lender,
such Lender is no longer a Defaulting Lender.

(d) If any change after the Effective Date in federal, state, or foreign laws or
regulations or the adoption or making after such date of any interpretations,
directives or requests applying to a class of banks including any Lender under
any federal, state, or foreign laws or regulations (whether or not having the
force of law) by any court or governmental or monetary authority charged with
its interpretation or administration makes it unlawful or impossible for any
Lender to make, maintain or fund any Eurodollar Borrowing, such Lender shall
notify Borrower and Administrative Agent, whereupon the obligation of such
Lender to make or continue, or to convert any Borrowings to, Eurodollar
Borrowings, shall be suspended until such Lender notifies Borrower and
Administrative Agent that the circumstances giving rise to such suspension no
longer exist. Before giving any such notice, such Lender shall designate a
different applicable lending office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If any Lender determines that it may not
lawfully continue to maintain any Eurodollar Borrowings to the end of the
applicable Interest Periods, all of the affected Borrowings shall be
automatically converted to ABR Borrowings as of the date of such Lender’s
notice, and upon such conversion Borrower shall compensate such Lender pursuant
to Section 2.17 for the loss, cost and expense attributable to such event.

 

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Section 2.21. Defaulting Lenders. 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:

(a) Fees shall cease to accrue on the Unused Commitment of such Defaulting
Lender pursuant to Section 2.13(a).

(b) Such Defaulting Lender shall not have the right to vote on any issue on
which voting is required (other than to the extent expressly provided in
Section 11.02(b)) and the Credit Exposure of such Defaulting Lender shall not be
included in determining whether the Required Lenders or the Majority Lenders
have taken or may take any action hereunder.

(c) If any LC Exposure exists at the time a Lender becomes a Defaulting Lender
then:

(i) all or any part of such LC Exposure of such Defaulting Lender shall be
reallocated among the non-Defaulting Lenders in accordance with their respective
Applicable Percentages but only to the extent (x) the sum of all non-Defaulting
Lenders’ Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all non-Defaulting Lenders’ Commitments and (y) the
conditions set forth in Section 5.02 are satisfied at that time;

(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrower shall, within one (1) Business Day
following notice by the Administrative Agent, cash collateralize for the benefit
of the Issuing Bank, the Borrower’s obligations corresponding to such Defaulting
Lender’s LC Exposure (after giving effect to any partial reallocation pursuant
to clause (i) above) in accordance with the procedures set forth in
Section 2.07(j) for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 2.13(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
clause (i) above, then the fees payable to the Lenders pursuant to
Section 2.13(a) and Section 2.13(b) shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither
reallocated nor cash collateralized pursuant to clauses (i) or (ii) above, then,
without prejudice to any rights or remedies of the Issuing Bank or any Lender
hereunder, all letter of credit fees payable under Section 2.13(b) with respect
to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank
until such LC Exposure is reallocated and/or cash collateralized.

 

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(d) So long as such 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 2.21(c), and participating interests in any
such newly issued or increased Letter of Credit shall be allocated among
non-Defaulting Lenders in a manner consistent with Section 2.21(c)(i) (and such
Defaulting Lender shall not participate therein).

(e) 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 Credit Exposure which
results in its Credit Exposure being less than its Applicable Percentage of the
Aggregate Credit Exposure, then no payments will be made to such Defaulting
Lender until such time as such Defaulting Lender shall have complied with this
Section 2.21 and all amounts due and owing to the Lenders has been equalized in
accordance with each Lender’s respective pro rata share of the Obligations.
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 2.21(e), all principal will
be paid ratably as provided in Section 2.19(b).

(f) In the event that each of the Administrative Agent, the Borrower and Issuing
Bank 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 the date of such readjustment such Lender shall purchase at par such of
the Loans of the other Lenders as the Administrative Agent shall determine may
be necessary in order for such Lender to hold such Loans in accordance with its
Applicable Percentage.

(g) With respect to any Defaulting Lender, 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
Defaulting Lender to satisfy such Defaulting Lender’s outstanding obligations.

Section 2.22. Returned Payments. If after receipt of any payment which is
applied to the payment of all or any part of the Obligations, the Administrative
Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not

 

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been received by the Administrative Agent or such Lender. The provisions of this
Section 2.22 shall be and remain effective notwithstanding any contrary action
which may have been taken by the Administrative Agent or any Lender in reliance
upon such payment or application of proceeds. The provisions of this
Section 2.22 shall survive the termination of this Agreement.

Section 2.23. [Reserved].

Section 2.24. Superpriority Nature of Obligations and Liens.

(a) The priority of the Obligations and the Liens of the Administrative Agent
and the Lenders on the Collateral owned by the Loan Parties shall be set forth
in the Interim DIP Order and the Final DIP Order; subject to the Carve Out, such
Obligations shall at all times constitute allowed super-priority administrative
expense claims in the Bankruptcy Cases, having priority over all administrative
expenses of the kind specified in, or ordered pursuant to, sections 105, 326,
328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1113 or 1114 or any
other provision of the Bankruptcy Code or otherwise and shall be payable from
all assets and property of the Credit Parties. Subject to the terms and
conditions of the DIP Orders, such Liens shall be (i) pursuant to section
364(c)(2) or 364(d) of the Bankruptcy Code, as applicable, first priority,
perfected liens and security interests on all assets of the Borrower and the
Guarantors, including, without limitation, (A) all assets of the Credit Parties
of the type securing the obligations under the Existing RBL Facility, (B) all
personal property of the Credit Parties, (C) all oil and gas properties of the
Borrower and its subsidiaries (including, without limitation, all of the
Borrowing Base Properties (as defined below)) and (D) all deposit accounts,
securities accounts and commodity accounts of the Credit Parties, (ii) pursuant
to Section 364(c)(3) of the Bankruptcy Code, a junior lien on any assets of the
Credit Parties subject to a valid, perfected, and non-avoidable lien as of the
Petition Date, other than any such liens securing the obligations under the
Existing RBL Facility, the 1.5 Lien Notes or the 1.75 Lien Debt and
(iii) pursuant to section 364(c)(2) or 364(d) of the Bankruptcy Code, as
applicable, a valid first priority pledge of 100% of the stock of each of the
Borrower’s direct and indirect Subsidiaries. Notwithstanding anything in the
Loan Documents to the contrary, the Liens held by the Administrative Agent on
the Collateral shall be for the benefit of the Secured Parties. All of the Liens
described in this Section 2.24 shall be valid, effective and perfected upon
entry of the Interim DIP Order or Final DIP Order, as applicable, without the
necessity of any further actions, including, but not limited to, the execution,
recordation of filings by the Debtors of mortgages, security agreements, control
agreements, pledge agreements, financing statements or other similar documents
or notices, or the possession, control or other acts by the Administrative Agent
of, or over, any Collateral, as set forth in the Interim DIP Order or Final DIP
Order, as applicable. The Lenders, or the Administrative Agent on behalf of the
Lenders, shall be permitted, but not required, to make or authorize the making
of any filings, deliver any notices or take any other acts as may be desirable
under state law in order to reflect the perfection and priority of the Lenders’
claims described herein.

(b) Subject in all respects to the priorities set forth in Section 2.24(a) above
and the terms of the DIP Orders (including the Carve Out), the Borrower and the
Guarantors hereby grant to the Administrative Agent on behalf of the Secured
Parties a security interest in, and mortgage on, all of the right, title and
interest of the Borrower and the Guarantors in all real Property owned or leased
by the Borrower or any Guarantor, together in each case with all of the

 

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right, title and interest of the Borrower or such Guarantor in and to all
buildings, improvements, and fixtures related thereto, any lease or sublease
thereof, all general intangibles relating thereto and all proceeds thereof. The
Borrower and the Guarantors hereby acknowledge that, pursuant to the DIP Order,
the Liens in favor of the Administrative Agent on behalf of the Secured Parties
in all of such real Property owned or leased by the Borrower or any Guarantor
shall be perfected without the recordation of any instruments of mortgage or
assignment and the Administrative Agent and the other Secured Parties shall have
the benefits of the DIP Order.

Article III

Borrowing Base

Section 3.01. Initial Borrowing Base. For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be $250,000,000 (the “Initial Borrowing Base”).
Notwithstanding the foregoing, after the first Redetermination Date, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to this Article III, Section 6.12 and Section 7.03(a).

Section 3.02. Scheduled and Interim Redeterminations. The Borrowing Base shall
be redetermined (i) first, on or about January 1, 2019 based on a Reserve Report
prepared by the Borrower’s internal engineering staff in a form reasonably
acceptable to the Administrative Agent (the “First Scheduled Redetermination”)
and (ii) thereafter, semi-annually in accordance with this Section 3.02 (each
such redetermination in the preceding clauses (i) and (ii), a “Scheduled
Redetermination”), and, subject to Section 3.04, such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders on or about (x) January 1, 2019 or
(y) April 1 and October 1 of each year, commencing April 1, 2019, as applicable.
In addition, after the First Scheduled Redetermination, (i) the Borrower may, by
notifying the Administrative Agent thereof, elect to cause the Borrowing Base to
be redetermined once between Scheduled Redeterminations, and (ii) the
Administrative Agent may (either in its discretion or at the direction of the
Required Lenders), by notifying the Borrower thereof, elect to cause the
Borrowing Base to be redetermined once between Scheduled Redeterminations (each
such redetermination, an “Interim Redetermination”), in the case of each of
clauses (i) and (ii) above, in accordance with this Article III.

Section 3.03. Scheduled and Interim Redetermination Procedure.

(a) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the
Reserve Report and (B) such other reports, data and supplemental information,
including, without limitation, the information provided pursuant to
Section 6.10, as may, from time to time, be reasonably requested by the Required
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 Interests as described in the Engineering Reports, the existence of any

 

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other Indebtedness, the financial condition of the Credit Parties, the economic
effect of the Borrower’s and its Restricted Subsidiaries’ Swap Agreements then
in effect, the value of the Credit Parties’ Swap Agreements, the Credit Parties’
midstream contracts (including the Midstream Contracts listed on Schedule 3.03
to the extent the Credit Parties have not filed a motion seeking to reject such
Midstream Contracts in the Bankruptcy Cases pursuant to section 365 of the
Bankruptcy Code), the Carve-Out and such other credit factors) as the
Administrative Agent deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as it exists at the particular
time. As of any Redetermination Date, the commodity price forecasts used in such
calculations of the Borrowing Base shall be the benchmark oil and gas prices
utilized at such time by JPMorgan Chase Bank, N.A., in borrowing base
determinations for conforming reserve-based revolving credit facilities.

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

(i) in the case of a Scheduled Redetermination (A) if the Administrative Agent
shall have received the Engineering Reports and other information required to be
delivered by the Borrower pursuant to Section 6.10(a) in a timely and complete
manner, then on or about March 15th and September 15th of such year following
the date of delivery or (B) if the Administrative Agent shall not have received
the Engineering Reports required to be delivered by the Borrower pursuant to
Section 6.10(a) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports and other
information from the Borrower and has had a reasonable opportunity to determine
the Proposed Borrowing Base in accordance with Section 3.03(a);

(ii) 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; and

(iii) in the case of the First Scheduled Redetermination, (A) if the
Administrative Agent shall have received the Engineering Reports and other
information required to be delivered by the Borrower pursuant to Section 6.10(a)
in a timely and complete manner, then on or about December 15, 2018 or (B) if
the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to Section 6.10(a) in a timely
and complete manner, then promptly after the Administrative Agent has received
complete Engineering Reports and other information from the Borrower and has had
a reasonable opportunity to determine the Proposed Borrowing Base in accordance
with Section 3.03(a).

(c) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved by all of the Lenders as provided in this
Section 3.03(c); 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 Administrative Agent and the Required Lenders (in each Lender’s
sole discretion consistent with its normal oil and gas lending criteria as it
exists at the particular time) as provided in this Section 3.03(c). Upon receipt
of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days
to agree with the

 

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Proposed Borrowing Base or disagree with the Proposed Borrowing Base by
proposing an alternate Borrowing Base, and each Lender shall make its
determination of the appropriate amount of the Borrowing Base consistent with
each such Lender’s normal and customary oil and gas lending criteria as it
exists at the particular time. If at the end of such fifteen (15) days, any
Lender has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Borrowing Base. 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 Administrative Agent and the Required
Lenders, in the case of a Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect, have approved or deemed to have
approved, as aforesaid, then the Proposed Borrowing Base shall become the new
Borrowing Base, effective on the date specified in Section 3.04. If, however, at
the end of such 15-day period, all of the Lenders or the Administrative Agent
and the Required Lenders, as applicable, have not approved or deemed to have
approved, as aforesaid, then the Administrative Agent shall poll the Lenders to
ascertain the highest Borrowing Base then acceptable to a number of Lenders
sufficient to constitute the Required Lenders or all of the Lenders, as
applicable, and, subject to the approval rights contained in this Section 3.04,
such amount shall become the new Borrowing Base, effective on the date specified
in Section 3.04.

(d) Notwithstanding anything to the contrary in this Section 3.03, upon receipt
of any Proposed Borrowing Base Notice in connection with a Scheduled
Redetermination or Interim Redetermination, the Borrower may elect in writing to
the Administrative Agent that the amount of the Borrowing Base be recalculated
to equal the amount that is 66.67% of the net present value, discounted at nine
percent (9%) per annum, of the future net revenues expected to accrue to the
Borrower’s and its Subsidiaries’ collective interests in the Borrowing Base
Properties classified as “proved developed producing reserves,” using the
updated commodity pricing forecasts set forth in Section 3.03(a); provided that
such calculation shall be made only on the basis of a Reserve Report prepared by
an Approved Petroleum Engineer (which the Borrower shall deliver to the
Administrative Agent in connection with any such request, to the extent a
Reserve Report prepared by an Approved Petroleum Engineer was not previously
delivered in connection with such Borrowing Base redetermination), which such
Reserve Report shall be adjusted to account for produced volumes and proved
developed producing conversions through the most recent quarter end.

Section 3.04. 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 Administrative Agent and the Required Lenders, as
applicable, pursuant to Section 3.03(c), the Administrative Agent shall notify
the Borrower and the Lenders of the amount of the redetermined Borrowing Base
(the “New Borrowing Base Notice”), and such amount shall become the new
Borrowing Base, effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders, (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 6.10(a) in a timely and complete manner, then on or about April 1st and
October 1st of such year, as applicable, following such notice, or if the
Administrative Agent shall not have received the Engineering Reports required to
be delivered by the Borrower pursuant to Section 6.10(a) in a timely and
complete manner, then on the Business Day next succeeding delivery of such
notice; and (b) in the case of an Interim Redetermination, on the Business Day
next succeeding delivery of such notice.

 

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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 3.06 or Section 6.12, whichever
occurs first. Notwithstanding the foregoing, no Scheduled Redetermination or
Interim Redetermination shall become effective until the New Borrowing Base
Notice related thereto is received by the Borrower.

Section 3.05. Lenders’ Sole Discretion. The Lenders shall have no obligation to
determine the Borrowing Base at any particular amount. Furthermore, Borrower
acknowledges that the Lenders have no obligation to increase the Borrowing Base
and that any increase in the Borrowing Base is in each Lender’s sole discretion
and subject to the individual credit approval processes of each of the Lenders
which processes shall be conducted in good faith and based upon such information
and such other information (including, without limitation, the status of title
information with respect to the Oil and Gas Interests as described in the
Engineering Reports, the existence of any other Indebtedness, the financial
condition of the Credit Parties, the economic effect of the Borrower’s and its
Restricted Subsidiaries’ Swap Agreements then in effect and such other credit
factors) as such Lender deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as it exists at the particular
time.

Section 3.06. Mandatory Borrowing Base Reduction. (a) If at any time, the sum of
(i) the aggregate Engineered Value of the Borrowing Base Properties Disposed of
(as determined by the Administrative Agent and confirmed by the Required
Lenders) and (ii) the Borrowing Base value attributable to Swap Agreements
terminated, liquidated or otherwise monetized since the last Scheduled
Redetermination exceeds, individually or in the aggregate when combined with all
such other terminated, liquidated or monetized Swap Agreements and Disposed
Borrowing Base Properties since the last Scheduled Redetermination, two and half
percent (2.5%) of the then effective Borrowing Base, the Borrowing Base shall be
automatically reduced pursuant to this Section 3.06(a) by an amount equal to
such Engineered Value and/or attributable Borrowing Base value and, in each
case, the Borrowing Base as so reduced shall become the new Borrowing Base
immediately upon the consummation of such Disposition (or in the case of a Swap
Agreement, termination, liquidation or other monetization), effective and
applicable to the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders until the next redetermination or other adjustment of the Borrowing Base
pursuant to this Agreement.

(b) Notwithstanding anything in this Agreement to the contrary, if at any time,
the sum of (i) the fair market value (as determined by the Administrative Agent
in its reasonable discretion) of the assets Disposed of and Swap Agreements
terminated, liquidated or otherwise monetized since the Effective Date,
individually or in the aggregate when combined with all such other terminated,
liquidated or monetized Swap Agreements and Disposed assets since the Effective
Date, exceeds $10,000,000.00, the Borrowing Base shall be automatically reduced
pursuant to this Section 3.06(b) by an amount equal to such fair market value,
and, in each case, the Borrowing Base as so reduced shall become the new
Borrowing Base immediately upon the consummation of such Disposition (or in the
case of a Swap Agreement, termination, liquidation, or other monetization),
effective and applicable to the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders until the next redetermination or other adjustment of the
Borrowing Base pursuant to this Agreement.

 

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Article IV

Representations and Warranties

Each Credit Party represents and warrants to the Lenders that (it being
understood and agreed that with respect to the Effective Date such
representations and warranties are deemed to be made concurrently with and after
giving effect to the consummation of the Transactions):

Section 4.01. Organization; Powers. Each Credit Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and subject to any restrictions arising on account of the
Borrower’s or any Restricted Subsidiaries’ status as a “debtor” under the
Bankruptcy Code, has all requisite power and authority to carry on its business
as now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

Section 4.02. Authorization; Enforceability. Subject to entry of the DIP Order
and subject to any restrictions arising on account of the Borrower’s or any
Restricted Subsidiaries’ status as a “debtor” under the Bankruptcy Code, the
Transactions are within each Credit Party’s corporate, limited liability company
or partnership powers and have been duly authorized by all necessary corporate,
limited liability company or partnership and, if required, stockholder action;
and this Agreement and each of the Loan Documents to which a Credit Party is
party have been duly executed and delivered by such Credit Party and constitute
legal, valid and binding obligations of such Credit Party, enforceable in
accordance with their 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 4.03. Governmental Approvals; No Conflicts. Subject to entry of the DIP
Order and subject to any restrictions arising on account of the Borrower’s or
any Restricted Subsidiaries’ status as a “debtor” under the Bankruptcy Code, the
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and, after the
Effective Date, the filing of this Agreement and related Loan Documents by the
Borrower with, and other required disclosures required by, the Securities and
Exchange Commission pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, (b) will not violate any applicable law or regulation or
the charter, by-laws or other Organizational Documents of the Borrower or any
Restricted Subsidiary or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other
instrument evidencing Material Indebtedness or a Material Sales Contract (other
than any Midstream Contract) binding upon the Borrower or any Restricted
Subsidiary or any of their respective assets, or give rise to a right thereunder
to require any payment to be made by the Borrower or any Restricted Subsidiary,
and (d) will not result in the creation or imposition of any Lien on any asset
of the Borrower or any Restricted Subsidiary not otherwise permitted under
Section 7.02.

 

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Section 4.04. Financial Condition; No Material Adverse Effect.

(a) The Borrower has heretofore furnished to the Lenders the consolidated
balance sheet and related statements of income and cash flows of the Borrower
and its Consolidated Subsidiaries (i) as of and for the fiscal years ended
December 31, 2016, audited by KPMG LLP, and (ii) as of and for the fiscal
quarters ended March 31, 2017, June 30, 2017, and September 30, 2017, setting
forth in comparative form the figures for the corresponding period of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by a Responsible Officer. Such financial statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes, in the case of the statements referred to in
clause (ii) above.

(b) Except as disclosed to the Administrative Agent in writing, neither the
Borrower nor any Restricted Subsidiary has any material contingent liabilities,
material liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the
consolidated balance sheets of the Borrower or as otherwise disclosed to the
Lenders or their advisors in writing.

(c) Each Credit Party has disclosed to the Lenders in writing any and all facts
that, in the reasonable good faith judgment of such Credit Party, could
reasonably be expected to result in a Material Adverse Effect.

Section 4.05. Properties.

(a) Except as otherwise provided in Section 4.15 with respect to proved reserves
included in the Oil and Gas Interests of the Borrower and each Restricted
Subsidiary, the Borrower and each Restricted Subsidiary has good title to, or
valid leasehold interests in, all such real and personal property material to
its business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.

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

(c) The rights and Properties presently owned, leased or licensed by the Credit
Parties including all easements and rights of way, include all material rights
and Properties necessary to permit the Borrower and the Restricted Subsidiaries
to conduct their business.

(d) All of the material Properties of the Borrower and the Restricted
Subsidiaries (other than the Oil and Gas Interests, which are addressed in
Section 4.18) which are reasonably necessary for the operation of their
businesses are in good working condition and are maintained in accordance with
prudent business standards.

 

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(e) The Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and such
Restricted Subsidiaries, as the case may be, 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.

Section 4.06. Litigation and Environmental Matters.

(a) Other than the Bankruptcy Cases, there are no actions, suits, investigations
or proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Restricted Subsidiary, (i) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve
this Agreement, in each case of the foregoing clauses (i) and (ii), is not
otherwise subject to the automatic stay as a result of the Bankruptcy Cases.

(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither the Borrower nor any Restricted
Subsidiary to the Borrower’s knowledge (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability, in each case of the foregoing clauses (i) through (iv), is not
otherwise subject to the automatic stay as a result of the Bankruptcy Cases.

(c) Since the date of this Agreement, there has been no change in the status of
the Disclosed Matters that, individually or in the aggregate, has resulted in,
or materially increased the likelihood of, a Material Adverse Effect and is not
otherwise subject to the automatic stay as a result of the Bankruptcy Cases

Section 4.07. Compliance with Laws and Agreements. The Borrower and each
Restricted Subsidiary is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its Property and all indentures,
agreements and other instruments binding upon it or its Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default or Borrowing Base
Deficiency has occurred and is continuing.

Section 4.08. Investment Company Status. Neither the Borrower nor any Restricted
Subsidiary is an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940.

 

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Section 4.09. Taxes. The Borrower and each Restricted Subsidiary has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Restricted Subsidiary, as
applicable, has set aside on its books adequate reserves, (b) to the extent that
the failure to do so could not reasonably be expected to result in a Material
Adverse Effect, or (c) to the extent otherwise excused or prohibited by the
Bankruptcy Code and not otherwise authorized by the Bankruptcy Court.

Section 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Benefit Plan (based on the assumptions used for
purposes of FASB Statement 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $5,000,000 the
fair market value of the assets of such Benefit Plan, and the present value of
all accumulated benefit obligations of all underfunded Benefit Plans (based on
the assumptions used for purposes of FASB Statement 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $5,000,000 the fair market value of the assets of all such underfunded
Benefit Plans.

Section 4.11. Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
Restricted Subsidiary is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower or
any Restricted Subsidiary to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or delivered hereunder (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 the Projections, the
Borrower represents only that such information was prepared in good faith based
on assumptions believed to be reasonable at the time.

Section 4.12. [Reserved].

Section 4.13. Capitalization and Credit Party Information. Schedule 4.13 lists,
as of the Effective Date (a) each Subsidiary that is an Unrestricted Subsidiary,
(b) for the Borrower, its full legal name, its jurisdiction of organization, its
organizational identification number and its federal tax identification number,
and (c) for each Restricted Subsidiary its full legal name, its jurisdiction of
organization, its organizational identification number, its federal tax
identification number, the number of shares of capital stock or other Equity
Interests outstanding and the owner(s) of such Equity Interests.

Section 4.14. Margin Stock. Neither the Borrower nor any Restricted Subsidiary
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock or
any other purpose that would cause the DIP Facilities to constitute a “purpose
credit” (within the meaning of Regulation U issued by the Board), and no part of
the proceeds of any Loan will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.

 

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Section 4.15. Oil and Gas Interests. Each Credit Party has good and defensible
title to all proved reserves included in the Oil and Gas Interests (for purposes
of this Section 4.15, “proved Oil and Gas Interests”) described in the most
recent Reserve Report provided to the Administrative Agent, free and clear of
all Liens except Liens permitted pursuant to Section 7.02; all such proved Oil
and Gas Interests are valid, subsisting, and in full force and effect, and all
rentals, royalties, and other amounts due and payable in respect thereof have
been duly paid; without regard to any consent or non-consent provisions of any
joint operating agreement covering any Credit Party’s proved Oil and Gas
Interests, such Credit Party’s share of (a) the costs for each proved Oil and
Gas Interest described in the Reserve Report is not materially greater than the
decimal fraction set forth in the Reserve Report, before and after payout, as
the case may be, and described therein by the respective designations “working
interests,” “WI,” “gross working interest,” “GWI,” or similar terms (except in
such cases where there is a corresponding increase in the net revenue interest),
and (b) production from, allocated to, or attributed to each such proved Oil and
Gas Interest is not materially less than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and described
therein by the designations “net revenue interest,” “NRI,” or similar terms;
each well drilled in respect of proved producing Oil and Gas Interests described
in the Reserve Report (1) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and the Credit Party that owns such proved producing
Oil and Gas Interests is currently receiving payments for its share of
production, with no funds in respect of any thereof being presently held in
suspense, other than any such funds being held in suspense pending delivery of
appropriate division orders, and (2) has been drilled, bottomed, completed, and
operated in compliance with all applicable laws, in the case of clauses (1) and
(2), except where any failure to satisfy clause (1) or to comply with clause
(2) would not have a Material Adverse Effect or would otherwise be subject to
the automatic stay as a result of the filing of the Bankruptcy Cases, and no
such well which is currently producing Hydrocarbons is subject to any penalty in
production by reason of such well having produced in excess of its allowable
production.

Section 4.16. Insurance. Each Credit Party has (a) all insurance policies
sufficient for the compliance by each of them with all material Governmental
Requirements and all material agreements to which such Credit Party is a party
and (b) insurance coverage in such amounts and against such risk (including,
without limitation, public liability) that are usually insured against by
companies similarly situated and engaged in the same or a similar business for
the assets and operations of the Credit Parties. 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 4.17. [Reserved].

 

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Section 4.18. Deposit Accounts. Except for the BG Escrow Account, the BG
Operating Account, the Permitted Non-JPMorgan Accounts and other deposit and
investment accounts maintained at financial institutions other than the
Administrative Agent or any Lender the aggregate balance of which does not
exceed $250,000 at any time for all such other deposit and investment accounts
taken as a whole, no Credit Party maintains any deposit or investment account
into which either (a) proceeds of Hydrocarbon production from the Oil and Gas
Interests included in the Borrowing Base Properties are deposited or
(b) distributions and dividends on Equity Interests owned by any Credit Party
are paid and deposited, in each case, other than deposit or investment accounts
maintained with the Administrative Agent or any other Lender.

Section 4.19. 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 Interests (and Properties unitized therewith) of the Borrower and the
Restricted Subsidiaries have been maintained, operated and developed in a good
and workmanlike manner and in conformity with all Governmental Requirements and
in conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Oil and Gas Interests and other contracts and
agreements forming a part of the Oil and Gas Interests of the Borrower and the
Restricted Subsidiaries. Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Interest of the Borrower or any Restricted Subsidiary is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and
(ii) none of the wells comprising a part of the Oil and Gas Interests (or
Properties unitized therewith) of the Borrower and the Restricted Subsidiaries
is deviated from the vertical more than the maximum permitted by Governmental
Requirements, and such wells are, in fact, bottomed under and are producing
from, and the well bores are wholly within, the Oil and Gas Interests (or in the
case of wells located on Properties unitized therewith, such unitized
Properties) of the Borrower and the Restricted Subsidiaries. The wells drilled
in respect of proved producing Oil and Gas Interests described in the Reserve
Report (other than wells drilled in respect of such proved producing Oil and Gas
Interests that have been subsequently Disposed of in accordance with the terms
of this Agreement) are capable of, and are presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and the Credit Party that owns such proved producing
Oil and Gas Interests is currently receiving payments for its share of
production, with no funds in respect of any thereof being presently held in
suspense, other than any such funds being held in suspense pending delivery of
appropriate division orders. 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 Restricted Subsidiary that are necessary to
conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are operated
by the Borrower or any Restricted Subsidiary, in a manner consistent with the
past practices of the Borrower and the Restricted Subsidiaries (other than those
the failure of which to maintain in accordance with this Section 4.19 could not
reasonably be expected to have a Material Adverse Effect).

Section 4.20. Foreign Corrupt Practices. No Credit Party, nor any director,
officer, agent, employee or Affiliate of any Credit Party is aware of or has
taken any action, directly or indirectly, that would result in a material
violation by such Persons of the FCPA, including without limitation, making use
of the mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign

 

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political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA; and, the Credit Parties and their
Affiliates have conducted their business in material compliance with the FCPA
and have instituted and maintained policies and procedures designed to ensure,
and which are reasonably expected to continue to ensure, continued compliance
therewith.

Section 4.21. Anti-Corruption Laws and Sanctions. The Borrower has implemented
and maintains in effect policies and procedures designed to ensure compliance by
the Borrower, its Subsidiaries and their respective directors, officers,
employees and agents with Anti-Corruption Laws and applicable Sanctions, and the
Borrower, its Subsidiaries and their respective officers and employees and to
the knowledge of the Borrower its directors and agents, are in compliance with
Anti-Corruption Laws and applicable Sanctions in all material respects and are
not knowingly engaged in any activity that would reasonably be expected to
result in Borrower being designated as a Sanctioned Person. None of (a) the
Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary
any of their respective directors, officers or employees, or (b) to the
knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will
act in any capacity in connection with or benefit from the credit facility
established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit,
use of proceeds or other transaction contemplated by this Agreement will violate
Anti-Corruption Laws or applicable Sanctions.

Section 4.22. Security Interest in Collateral. Subject to the entry of the DIP
Orders by the Bankruptcy Court, the provisions of each Security Instrument and
the DIP Order are effective to create in favor of the Administrative Agent for
the benefit of the Secured Parties a legal, valid, and enforceable fully
perfected Lien in all right, title, and interest of the Borrower and each
Restricted Subsidiary party thereto in the Collateral, with the priority
ascribed to such Lien in the DIP Orders.

Section 4.23. Locations of Business and Offices. The principal place of business
and chief executive office of the Borrower is located at the address for the
Borrower set forth in Section 11.01(a)(i) or at such other location as the
Borrower may have previously advised the Administrative Agent.

Section 4.24.    

Section 4.24 [Reserved].

Section 4.25. Gas Imbalances, Prepayments. Except as set forth on Schedule 4.25
or as disclosed in writing to the Administrative Agent and the Lenders in
connection with the most recently delivered Reserve Report, on a net basis there
are no gas imbalances, take or pay or other prepayments that would require the
Borrower or any of the Restricted Subsidiaries to deliver Hydrocarbons produced
from their respective Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor.

 

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Section 4.26. Marketing of Production. Except for contracts listed and in effect
on the date hereof on Schedule 4.26, 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 represent that it or
the Restricted Subsidiaries are receiving a price for all production sold
thereunder that 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 that are
not cancelable on 60 days’ notice or less without penalty or detriment for the
sale of production from the Borrower’s or the Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase, production, whether or not the same are currently being exercised) and
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.

Section 4.27. Restriction on Liens. Neither the Borrower nor any of the
Restricted Subsidiaries is a party to any material agreement or arrangement
(other than instruments creating Liens permitted by Section 7.02, but then only
on the Property subject of such Lien), or subject to any order, judgment, writ
or decree other than pursuant to the DIP Orders, that restricts or purports to
restrict its ability to grant Liens to the Administrative Agent and the Lenders
on or in respect of their respective assets or Properties to secure the
Obligations.

Section 4.28. Hedging Transactions. Except for Swap Agreements with Lender
Counterparties, no Debtor is party to any Swap Agreements as of the date hereof.

Section 4.29. Use of Loans. Each Credit Party will use the proceeds of the Loans
and solely for Approved Purposes. No Credit Party is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock or any other purpose that would cause the DIP Facilities to constitute a
“purpose credit” (within the meaning of Regulation U or X of the Board). No part
of the proceeds of any Loan will be used for any purpose which violates the
provisions of Regulations T, U or X of the Board.

Section 4.30. Foreign Operations. Except as set forth on Schedule 4.30, the
Borrower and the other Credit Parties do not own any Oil and Gas Interests that
are located outside of the geographic boundaries of the United States.

Article V

Conditions

Section 5.01. Effective Date. The obligations of the Lenders to make Loans and
of the 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 11.02):

(a) The Administrative Agent (or its counsel) shall have received (i) from each
party hereto either (A) a counterpart of this Agreement signed on behalf of such
party or (B) written evidence satisfactory to the Administrative Agent (which
may include telecopy or electronic transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement and
(ii) duly executed copies of the Loan Documents listed on Schedule 5.01(a) and
such other certificates, documents, instruments and agreements as the
Administrative Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents.

 

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(b) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and their respective
permitted assignees and dated as of the Effective Date) of Kirkland & Ellis LLP,
counsel for the Credit Parties, and covering such other matters relating to the
Credit Parties, this Agreement and the other Loan Documents as the
Administrative Agent shall reasonably request.

(c) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of each Credit Party, the
authorization of the Transactions and any other legal matters relating to the
Credit Parties, this Agreement or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received certificates of insurance
coverage of the Loan Parties in form and substance reasonably satisfactory to
the Administrative Agent evidencing that the Loan Parties are carrying insurance
in accordance with this Agreement.

(e) The Administrative Agent and the Lenders shall have received all fees and
other amounts due and payable on or prior to the Effective Date, and, to the
extent invoiced, reimbursement or payment of all out-of-pocket reasonable and
documented expenses required to be reimbursed or paid by the Borrower hereunder,
including all fees, expenses and disbursements of counsel for the Administrative
Agent and each Lender to the extent invoiced on or prior to the Effective Date.

(f) To the extent requested and available through commercially reasonable
efforts, the Administrative Agent shall have received the results of a Lien
search, in form and substance reasonably satisfactory thereto, made against the
Credit Parties under the Uniform Commercial Code (or applicable judicial docket)
as in effect in each jurisdiction in which filings or recordations under the
Uniform Commercial Code should be made to evidence or perfect security interests
in all assets of such Credit Party, together with the results of any other Lien
search, in form and substance reasonably satisfactory to the Administrative
Agent.

(g) The Administrative Agent shall have received UCC-1 financing statements with
respect to each Credit Party required by law or reasonably requested by the
Administrative Agent, in each case in form and substance satisfactory to the
Administrative Agent.

(h) [Reserved].

(i) The Administrative Agent shall have received title information, and
information with respect to the environmental condition of, in form and
substance satisfactory to the Administrative Agent setting forth the status of
title to at least the Minimum Mortgaged Value.

(j) Subject to entry of the DIP Orders, the Administrative Agent, on behalf of
the Lenders, shall have a valid Lien on and a security interest in the
Collateral with the priority set forth in this Agreement and the DIP Orders.

 

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(k) The Administrative Agent shall be reasonably satisfied that all loans and
other obligations under the Existing RBL Facility will be repaid in full, the
Existing RBL Facility will be terminated, and the Liens, if any, securing the
Existing RBL Facility will be assigned as set forth in the DIP Orders, in each
case, substantially contemporaneously with the proceeds of the Loans to be made
to the Borrower on the Effective Date.

(l) In the event that any Loans are made on the Effective Date, the
Administrative Agent shall have received a Borrowing Request acceptable to the
Administrative Agent setting forth the Loans requested by the Borrower on the
Effective Date, the Type and amount of each Loan and the accounts to which such
Loans are to be funded.

(m) The Administrative Agent shall be reasonably satisfied that after giving
effect to the Transactions, (i) the Aggregate Unused Commitments on the
Effective Date will not be less than $75,000,000 and (ii) the Credit Parties
shall have Unrestricted Cash and cash equivalents of not less than $10,000,000,
in each case, measured on a bank (and not book) basis.

(n) Each Credit Party shall have obtained all approvals required from any
Governmental Authority and all consents of other Persons, in each case that are
necessary or, in the reasonable discretion of the Administrative Agent in
consultation with the Credit Parties, advisable, in connection with the
Transactions and each of the foregoing shall be in full force and effect and in
form and substance reasonably satisfactory to the Administrative Agent. All
material applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the transactions contemplated by the Loan
Documents or the financing thereof and no action, request for stay, petition for
review or rehearing, reconsideration, or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable agency to take
action to set aside its consent on its own motion shall have expired.

(o) There shall not exist any action, suit, injunction investigation, litigation
or proceeding or other legal or regulatory developments, pending or threatened
in any court or before any arbitrator or Governmental Authority that, in the
reasonable opinion of Administrative Agent, singly or in the aggregate,
materially impairs the Transactions, the financing thereof or any of the other
transactions contemplated by the Loan Documents or that could reasonably be
expected to result in a Material Adverse Effect.

(p) The Lenders shall have received (i) reasonably satisfactory audited
consolidated financial statements of the Borrower for the year ended
December 31, 2016, (ii) reasonably satisfactory unaudited consolidated financial
statements of the Borrower for each of the first three fiscal quarters of 2017
and (iii) the Initial Reserve Report, in form and substance reasonably
satisfactory to the Administrative Agent.

(q) The Lenders shall have received (i) a reasonably satisfactory balance sheet
of the Borrower giving pro forma effect to the Indebtedness to be incurred on
the Effective Date as a part of the Transactions, (ii) financial projections of
the Borrower and its Consolidated Subsidiaries through the 2018 fiscal year
consisting of monthly projections for the first twelve months after the
Effective Date (including the supplement thereto delivered pursuant to
Section 5.02(h), the “Budget”) and (iii) the Initial Forecast.

 

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(r) The Bankruptcy Court shall have entered the Interim DIP Order granting the
super-priority claim status and the liens contemplated hereby and authorizing
the loans under the Facilities, which order (i) shall be in full force and
effect and shall not have been, in whole or in part, vacated, reversed, stayed,
or set aside and (ii) shall not have been modified or amended without the
reasonable consent of the Administrative Agent, Fairfax and the Lenders party to
this Agreement on the Effective Date. The Interim DIP Order shall be an order of
the Bankruptcy Court, in form and substance reasonably satisfactory to the
Administrative Agent, Fairfax and the Lenders party to this Agreement on the
Effective Date, authorizing and approving the DIP Facilities on an interim basis
and the transactions contemplated hereby, including, without limitation, the
granting of the super-priority status, security interests and liens, and the
payment of fees, in each case referred to herein and authorizing the Credit
Parties to borrow and incur debt under the DIP Facilities in an amount not to
exceed $250 million.

(s) All motions relating to the entry of the Interim DIP Order and the Final DIP
Order and seeking approval of the Loan Documents shall be in form and substance
reasonably satisfactory to the Lenders party to this Agreement on the Effective
Date, the Administrative Agent and its counsel, and shall include, without
limitation, a motion to reject the Midstream Contracts, which motion shall have
been filed within three days following the Petition Date.

(t) All first-day motions and related orders (including, without limitation,
orders listed on Schedule 5.01(t) (the “First-Day Orders”) entered by the
Bankruptcy Court in the Bankruptcy Cases shall be in form and substance
reasonably satisfactory to the Lenders party to this Agreement on the Effective
Date, the Administrative Agent and its counsel.

(u) The Administrative Agent shall have received, and be reasonably satisfied in
form and substance with, all documentation and other information required by
regulatory authorities under applicable anti-money laundering rules and
regulations, including but not restricted to the USA Patriot Act.

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

Section 5.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

(a) The Borrower shall have submitted a Borrowing Request in accordance with
Section 2.05 or a request for the issuance of a Letter of Credit in accordance
with Section 2.07, as applicable.

(b) The representations and warranties of each Credit Party set forth in the
Loan Documents shall be true and correct in all material respects (without
duplication of any materiality qualifier contained therein) 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 that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date.

 

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

(d) 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, the Consolidated Cash Balance shall not exceed the Consolidated Cash
Balance Limit; provided, that uses of the cash proceeds of such Borrowings
certified by a Responsible Officer of the Borrower to be applied within five
(5) Business Days of such Borrowing shall not be included in the Consolidated
Cash Balance for the purpose of satisfying this condition in Section 5.02(d);
provided, further, that to the extent such cash proceeds are not actually
applied as certified within such five (5) Business Day period, the
Administrative Agent may deduct the amount of such Borrowing in violation of the
condition in Section 5.02(d) from one or more Cash Collateral Accounts of the
Credit Parties.

(e) The Interim DIP Order and the Final Order, as applicable, shall be in full
force and not subject to a stay.

(f) The Borrower shall not be in default of the Sale Milestone.

(g) The Lenders shall have received all fees and other amounts due and payable
on or prior to the date of such Borrowing, and, to the extent invoiced at least
four (4) Business Days prior to the date of such Borrowing, reimbursement or
payment of all out-of-pocket reasonable and documented expenses required to be
reimbursed or paid by the Borrower hereunder, including all fees, expenses and
disbursements of counsel for each Lender to the extent invoiced at least four
(4) Business Days prior to the date of such Borrowing.

(h) With respect to any Borrowing on or after entry of the Final DIP Order in
accordance with the terms of this Agreement, the Lenders shall have received a
supplement to the Budget consisting of financial projections of the Borrower and
its Consolidated Subsidiaries for the 2019 fiscal year consisting of monthly
projections for the thirteenth through eighteenth months after the Effective
Date.

Each Borrowing and each issuance, amendment, renewal or extension of a 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 paragraphs (b), (c),
(d), (e), (f), (g) and, if applicable, (h) of this Section.

 

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Article VI

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each Credit Party covenants and agrees
with the Lenders that:

Section 6.01. Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent and each Lender:

(a) within ninety (90) days after the end of each fiscal year of the Borrower,
the audited consolidated (and unaudited consolidating) balance sheet and related
consolidated (and with respect to statements of operations, consolidating)
statements of operations, stockholders’ equity and cash flows of the Borrower
and its Consolidated Subsidiaries 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 a firm of independent public accountants reasonably
acceptable to Administrative Agent (without any qualification or exception as to
the scope of such audit) to the effect that such consolidated and consolidating
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 and consolidating basis in accordance with GAAP
consistently applied;

(b) within forty-five (45) days after the end of each fiscal quarter of the
Borrower, the consolidated (and unaudited consolidating) balance sheet and
related consolidated (and with respect to statements of operations,
consolidating) statements of operations and cash flows of the Borrower and its
Consolidated Subsidiaries as of the end of and for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by a Responsible Officer as presenting fairly in all material respects
the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated and consolidating basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate in a form reasonably acceptable to Administrative Agent
signed by a Responsible Officer of the Borrower (A) 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
(B) setting forth reasonably detailed calculations demonstrating compliance with
Sections 7.03(a)(vii), (viii) and (xvi) and Sections 7.04(m), (n) and (o) as of
the end of each fiscal quarter ending on or before the first anniversary of the
Effective Date and on such first anniversary date and a brief description of the
event or events occurring from and including the Effective Date included in such
calculation and (C) a report, in reasonable detail, setting forth the Swap
Agreements then in effect, the notional volumes of and prices for, on a monthly
basis and in the aggregate, the Crude Oil and Natural Gas for each such Swap
Agreement and the term of each such Swap Agreement and as soon as available but
in any event within five (5) Business

 

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Days after the end of each fiscal month, a certificate in a form reasonably
acceptable to Administrative Agent signed by a Responsible Officer of the
Borrower 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;

(d) 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 Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by the Borrower to its
shareholders generally, as the case may be;

(e) as soon as available, and in any event no later than December 31, 2018 and
each March 1 and September 1 thereafter, the Reserve Reports required on such
dates pursuant to Section 3.02, together with a certificate in a form reasonably
acceptable to Administrative Agent signed by a Responsible Officer of the
Borrower 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;

(f) [Reserved];

(g) [Reserved];

(h) prompt written notice (and in any event within thirty (30) days prior
thereto) of any change (i) in any Credit Parties’ corporate, partnership or
limited liability company name, (ii) in the location of any Credit Parties’
chief executive office or principal place of business, (iii) in any Credit
Parties’ corporate structure, (iv) in any Credit Parties’ jurisdiction of
organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in any Credit Parties’ federal taxpayer
identification number.

(i) promptly, but in any event within five (5) Business Days after the execution
thereof, copies of any amendment, modification or supplement to the certificate
or articles of incorporation, by-laws, any preferred stock designation or any
other Organizational Document of any Credit Party;

(j) to the extent practicable at least one (1) day prior to, such filing, copies
of all material pleadings, motions, applications, judicial information,
financial information and other documents to be filed by or on behalf of the
Borrower or any of the Guarantors with the Bankruptcy Court in the Bankruptcy
Cases or delivered to any official committee appointed in the Bankruptcy Cases
(other than (x) emergency pleadings, motions or other filings, where despite
such Debtor’s commercially reasonable efforts, such one-day notice is
impracticable and (y) fee statements, fee applications, and other documents
related to payment of professional expenses in connection with the Bankruptcy
Cases); provided that copies of pleadings, motions, applications, judicial
information, financial information or other documents to be so filed by or on
behalf of the Borrower or any of the Guarantors to the extent directly relating
to this Agreement or any other Loan Documents, including, without limitation,
any amendment, modification or supplement to this Agreement (or a waiver of the
provisions thereof) or any other matter adversely affecting the liens, claims or
rights of the Lenders under this Agreement or any other Loan Document in any
material respect shall be delivered to the Administrative Agent or its counsel
(who shall then provide copies to the Lenders) at least one (1) day prior to
such filing; and

 

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(k) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of any Credit Party, or
compliance with the terms of this Agreement, as the Administrative Agent or any
Lender may reasonably request.

Section 6.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting any Credit Party
or any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and the Restricted Subsidiaries in an aggregate amount
exceeding $5,000,000;

(d) any written notice or written claim to the effect that any Credit Party is
or may be liable to any Person as a result of the release by any Credit Party,
or any other Person of any Hazardous Materials into the environment, which could
reasonably be expected to have a Material Adverse Effect;

(e) any written notice alleging any violation of any Environmental Law by any
Credit Party, which could reasonably be expected to have a Material Adverse
Effect;

(f) the occurrence of any material breach or default under, or repudiation or
termination of, any Material Sales Contract that results in, or could reasonably
be expected to result in, a Material Adverse Effect;

(g) the receipt by the Borrower or any Restricted Subsidiary of any management
letter or comparable analysis prepared by the auditors for the Borrower or any
such Restricted Subsidiary;

(h) [Reserved]; and

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

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

 

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Section 6.03. Existence; Conduct of Business. The Borrower will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.03.

Section 6.04. Payment of Obligations. Subject to the Budget covenant set forth
in Section 6.26, including the Permitted Variances, and any necessary Bankruptcy
Court approvals, the Borrower will, and will cause each Restricted Subsidiary
to, pay its obligations, including Tax liabilities, that, if not paid, could
result in a Material Adverse Effect before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Restricted
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.

Section 6.05. Insurance. The Borrower will, and will cause each Restricted
Subsidiary and use commercially reasonable efforts to cause each operator of
Borrowing Base Properties 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. On or prior to the Effective Date
and thereafter, upon request of the Administrative Agent, the Borrower will
furnish or cause to be furnished to the Administrative Agent from time to time a
summary of the respective insurance coverage of the Borrower and its Restricted
Subsidiaries in form and substance reasonably satisfactory to the Administrative
Agent, and, if requested, will furnish the Administrative Agent copies of the
applicable policies. Upon demand by Administrative Agent, the Borrower will
cause any insurance policies covering any such property to be endorsed (a) to
provide that such policies may not be cancelled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Administrative
Agent, (b) to include the Administrative Agent as loss payee with respect to all
property/casualty policies and additional insured with respect to all liability
policies and (c) to provide for such other matters as the Lenders may reasonably
require.

Section 6.06. Operation and Maintenance of Properties. Subject to the Budget
covenant set forth in Section 7.15 and as contemplated by the Budget, including
the Permitted Variances, and any necessary Bankruptcy Court approvals, the
Borrower will, and will cause each of its Restricted Subsidiaries to:

(a) operate its Oil and Gas Interests and other material Properties or cause
such Oil and Gas Interests and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all Governmental Requirements, including, without limitation, applicable
pro ration requirements and Environmental Laws, and all applicable laws, rules
and regulations of every other Governmental Authority from time to time
constituted to regulate the development and operation of its Oil and Gas
Interests and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect;

 

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(b) keep and maintain in good working order and condition (ordinary wear and
tear excepted), and effectuate related capital expenditures contemplated by the
Budget with respect to, all Property material to the conduct of its business;
preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear and obsolescence excepted) all of its material Oil and
Gas Interests and other material Properties, including, without limitation, all
equipment, machinery and facilities;

(c) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Interests and will do all other things necessary
to keep materially unimpaired its rights with respect thereto and prevent any
forfeiture thereof or default thereunder, except, in each case, where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect;

(d) promptly perform, or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Interests and other
material Properties, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect; and

(e) operate its Oil and Gas Interests and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas Interests and
other material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental Requirements;
and to the extent that a Credit Party is not the operator of any Property, the
Borrower shall use commercially reasonable efforts to cause the operator to
comply with this Section 6.06.

Section 6.07. Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and,
provided an officer of the Borrower has the reasonable opportunity to
participate, its independent accountants, all at such reasonable times and as
often as reasonably requested.

Section 6.08. Compliance with Laws. The Borrower will maintain in effect and
enforce policies and procedures designed to ensure compliance by the Borrower,
its Subsidiaries and their respective directors, officers, employees and agents
with Anti-Corruption Laws, anti-money laundering laws, and applicable Sanctions.

 

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Section 6.09. Use of Proceeds and Letters of Credit.

(a) The proceeds of the Revolver B Loans will be used only to refinance the
loans and other obligations outstanding under the Existing RBL Facility
Documents. The proceeds of the Revolver A Loans will be used only (a) to
refinance in part the loans and other obligations under the Existing RBL
Facility to the extent not refinanced by application of the proceeds of the
Revolver B Facility, (b) for post-petition operating expenses in accordance with
the Budget pursuant to Section 7.15, (c) to pay certain transaction costs, fees
and expenses, and (d) for certain other costs and expenses of administration of
the Bankruptcy Cases, including funding the Carve-Out (such permitted uses set
forth in the foregoing sentences, collectively, the “Approved Purposes”). No
part of the proceeds of any Loan and no Letter of Credit will be used, whether
directly or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations T, U and X. Letters of Credit
will be issued only to support general corporate purposes of the Borrower and
the Restricted Subsidiaries.

(b) Proceeds of the Loans shall not be used (i) to permit the Borrower, any
Guarantor or any of their representatives to challenge or otherwise contest or
institute any proceeding to determine (x) the validity, perfection or priority
of security interests in favor of any of the Lenders or the Secured Parties, or
(y) the enforceability of the obligations of the Borrower or any Guarantor under
this Agreement or (ii) to investigate, commence, prosecute or defend any claim,
motion, proceeding or cause of action against any of the Lenders or the Secured
Parties, each in such capacity, and their respective agents, attorneys, advisors
or representatives, including, without limitation, any lender liability claims
or subordination claims.

Section 6.10. Reserve Reports.

(a) On or before December 1, 2018, and each March 1 and September 1 thereafter,
the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Interests of the Borrower and the other Credit
Parties as of September 30, 2018 (for the Reserve Report delivered on
December 1, 2018), and for each subsequent Reserve Report, the immediately
preceding December 31 and June 30. The Reserve Report as of December 31 of each
year shall be prepared by one or more Approved Petroleum Engineers. The Reserve
Report as of June 30 of each year shall be prepared either by Approved Petroleum
Engineers or by Borrower’s internal reserve engineering staff, which 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 the
Borrower’s internal reserve engineering staff, which 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 with an
“as of” date of no more than sixty (60) days prior to such Redetermination Date
and delivered to the Administrative Agent not later than thirty (30) days prior
to such Redetermination Date; provided, that, in lieu thereof, in connection
with such Interim Redetermination, if agreed by the Borrower and the
Administrative Agent, the most recently delivered Reserve Report may be used for
such Interim Redetermination. For any Interim Redetermination requested by the
Administrative Agent or the Borrower pursuant to Section 3.02, the Borrower
shall provide such Reserve Report with an “as of” date as required by the
Administrative Agent as soon as possible, but in no event later than 30 days
following the receipt of such request.

 

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Section 6.11. Title Data.

(a) Within 30 days (or such longer time period as acceptable to the
Administrative Agent in its sole discretion) after the delivery to the
Administrative Agent and the Lenders of each Reserve Report required by
Section 6.10, the Borrower will deliver title information in form and substance
acceptable to the Administrative Agent covering enough of the Oil and Gas
Interests 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, satisfactory title information on at least eighty-five
(85%) of the total Engineered Value of the Borrowing Base Properties (the
“Minimum Mortgaged Value”) of the Oil and Gas Interests evaluated by such
Reserve Report.

(b) If title information for additional Properties has been provided under
Section 6.11(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 that are not permitted by Section 7.02, either (i) cure
any such title defects or exceptions (including defects or exceptions as to
priority), (ii) substitute acceptable Mortgaged Properties with no title defects
or exceptions (other than Liens which are permitted by Section 7.02) 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, satisfactory title information on at least the
Minimum Mortgaged Value.

(c) If any title defect or exception identified by the Administrative Agent
pursuant to a notice to the Borrower as described in Section 6.11(b) cannot be
cured or the Borrower does not substitute acceptable Mortgaged Properties or the
Borrower does not comply with the requirement to provide acceptable title
information covering at least the Minimum Mortgaged Value, in each case within
the 60-day period described in Section 6.11(b), such default shall not be a
Default, but instead the Administrative Agent and/or the Required Lenders shall
have the right to exercise the remedy described in the immediately succeeding
sentence in their sole discretion from time to time, and any failure to so
exercise such remedy at any time shall not be a waiver as to any future exercise
of such remedy by the Administrative Agent or the Lenders. To the extent that
the Administrative Agent or the Required Lenders are not satisfied with title to
any Mortgaged Property after the 60-day period described in Section 6.11(b) has
elapsed, such Mortgaged Property shall not count towards the percentage of the
Minimum Mortgaged Value for satisfactory title information and shall be deemed
not to have been included in the most recently delivered Reserve Report, and the
Administrative Agent may send a notice to the Borrower and the Lenders that the
then outstanding Borrowing Base shall be reduced by an amount as determined by
the Required Lenders to cause the Borrower to be in compliance with the
requirement to provide satisfactory title information on the Minimum Mortgaged
Value. This new Borrowing Base shall become effective immediately after receipt
of such notice.

Section 6.12. Swap Agreements. After the Effective Date, the Borrower and any
one or more of its Restricted Subsidiaries may enter into Swap Agreements with
one or more Lender Counterparties, subject to the maximum hedging limitations
set forth in Section 7.05.

 

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Section 6.13. Restricted Subsidiaries. In the event any Person is or becomes a
Restricted Subsidiary, Borrower will (a) promptly take all action necessary to
comply with Section 6.14, (b) promptly take all such action and execute and
deliver, or cause to be executed and delivered, to the Administrative Agent all
such documents, opinions, instruments, agreements, and certificates similar to
those described in Section 5.01(b) and Section 5.01(c) that the Administrative
Agent may request, and (c) promptly cause such Restricted Subsidiary to
(i) become a party to this Agreement and Guarantee the Obligations by executing
and delivering to the Administrative Agent a Counterpart Agreement in the form
of Exhibit B, and (ii) to the extent reasonably requested by the Administrative
Agent, execute and deliver Mortgages and other Security Instruments creating
Liens prior and superior in right to any other Person, subject to Permitted
Encumbrances, in such Restricted Subsidiary’s Oil and Gas Interests and other
assets. Upon delivery of any such Counterpart Agreement to the Administrative
Agent, notice of which is hereby waived by each Credit Party, such Restricted
Subsidiary shall be a Guarantor and shall be as fully a party hereto as if such
Restricted Subsidiary were an original signatory hereto. Each Credit Party
expressly agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Credit Party hereunder. This
Agreement shall be fully effective as to any Credit Party that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Credit Party hereunder. With respect to each such Restricted
Subsidiary, the Borrower shall promptly send to the Administrative Agent written
notice setting forth with respect to such Person the date on which such Person
became a Restricted Subsidiary of the Borrower, and supplement the data required
to be set forth in the Schedules to this Agreement as a result of the
acquisition or creation of such Restricted Subsidiary; provided that such
supplemental data must be reasonably acceptable to the Administrative Agent and
Majority Lenders.

Section 6.14. Pledged Equity Interests. On the date hereof and at the time
hereafter that any Subsidiary of the Borrower is created or acquired, any
Unrestricted Subsidiary becomes a Restricted Subsidiary or any Affiliate that is
not a Credit Party serves as an operator of any Borrowing Base Properties, the
Borrower and the Subsidiaries (as applicable) shall execute and deliver to the
Administrative Agent for the benefit of the Secured Parties, a Pledge Agreement
(or an amendment or amendment and restatement of the existing Pledge Agreement),
in form and substance acceptable to the Administrative Agent, from the Borrower
and/or the Subsidiaries (as applicable) covering all Equity Interests owned by
the Borrower or such Restricted Subsidiaries in any Subsidiaries and in any
Affiliate that is an operator of any Borrowing Base Properties, together with
all certificates (or other evidence acceptable to Administrative Agent)
evidencing the issued and outstanding Equity Interests of each such Subsidiary
of every class owned by such Credit Party (as applicable) which, if
certificated, shall be duly endorsed or accompanied by stock powers executed in
blank (as applicable), as Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect a security interest in the issued and
outstanding Equity Interests owned by Borrower or any Restricted Subsidiary in
each Subsidiary prior and superior in right to any other Person.

Section 6.15. Production Proceeds and Bank Accounts. Each Credit Party and each
Subsidiary shall maintain with the Administrative Agent or any Lender as its
depository bank(s) all depository accounts, including for the maintenance of
operating, administrative, cash management, collection activity and other
deposit accounts for the conduct of its business (other than Permitted
Non-JPMorgan Accounts). Except for Permitted Non-JPMorgan Accounts, the

 

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BG Escrow Account and the BG Operating Account, each Credit Party shall cause
all production proceeds and revenues attributable to the Oil and Gas Interests
of such Credit Party and all distributions and dividends on any Equity Interests
owned by any Credit Party to be paid and deposited into deposit accounts of such
Credit Party maintained with the Administrative Agent or any Lender.

Section 6.16. Unrestricted Subsidiaries. The Borrower will cause the management,
business and affairs of each of the Borrower and its Restricted Subsidiaries to
be conducted in such a manner (including, without limitation, by keeping
separate books of account, furnishing separate financial statements of
Unrestricted Subsidiaries to creditors and potential creditors thereof and by
not permitting Properties of the Borrower and its respective Restricted
Subsidiaries to be commingled with those of Unrestricted Subsidiaries) so that
each Unrestricted Subsidiary that is a corporation, limited liability company or
partnership will be treated as an entity separate and distinct from the Borrower
and its Restricted Subsidiaries.

Section 6.17. [Reserved].

Section 6.18. Further Assurances.

(a) Each Credit Party at its sole expense will, and will cause each of its
Restricted 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 other
Credit Party, 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 Obligations, 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
necessary or appropriate, in the reasonable discretion of the Administrative
Agent, in connection therewith.

(b) Each Credit Party hereby authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Credit Party or
any other Credit Party where permitted by law. A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. Each Credit Party acknowledges and agrees that any such
financing statement may describe the collateral as “all assets” of the
applicable Credit Party or words of similar effect as may be required by the
Administrative Agent.

Section 6.19. Sale Milestone; Plan of Reorganization. The Credit Parties shall
seek a Bankruptcy Court hearing no later than July 1, 2018 to consider the sale
of all or substantially all of the Debtors’ Properties (the “Sale Milestone”);
provided, that notwithstanding anything to the contrary herein, Fairfax may
waive the Sale Milestone in its reasonable discretion. The Credit Parties and
the Lenders shall negotiate in good faith the terms of a Plan of Reorganization
equitizing the 1.75 Lien Debt and any other Indebtedness as an alternative to,
or “toggle” from the sale process depending on the value of bids received in
seeking satisfaction of the Sale Milestone.

 

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Section 6.20. Maintenance of Insurance. The Borrower will, and will cause each
Subsidiary to, maintain, or cause to be maintained, with financially sound and
reputable insurance companies, insurance with respect to the properties and
business of the Borrower and each of its Subsidiaries against such liabilities,
casualties, risks and contingencies and in at least such amounts as is customary
in the industry (including reasonable and customary self-insurance to the extent
reasonable and prudent operators of oil and gas properties similar to the
Borrower self-insure for such risks) and providing for not less than 30 days’
prior notice to the Administrative Agent of termination, lapse or cancellation
of such insurance; and furnish to the Administrative Agent, at the request of
any Lender, certificates evidencing such insurance.

Section 6.21. Environmental Matters.

(a) The Borrower will, and will cause each Subsidiary to, establish and
implement such procedures as may be reasonably necessary to continuously
determine and assure that any failure of the following could not reasonably be
expected to have a Material Adverse Effect: (a) all Property of the Borrower and
the Subsidiaries and the operations conducted thereon and other activities of
the Borrower and the Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (b) no oil, oil and gas production or
exploration wastes, Hazardous Materials or solid wastes are disposed of or
otherwise released on or to any Property owned by any such party except in
compliance with Environmental Laws, (c) no Hazardous Material will be released
on or to any such Property in a quantity equal to or exceeding that quantity
which requires reporting pursuant to Section 103 of the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980, as amended,
and (d) no oil, oil and gas exploration and production wastes or Hazardous
Materials or solid wastes are released on or to any such Property so as to pose
an imminent and substantial endangerment to public health or welfare or the
environment.

(b) The Borrower will promptly notify the Administrative Agent and the Lenders
in writing of any written threatened action, investigation or inquiry (including
written notices thereof) by any Governmental Authority against the Borrower or
any of the 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, not fully covered by insurance, subject to normal
deductibles (whether individually or in the aggregate) in excess of $10,000,000.

Section 6.22. ERISA Compliance. As soon as available, and in any event, within
10 days after the Borrower obtains knowledge of any of the following, the
Borrower will furnish and will cause each ERISA Affiliate to promptly furnish to
the Administrative Agent with sufficient copies to the Lenders (a) a written
notice signed by a Responsible Officer describing the occurrence of any ERISA
Event or of any material “prohibited transaction,” as described in section 406
of ERISA or in section 4975 of the Code, in connection with any Benefit Plan or
any trust created thereunder, and specifying what action the Borrower or the
ERISA Affiliate is taking or proposes to take with respect thereto, and, when
known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, (b)

 

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copies of any notice of the PBGC’s intention to terminate or to have a trustee
appointed to administer any Benefit Plan and (c) a written notice of the
Borrower’s or an ERISA Affiliate’s participation in a Multiemployer Plan. With
respect to each Benefit Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each ERISA Affiliate to, (i) satisfy in full and in a
timely manner, without incurring any material late payment or underpayment
charge or penalty and without giving rise to any Lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any
material late payment or underpayment charge or penalty, all material premiums
required pursuant to sections 4006 and 4007 of ERISA.

Section 6.23. Performance of Obligations. Subject to the Budget covenant set
forth in Section 6.26, including the Permitted Variances, and any necessary
Bankruptcy Court approvals, the Borrower will, and will cause each Subsidiary to
(i) pay and perform all Obligations in accordance with the terms of the Loan
Documents and (ii) pay and perform all other obligations where the failure to
pay or perform such obligations would be reasonably expected to result in a
Material Adverse Effect.

Section 6.24. [Reserved].

Section 6.25. Marketing Activities. Subject to any necessary order or
authorization of the Bankruptcy Court, the Borrower shall (at its own expense),
and shall cause each Subsidiary to, only engage in the following marketing
activities for any Hydrocarbons or enter into any contracts related thereto:
(a) contracts for the sale of Oil and Gas Interests scheduled or reasonably
estimated to be produced from their Oil and Gas Interests constituting proved
reserves during the period of such contract and (b) contracts for the sale of
Hydrocarbons scheduled or reasonably estimated to be produced from Oil and Gas
Interests constituting proved reserves of third parties during the period of
such contract associated with the Oil and Gas Interests of the Borrower and its
Restricted Subsidiaries that the Borrower or one of its Restricted Subsidiaries
has the right or obligation to market pursuant to joint operating agreements,
unitization agreements or other similar contracts (or contracts executed in
connection therewith) that are usual and customary in the Oil and Gas Business.

Section 6.26. Budget Compliance and Permitted Variances.

(a) On each four-week anniversary of the Effective Date (each, a “Reporting
Date”), the Borrower shall provide to the Administrative Agent an updated
thirteen (13)-week cash flow forecast, containing line items of sufficient
detail to reflect the Borrower’s and its subsidiaries’ projected receipts and
disbursements for such 13-week period (the “13-Week Forecast”). Such 13-Week
Forecast shall include monthly informational reporting regarding the ratio of
the net present value, discounted at ten percent (10%) per annum, of the future
net revenues expected to accrue to the Borrower’s and its Subsidiaries’
collective interests in the Borrowing Base Properties classified as “proved
developed producing reserves” to the Commitments at such time (it being
understood that the commodity price forecasts used in such calculations shall be
the benchmark oil and gas prices utilized at such time by JPMorgan Chase Bank,
N.A. in borrowing base determinations for conforming reserve-based revolving
credit facilities and using first day

 

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of the calendar month in which the 13-Week Forecast is delivered as the
effective date of the projection of reserve cash flows). Each 13-Week Forecast
shall be consistent in all material respects with the applicable period covered
by the Budget, including the Initial Forecast. The parties acknowledge that
certain differences will exist between an accrual-based forecast, such as the
Budget, and a receipts and disbursements-based forecast, such as the 13-Week
Forecast, including, but not limited to, differences in operational timing, and
agree that such differences shall be deemed consistent for purposes of the
preceding sentence.

(b) On (i) the first Thursday (or, if such Thursday is not a Business Day, the
immediately succeeding Business Day) following each Reporting Date (each such
Thursday, a “Testing Date”) and (ii) the third Thursday (or, if such Thursday is
not a Business Day, the immediately succeeding Business Day) following each
Reporting Date (each such Thursday, an “Alternate Testing Date” and, together
with each Testing Date, a “Variance Testing Date”), the Borrower shall provide
to the Administrative Agent a variance report tested as of the most recent
Variance Testing Date for the immediately preceding four-week period then ended
(each such period, a “Testing Period” and each such report, a “Variance
Report”), in form and substance reasonably satisfactory to the Administrative
Agent and the Majority Lenders, detailing the following: (i) the aggregate
disbursements of the Borrower and its Subsidiaries and aggregate receipts during
the applicable Testing Period; and (ii) any variance (whether positive or
negative, expressed as a percentage) between the aggregate disbursements made
during such Testing Period by the Borrower and its Subsidiaries against the
aggregate disbursements for the Testing Period, as set forth in the applicable
13-Week Forecast.

(c) On each Thursday, commencing with the first Thursday to occur after the
Effective Date, the Borrower shall provide to the Administrative Agent and the
Lenders a report showing actual receipts and disbursements through the prior
week in the format of the 13-Week Forecast, and an explanation of any variance
to the applicable 13-Week Forecast.

Section 6.27. Midstream Contracts. The Credit Parties shall use commercially
reasonable efforts to cause the Bankruptcy Court to enter a Final Order
approving the rejection of the Midstream Contracts pursuant to section 365 of
the Bankruptcy Code no later than sixty (60) days after the Petition Date.

Article VII

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, each Credit Party covenants and agrees with the Lenders
that:

Section 7.01. Indebtedness. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, except:

(a) the Obligations;

(b) Indebtedness existing on the date hereof and set forth in Schedule 7.01;

 

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(c) Indebtedness of the Borrower to any Guarantor and of any Guarantor to the
Borrower or any other Guarantor; provided, that (i) all such Indebtedness shall
be unsecured and subordinated in right of payment to the payment in full of all
of the Obligations as provided in Section 8.06 and (ii) all such Indebtedness is
evidenced by promissory notes in form and substance reasonably satisfactory to
the Administrative Agent, and such promissory notes are subject to a security
interest in favor of the Administrative Agent for the benefit of the Secured
Parties on terms and conditions reasonably satisfactory to the Administrative
Agent prior and superior in right to any other Person;

(d) Guarantees of the Obligations;

(e) Indebtedness of the Borrower and the Restricted Subsidiaries as contemplated
by the Budget to finance the acquisition, construction or improvement of any
fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof ; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (e) shall not exceed
$10,000,000 at any time outstanding;

(f) subject to compliance with the Budget covenant set forth in Section 7.14
including the Permitted Variances, Indebtedness incurred or deposits made by the
Borrower and any Restricted Subsidiary (i) under worker’s compensation laws,
unemployment insurance laws or similar legislation, or (ii) in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Credit Party is a party, (iii) to secure public or statutory
obligations of such Credit Party, and (iv) of cash or U.S. Government Securities
made to secure the performance of statutory obligations, surety, stay, customs
and appeal bonds to which such Credit Party is a party in connection with the
operation of the Oil and Gas Interests, in each case in the ordinary course of
business;

(g) Indebtedness of any Borrower or any Restricted Subsidiary under Swap
Agreements to the extent permitted under Section 7.05;

(h) Indebtedness of the Credit Parties under the (i) Existing Senior Notes, (ii)
1.75 Lien Debt and (iii) Second Lien Debt, in each case in an aggregate
outstanding principal amount as of the Petition Date;

(i) Guarantees by the Borrower of the obligations of EOC to pay the BG
Development Costs under Section 2.3 of the BG Joint Development Agreement with
respect to Oil and Gas Interests owned by the Credit Parties or any of its
Unrestricted Subsidiaries;

(j) Indebtedness incurred by a Credit Party or any of its Subsidiaries under
customary agreements consisting of indemnification, adjustment of purchase price
or similar obligations entered into in connection with Dispositions permitted
under Section 7.03 and in compliance with the Budget covenant set forth in
Section 7.15, including the Permitted Variances, in all respects;

 

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(k) [Reserved];

(l) Guarantees by the Borrower of the obligations of certain of its Subsidiaries
to pay such Subsidiaries’ share of the Marcellus Development Costs with respect
to the Marcellus JV Oil and Gas Assets in accordance with the terms of the
Marcellus JV Documents;

(m) Guarantees by any Restricted Subsidiary of the Indebtedness permitted under
clause (h) of this Section 7.01;

(n) Other unsecured Indebtedness of the Credit Parties in an aggregate principal
amount not exceeding $25,000,000 at any time outstanding and in compliance with
the Budget covenant set forth in Section 7.15, including the Permitted
Variances, in all respects;

(o) Indebtedness of the Credit Parties pursuant to the 1.5 Lien Notes in an
aggregate outstanding principal amount as of the Petition Date; and

(p) Indebtedness incurred in the ordinary course of business in connection with
letters of credit not exceeding, when combined with all LC Exposure,
$50,000,000; provided that such Indebtedness is permitted under this
Section 7.01(p) only if (i) the Issuing Bank is unwilling or unable for any
reason to issue Letters of Credit under this Agreement and (ii) JPMorgan Chase
Bank, N.A. is not a Lender under the Revolver A Facility.

Section 7.02. Liens. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

(a) any Lien created pursuant to this Agreement or any other Loan Document;

(b) Permitted Encumbrances; provided that the Liens permitted under this clause
(b) shall be subject to the Liens permitted under the foregoing clause (a);

(c) any Lien on any Property of the Borrower or any Restricted Subsidiary
existing as of the Effective Date and set forth in Schedule 7.02; provided that
(i) such Lien shall not apply to any other Property of the Borrower or any other
Restricted Subsidiary and (ii) such Lien shall secure only those obligations
which it secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;

(d) any Lien existing on any Property prior to the acquisition thereof by the
Borrower or any Restricted Subsidiary or existing on any Property of any Person
that becomes a Restricted Subsidiary after the date hereof prior to the time
such Person becomes a Restricted Subsidiary; provided that (i) such Lien secures
Indebtedness permitted by Section 7.01(e), (ii) such Lien and the Indebtedness
secured thereby are incurred prior to or within ninety (90) days after such
acquisition or the completion of such construction or improvement, (iii) such
Lien shall not apply to any other Property of the Borrower or any other
Restricted Subsidiary and (iv) such Lien shall secure only those obligations
which it secures on the date of such acquisition or the date such Person becomes
a Restricted Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

 

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(e) [Reserved];

(f) Liens in favor of BG Production on the BG Escrow Account and BG Operating
Account to secure the obligations of EOC under the BG Joint Development
Agreement;

(g) Liens arising under the DIP Orders;

(h) [Reserved];

(i) [Reserved];

(j) Liens securing Indebtedness permitted under Section 7.01(h) to the extent
such Indebtedness is Second Lien Debt subject to the DIP Orders;

(k) Liens securing Indebtedness permitted under Section 7.01(h) and
Section 7.01(o), as applicable, only to the extent such Indebtedness is 1.5 Lien
Notes or 1.75 Lien Debt; provided that, such Liens are subject to the
Intercreditor Agreement and the DIP Orders; and

(l) Liens on any cash collateral to secure obligations under letters of credit
permitted under Section 7.01(p).

Section 7.03. Fundamental Changes and Dispositions.

(a) Other than in connection with the Bankruptcy Cases and subject to Bankruptcy
Court approval (if applicable), the Borrower will not, nor will it permit any of
its Restricted Subsidiaries to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or Dispose of
(in one transaction or in a series of transactions) all or any substantial part
of its assets, or any of its Borrowing Base Properties or any of the Equity
Interests of any Restricted Subsidiary (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, the Borrower or any
Restricted Subsidiary may sell Hydrocarbons produced from its Oil and Gas
Interests in the ordinary course of business, and if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing:

(i) any Restricted Subsidiary may merge into the Borrower in a transaction in
which the Borrower is the surviving entity;

(ii) any Restricted Subsidiary may merge into any other Restricted Subsidiary in
a transaction in which the surviving entity is a Restricted Subsidiary;

(iii) any Restricted Subsidiary may sell, transfer, lease or otherwise dispose
of its assets to the Borrower or to another Restricted Subsidiary;

(iv) the Borrower may sell, transfer, lease or otherwise dispose of its assets
to any Restricted Subsidiary;

(v) any Restricted Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and such Restricted Subsidiary and is not materially
disadvantageous to the Lenders;

 

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(vi) the Borrower or any Restricted Subsidiary may sell, transfer, lease or
otherwise dispose of equipment and related items in the ordinary course of
business, that are obsolete or no longer necessary in the business of the
Borrower or any of its Restricted Subsidiaries or that is being replaced by
equipment of comparable value and utility;

(vii) subject to Section 2.12(b), the Borrower or any Restricted Subsidiary may
Dispose of Borrowing Base Properties (whether pursuant to a Disposition of all,
but not less than all, of the Equity Interests of any Restricted Subsidiary or
otherwise); provided that, with respect to this clause (vii) only, (I) the
Borrower or such Restricted Subsidiary receives fair market value for such
Borrowing Base Properties, (II) the Borrower or such Restricted Subsidiary
receives at least 75% cash consideration for such Borrowing Base Properties,
(III) if (A) the Engineered Value (as assigned by the Administrative Agent) of
all Borrowing Base Properties Disposed of (calculated without including any
Required Marcellus Assignments) between Scheduled Redeterminations exceeds, in
the aggregate for all Credit Parties taken as a whole, two and a half percent
(2.5%) of the Borrowing Base most recently determined on such Scheduled
Redetermination or (B) the fair market value of all such assets Disposed of
since the Effective Date exceeds $10,000,000, the Borrower shall provide written
notice of such Disposition pursuant to this clause (vii) and (IV) the Borrowing
Base shall be adjusted pursuant to Section 3.06; provided that, the Credit
Parties may not sell, transfer, lease, exchange, abandon or otherwise Dispose of
(in one transaction or a series of related transactions) all or substantially
all of the Borrowing Base Properties (whether pursuant to a Disposition of
Equity Interests of a Restricted Subsidiary or otherwise) without (x) the prior
written consent of all of the Lenders or (y) in connection with the consummation
of any such Disposition, paying the Obligations in full in cash (other than
contingent obligations under the Loan Documents for which no claim has been made
and liquidated that by the express terms of the Loan Documents survive
termination thereof and/or payment in full of the Obligations);

(viii) subject to Section 2.12(b) and Section 3.06, the Borrower or any
Restricted Subsidiary may with the prior written consent of Required Lenders,
Dispose of Borrowing Base Properties (whether pursuant to a Disposition of
Equity Interests of a Restricted Subsidiary or otherwise); provided that, the
Credit Parties may not sell, transfer, lease, exchange, abandon or otherwise
Dispose of (in one transaction or a series of related transactions) all or
substantially all of the Borrowing Base Properties (whether pursuant to a
Disposition of Equity Interests of a Restricted Subsidiary or otherwise) without
the prior written consent of all of the Lenders;

(ix) the Borrower or any Restricted Subsidiary may Dispose of any assets as a
result of a casualty event or from the exercise of eminent domain, condemnation
or nationalization;

(x) [Reserved];

 

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(xi) [Reserved];

(xii) [Reserved];

(xiii) the Borrower or any Restricted Subsidiary may Dispose of Oil and Gas
Interests (including Dispositions of all (but not less than all) of the Equity
Interests of any Subsidiary of the Borrower that owns no Property other than
such Oil and Gas Interests) (i) to which no proved reserves are attributed,
(ii) which is not subject to the Lien created by any Security Instrument and
(iii) which was not evaluated in the most recently delivered Reserve Report(s);
provided, that the consideration received is not less than fair market value of
such Equity Interests or Oil and Gas Interests, as applicable and not less than
90% of the consideration received in respect of such Equity Interests or acreage
shall be cash or cash equivalents;

(xiv) EXCO PA, EXCO WV or any other Credit Party may sell, transfer or assign to
(A) the Marcellus Holding Companies an undivided 49.75% interest and (B) the
Marcellus JV Operator an undivided 0.5% interest, in the case of each of clauses
(A) and (B) above, in Oil and Gas Interests acquired thereafter by EXCO PA, EXCO
WV or any other Credit Party in the Appalachian Area to the extent required
pursuant to and in accordance with the terms and conditions of the Marcellus JV
Documents (such assignments, the “Required Marcellus Assignments”);

(xv) [Reserved]; and

(xvi) The Borrower or any Restricted Subsidiary may pursue and consummate any
other merger, consolidation, liquidation, dissolution, sale, transfer, lease or
other Disposition approved by an order of the Bankruptcy Court in form and
substance acceptable to the Majority Lenders so long as the consent of all
Lenders would not otherwise be required to permit such transaction hereunder
provided that, the Credit Parties may not sell, transfer, lease, exchange,
abandon, or otherwise Dispose of (in one transaction or a series of related
transactions) all or substantially all of the Borrowing Base Properties (whether
pursuant to a Disposition of Equity Interests of a Restricted Subsidiary or
otherwise) without (x) the prior written consent of all of the Lenders or (y) in
connection with the consummation of any such Disposition, paying the Obligations
in full in cash (other than contingent obligations under the Loan Documents for
which no claim has been made and liquidated and that by the express terms of the
Loan Documents survive termination thereof and/or payment in full of the
Obligations).

(b) For purposes of determining compliance with clause (vii) of Section 7.03(a)
with respect to any exchange of Oil and Gas Interests, the value of such
exchange shall be the net reduction, if any, in Engineered Value (as assigned by
the Administrative Agent) realized or resulting from such exchange.

(c) The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, engage to any material extent in any business other than businesses of the
type conducted by the Borrower and its Restricted Subsidiaries on the date of
execution of this Agreement and after giving effect to the Transactions and
businesses reasonably related thereto.

 

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Section 7.04. Investments, Loans, Advances, Guarantees and Acquisitions. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Restricted Subsidiary prior to such merger) any capital
stock, evidences of Indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, Guarantee any Indebtedness of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions) any assets
of any other Person constituting a business unit, except:

(a) Permitted Investments;

(b) investments by the Borrower in the Equity Interests of any Restricted
Subsidiary;

(c) investments by the Borrower or Guarantor consisting of intercompany
Indebtedness permitted under Section 7.01(c);

(d) Guarantees constituting Indebtedness permitted by Section 7.01;

(e) investments by the Borrower and its Restricted Subsidiaries that are
(1) customary in the oil and gas business, (2) made in the ordinary course of
the Borrower’s or such Restricted Subsidiary’s business, and (3) made in the
form of, or pursuant to, oil, gas and mineral leases, operating agreements,
farm-in agreements, farm-out agreements, development agreements, unitization
agreements, joint bidding agreements, services contracts and other similar
agreements that a reasonable and prudent oil and gas industry owner or operator
would find acceptable, in each case, in accordance with the Budget covenant set
forth in Section 7.15 including the Permitted Variances;

(f) investments consisting of Swap Agreements to the extent permitted under
Section 7.05;

(g) investments permitted under Section 7.03 and subject to the terms thereof;

(h) investments by EOC consisting of cash contributions to the BG Escrow Account
in accordance with the terms and conditions of the BG Joint Development
Agreement;

(i) [Reserved];

(j) [Reserved];

(k) [Reserved];

(l) [Reserved];

(m) cash equity investments by the Borrower and the Restricted Subsidiaries in
the Marcellus JV Operator or any of its Subsidiaries; provided that, (i) at the
time of and immediately after giving effect to any such investment, no Default
exists or would be caused thereby and (ii) the amount of such investments do not
exceed in the aggregate, $10,000,000 in any fiscal year;

 

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(n) cash equity investments by the Borrower and the Restricted Subsidiaries in
the Marcellus Midstream Owner or any of its Subsidiaries; provided that, (i) at
the time of and immediately after giving effect to any such investment, no
Default exists or would be caused thereby and (ii) the amount of such
investments do not exceed in the aggregate, $50,000,000 in any fiscal year;

(o) other investments by the Borrower and the Restricted Subsidiaries; provided
that, on the date any such other investment is made, the amount of such
investment, together with all other investments made pursuant to this clause
(o) of Section 7.04 (in each case determined based on the cost of such
investment) since the Effective Date, does not exceed in the aggregate,
$10,000,000; and

(p) any other investments approved by an order of the Bankruptcy Court in form
and substance acceptable to the Majority Lenders so long as the consent of all
Lenders would not otherwise be required to permit such transaction hereunder.

Section 7.05. Swap Agreements. The Borrower will not, nor will it permit any of
its Restricted Subsidiaries to, enter into or maintain any Swap Agreement and
Swap Agreements entered into in the ordinary course of business with Lender
Counterparties and not for speculative purposes to:

(a) hedge or mitigate Crude Oil and Natural Gas price risks to which the
Borrower or any Restricted Subsidiary has actual exposure; provided that at the
time the Borrower or any Restricted Subsidiary enters into any such Swap
Agreement, such Swap Agreement (i) does not have a term greater than sixty
(60) months from the date such Swap Agreement is entered into, (ii) when
aggregated with all other Swap Agreements then in effect would not cause the
aggregate notional volume per month for each of Crude Oil and Natural Gas,
calculated separately, under all Swap Agreements then in effect (other than
Excluded Hedges) to exceed, as of the date such Swap Agreement is executed,
ninety percent (90%) of the reasonably anticipated projected production from the
Credit Parties’ Proved Oil and Gas Properties constituting PDP Reserves as set
forth on the most recent Reserve Report delivered pursuant to this Agreement for
any month during the forthcoming five year period,

(b) effectively cap, collar or exchange interest rates (from fixed to floating
rates, from one floating rate to another floating rate or otherwise) with
respect to any interest-bearing liability or investment of any Credit Party, and

(c) in no event shall any Swap Agreement contain any requirement, agreement or
covenant for any Credit Party to post collateral, credit support (including in
the form of letters of credit) or margin to secure their obligations under such
Swap Agreement or to cover market exposures (other than Collateral and other
credit support pursuant to the Loan Documents).

 

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If, after the end of any fiscal month, commencing with the first full calendar
month ending after the Effective Date, the Borrower determines that the
aggregate weighted average of the notional volumes of all Swap Agreements in
respect of commodities for such month (other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) exceeded 100% of
actual production of Hydrocarbons in such month, then the Borrower (i) shall
promptly notify the Administrative Agent of such determination and (ii) shall,
within 30 days after such determination, terminate (only to the extent such
terminations are permitted pursuant to this Agreement), create off-setting
positions, or otherwise unwind or monetize (only to the extent such unwinds or
monetizations are permitted pursuant to this Agreement) existing Swap Agreements
such that, at such time, future hedging volumes will not exceed 100% of
reasonably anticipated projected production for the then-current and any
succeeding calendar month.

For purposes of entering into or maintaining Swap Agreement trades or
transactions under this Section 7.05, forecasts of reasonably anticipated
production from the Credit Parties’ Proved Oil and Gas Properties as set forth
on the most recent Reserve Report delivered pursuant to the terms of this
Agreement shall be deemed to be updated to account for any increase or decrease
therein anticipated because of information obtained by the Credit Parties and
delivered to the Administrative Agent at the option of the Borrower subsequent
to the publication of such Reserve Report including, without limitation, (i) the
Credit Parties’ internal forecasts of production decline rates for existing
wells, (ii) additions to or deletions from anticipated future production from
new wells, (iii) completed dispositions, and (iv) completed acquisitions coming
on stream or failing to come on stream; provided that (A) any such supplemental
information shall be reasonably satisfactory to the Administrative Agent and
(B) if any such supplemental information is delivered, such information shall be
presented on a net basis (i.e., it shall take into account both increases and
decreases in anticipated production subsequent to publication of the most recent
Reserve Report).

Except as otherwise required pursuant to the immediately preceding paragraph, in
the event any Credit Party enters into a Swap Agreement, the terms and
conditions of such Swap Agreement may not be amended or modified, nor may any
Credit Party sell, assign, monetize, transfer, cancel or otherwise dispose of
any of its rights and interests in any such Swap Agreement without the prior
written consent of the Majority Lenders (it being understood that any Lender
Counterparty may sell, assign, transfer, novate, or otherwise dispose of its
rights and interests in any Swap Agreement to any other Lender Counterparty at
any time); provided that, notwithstanding the foregoing, any Credit Party may
enter into a Swap Modification so long as (i) within three (3) Business Days
thereafter, the Borrower provides written notice to the Administrative Agent of
the terms of such Swap Modification, setting forth in reasonable detail, (x) the
effect of such Swap Modification on the aggregate notional volume of Crude Oil
and Natural Gas subject to the Credit Parties’ Swap Agreements and (y) the
amount of Net Cash Proceeds received by such Credit Party as a result of such
Swap Modification, (ii) the aggregate notional volume of Crude Oil and Natural
Gas affected by such Swap Modification, together with all other Swap
Modifications consummated since the Effective Date or the most recent
Redetermination Date, as applicable, does not exceed ten percent (10%) of the
aggregate notional volume of Crude Oil and Natural Gas subject to the Credit
Parties’ Swap Agreements in effect as of the most recent report with respect to
the Credit Parties’ Swap Agreements delivered pursuant to Section 6.01(c), and
(iii) the Borrower applies the Net Cash Proceeds received by any Credit Party as
a result of such Swap Modification to prepay the Loans in the manner set forth
in Section 2.12(b).

 

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Section 7.06. Restricted Payments. Neither the Borrower nor any of the
Restricted Subsidiaries shall declare or make any Restricted Payment, except
that each Restricted Subsidiary may make Restricted Payments to the Borrower and
to other Credit Parties and each Restricted Subsidiary that is not a Credit
Party may make Restricted Payments to any Restricted Subsidiary that is not a
Credit Party.

Section 7.07. Transactions with Affiliates. The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Restricted Subsidiary
than could be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Debtors not involving any other Affiliate,
(c) transactions described on Schedule 7.07, (d) any Restricted Payment
permitted by Section 7.06, (e) transactions with Unrestricted Subsidiaries
consisting of certain services agreements and secondment agreements pursuant to
which any Credit Party provides services and secondees to such Unrestricted
Subsidiaries to assist with such Unrestricted Subsidiaries’ operations, (f) the
investments permitted under Section 7.04 (other than any investments made
pursuant to clause (o) thereof), (g) [Reserved], (h) [Reserved] and (i) any
other transactions approved by an order of the Bankruptcy Court in form and
substance acceptable to the Majority Lenders (such acceptance not to be
unreasonably withheld or delayed) so long as the consent of all Lenders would
not be required to permit such transaction hereunder.

Section 7.08. Restrictive Agreements. The Borrower will not, nor will it permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Restricted
Subsidiary to create, incur or permit to exist any Lien upon any of its property
or assets, (b) the ability of any Restricted Subsidiary to pay dividends or
other distributions with respect to any of its Equity Interests or to make or
repay loans or advances to the Borrower or any Restricted Subsidiary or to
Guarantee Indebtedness of the Borrower or any Restricted Subsidiary; provided
that (i) the foregoing shall not apply to restrictions and conditions imposed by
law or by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions set forth in the Loan Documents, the 1.5 Lien Note Documents, the
1.75 Lien Debt Documents, the Senior Note Documents, or the Second Lien Debt
Documents, (iii) the foregoing shall not apply to restrictions and conditions
existing on the date hereof identified on Schedule 7.08 (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (iv) clause (a) of the foregoing shall
not apply to restrictions or conditions imposed by any agreement relating to
secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness and
(v) clause (a) of the foregoing shall not apply to customary provisions in
leases and other contracts restricting the assignment thereof. The Borrower will
not, nor will it permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into, incur or permit to exist any Lien on any Oil and Gas
Properties other than the Liens permitted under Section 7.02.

 

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Section 7.09. Disqualified Stock and Fiscal Year. The Borrower will not, nor
will it permit any of its Restricted Subsidiaries to, issue any Disqualified
Stock nor will it change its fiscal year.

Section 7.10. Amendments of Organizational Documents; Certain Agreements,
Existing Senior Notes, and Second Lien Debt.

(a) The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, enter into or permit any material modification or amendment of, or waive any
material right or obligation of any Person under its Organizational Documents
other than, in the case of Borrower, any amendments required in connection with
authorization of a stock split of Borrower’s common stock or the authorization
of the issuance of additional common stock.

(b) The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, directly or indirectly, prepay, repay, redeem, exchange, defease, or
purchase in any manner any Existing Senior Notes, any 1.5 Lien Notes, and 1.75
Lien Debt, or any Second Lien Debt or to make any payment or prepayment of
principal of, or premium or interest on, any other Indebtedness (or to make any
deposit in lieu thereof) other than as permitted pursuant to the DIP Orders.

(c) The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, enter into or permit any modification or amendment of the Senior Note
Documents, any 1.5 Lien Note Documents, any 1.75 Lien Debt Documents, and Second
Lien Debt Documents to the extent such modification or amendment (i) has not
been approved by the Bankruptcy Court in form and substance reasonably
acceptable to the Majority Lenders so long as the consent of all Lenders would
not otherwise be required to permit such transaction hereunder or (ii) taken as
a whole, would be adverse to the Lenders in any material respect.

(d) The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, enter into or permit any modification or amendment of the First-Day Orders
in a manner materially adverse to the interests of any Lender party to this
Agreement on the Effective Date without the consent of such Lender.

Section 7.11. Minimum Liquidity Test. The Borrower will not permit the sum of
the Aggregate Unused Commitments on such date plus the Credit Parties’
Unrestricted Cash and cash equivalents in Permitted Investments (but
specifically including any Credit Party’s interest in cash held in the BG
Operating Account and the BG Escrow Account for purposes of funding BG
Development Costs) as of such date minus any Borrowing Base Deficiency to be
less than $20,000,000 at any time.

Section 7.12. Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities. The Borrower will not, nor will it permit any Restricted Subsidiary
to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or
(ii) any other transaction pursuant to which it incurs or has incurred
Off-Balance Sheet Liabilities, except for Swap Agreements permitted under the
terms of Section 7.05 and Advance Payment Contracts; provided, that the
aggregate amount of all Advance Payments received by any Credit Party that have
not been satisfied by delivery of production at any time does not exceed, in the
aggregate $5,000,000.

 

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Section 7.13. [Reserved].

Section 7.14. Use of Proceeds. The Borrower will not request any Borrowing or
Letter of Credit, and the Borrower shall not use, and shall procure that its
Subsidiaries and its or their respective directors, officers, employees and
agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in
furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing
or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, or (c) in any manner that would
result in the violation of any Sanctions applicable to any party hereto.

Section 7.15. Budget Variance. As of any Variance Testing Date, for the Testing
Period ending on such Variance Testing Date, the Borrower shall not allow the
aggregate disbursements (excluding disbursements in respect of professional fees
incurred in the Bankruptcy Cases by the Borrower and its Subsidiaries during
such Testing Period) made by the Borrower and its Subsidiaries during such
Testing Period to be greater than 120% of the aggregate disbursements (excluding
disbursements in respect of professional fees incurred in the Bankruptcy Cases
by the Borrower and its Subsidiaries during such Testing Period) for the
Borrower and its Subsidiaries set forth in the 13-Week Forecasts for such
Testing Period (the “Variance Limit” and such variances in disbursements
permitted up to such cap, the “Permitted Variances”).

Section 7.16. ERISA Compliance. The Borrower shall not, and will cause each
Subsidiary to not, permit any Benefit Plan maintained by it or any Subsidiary to
(a) engage in any “prohibited transaction” as such term is defined in
Section 4975 of the Internal Revenue Code of 1954, as amended, (b) incur any
“accumulated funding deficiency,” as such term is defined in Section 302 of
ERISA, or (c) terminate in a manner which could result in the imposition of a
Lien on any Property of the Borrower pursuant to Section 4068 of ERISA; assume
an obligation to contribute to any Multiemployer Plan; or acquire any Person or
the assets of any Person which has now or has had at any time an obligation to
contribute to any Multiemployer Plan.

Section 7.17. Environmental Matters. The Credit Parties shall not 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
obligations 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 result in an environmental liability to any
Credit Party or any subsidiary of a Credit Party in excess of $5,000,000,
individually or in the aggregate.

Section 7.18. Gas Imbalances, Take-or-Pay or Other Prepayments. The Credit
Parties shall not allow gas imbalances, take-or-pay or other Advance Payments
with respect to the Oil and Gas Properties of the Credit Parties that would
require any Credit Party to deliver Hydrocarbons produced on Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor; provided, that (i) the aggregate amount of all Advance Payments
received by any Credit Party that have not been satisfied by delivery of
production at any time does not exceed, in the aggregate $5,000,000 and (ii) the
aggregate amount of such gas imbalances of any Credit Party does not exceed
$10,000,000 in the aggregate on a net basis.

 

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Section 7.19. Sale or Discount of Receivables. Except for receivables obtained
by the Borrower or any Subsidiary out of the ordinary course of business or the
settlement of joint interest billing accounts in the ordinary course of business
or discounts granted to settle collection of accounts receivable or the sale of
defaulted accounts arising in the ordinary course of business in connection with
the compromise or collection thereof and not in connection with any financing
transaction, the Borrower will not, and will not permit any Subsidiary to,
discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.

Section 7.20. [Reserved].

Section 7.21. Nature of Business. The Borrower will not, and will not permit any
Credit Party to, enter into any line of business other than (a) those in which
the Borrower or such Subsidiary is engaged as of the date hereof and (b) other
lines of business related to the production of oil, gas and other Hydrocarbons;
or permit any material change to be made in the character of its business as
conducted as of the date hereof.

Section 7.22. Subsidiaries. Each Credit Party shall not, and shall not permit
any of its Subsidiaries to, create or acquire any additional Subsidiary other
than EXCO Resources (PA), LLC or EXCO Appalachia Midstream, LLC unless the
Borrower complies with Section 6.13. Each Loan Party shall not, and shall not
permit any of its Subsidiaries to, sell, assign or otherwise dispose of any
Equity Interests in any Subsidiary except in compliance with Section 7.03.

Section 7.23. Contracts and Leases. No Loan Party shall, or shall permit any of
its Subsidiaries to, except as otherwise permitted pursuant to the DIP Orders,
any Plan of Reorganization confirmed by a Final Order or a motion filed by or
after consultation of Fairfax, assume, assume and assign or reject any executory
contract or unexpired lease not assumed, assumed and assigned or rejected on or
before the date hereof.

Section 7.24. No International Operations. From and after the Effective Date,
the Borrower and its Subsidiaries will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any Oil and Gas Interests not located within the geographical boundaries of the
United States. The Borrower shall at all times remain organized under the laws
of the United States of America or any State thereof or the District of
Columbia. The Borrower will not have any foreign Subsidiaries at any time.

Section 7.25. Plan of Reorganization. No Loan Party shall, or shall permit any
of its Subsidiaries to, file a plan of reorganization in the Bankruptcy Cases
that does not provide for payment in full in cash of the DIP Facilities
(excluding customary contingent obligations).

Article VIII

Guarantee of Obligations

Section 8.01. Guarantee of Payment. Each Guarantor unconditionally and
irrevocably guarantees to the Administrative Agent for the benefit of the
Secured Parties, the punctual payment of all Obligations now or which may in the
future be owing by any Credit Party (the “Guaranteed Liabilities”). This
Guarantee is a guaranty of payment and not of collection only.

 

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The Administrative Agent shall not be required to exhaust any right or remedy or
take any action against the Borrower or any other Person or any collateral. The
Guaranteed Liabilities include interest accruing after the commencement of a
proceeding under bankruptcy, insolvency or similar laws of any jurisdiction at
the rate or rates provided in the Loan Documents, or the Swap Agreements between
any Credit Party and any Secured Party, as the case may be, regardless of
whether such interest is an allowed claim. Each Guarantor agrees that, as
between the Guarantor and the Administrative Agent, the Guaranteed Liabilities
may be declared to be due and payable for the purposes of this Guarantee
notwithstanding any stay, injunction or other prohibition which may prevent,
delay or vitiate any declaration as regards the Borrower or any other Guarantor
and that in the event of a declaration or attempted declaration, the Guaranteed
Liabilities shall immediately become due and payable by each Guarantor for the
purposes of this Guarantee.

Section 8.02. Guarantee Absolute. Each Guarantor guarantees that the Guaranteed
Liabilities shall be paid strictly in accordance with the terms of this
Agreement and the Swap Agreements to which any Secured Party is a party. The
liability of each Guarantor hereunder is absolute and unconditional irrespective
of: (a) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Loan Documents or the Guaranteed Liabilities, or any
other amendment or waiver of or any consent to departure from any of the terms
of any Loan Document or Guaranteed Liability, including any increase or decrease
in the rate of interest thereon; (b) any release or amendment or waiver of, or
consent to departure from, any other guaranty or support document, or any
exchange, release or non-perfection of any collateral, for all or any of the
Loan Documents or Guaranteed Liabilities; (c) any present or future law,
regulation or order of any jurisdiction (whether of right or in fact) or of any
agency thereof purporting to reduce, amend, restructure or otherwise affect any
term of any Loan Document or Guaranteed Liability; (d) without being limited by
the foregoing, any lack of validity or enforceability of any Loan Document or
Guaranteed Liability; and (e) any other setoff, defense or counterclaim
whatsoever (in any case, whether based on contract, tort or any other theory)
with respect to the Loan Documents or the transactions contemplated thereby
which might constitute a legal or equitable defense available to, or discharge
of, the Borrower or a Guarantor.

Section 8.03. Guarantee Irrevocable. This Guarantee is a continuing guaranty of
the payment of all Guaranteed Liabilities now or hereafter existing under this
Agreement and such Swap Agreements to which any Secured Party is a party and
shall remain in full force and effect until payment in full of all Guaranteed
Liabilities and other amounts payable hereunder and until this Agreement and the
Swap Agreements are no longer in effect or, if earlier, when the Guarantor has
given the Administrative Agent written notice that this Guarantee has been
revoked; provided that any notice under this Section shall not release the
revoking Guarantor from any Guaranteed Liability, absolute or contingent,
existing prior to the Administrative Agent’s actual receipt of the notice at its
branches or departments responsible for this Agreement and such Swap Agreements
and reasonable opportunity to act upon such notice.

Section 8.04. Reinstatement. This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Liabilities is rescinded or must otherwise be returned by any Secured
Party on the insolvency, bankruptcy or reorganization of the Borrower, or any
other Credit Party, or otherwise, all as though the payment had not been made.

 

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Section 8.05. Subrogation. No Guarantor shall exercise any rights which it may
acquire by way of subrogation, by any payment made under this Guarantee or
otherwise, until all the Guaranteed Liabilities have been paid in full and this
Agreement and the Swap Agreements to which any Lender Counterparty is a party
are no longer in effect. If any amount is paid to the Guarantor on account of
subrogation rights under this Guarantee at any time when all the Guaranteed
Liabilities have not been paid in full, the amount shall be held in trust for
the benefit of the Lenders and the Lender Counterparties and shall be promptly
paid to the Administrative Agent to be credited and applied to the Guaranteed
Liabilities, whether matured or unmatured or absolute or contingent, in
accordance with the terms of this Agreement and such Swap Agreements. If any
Guarantor makes payment to the Administrative Agent, Lenders, or any Lender
Counterparties of all or any part of the Guaranteed Liabilities and all the
Guaranteed Liabilities are paid in full and this Agreement and such Swap
Agreements are no longer in effect, the Administrative Agent, Lenders and Lender
Counterparties shall, at such Guarantor’s request, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Liabilities resulting from the payment.

Section 8.06. Subordination. Without limiting the rights of the Administrative
Agent, the Lenders and the Lender Counterparties under any other agreement, any
liabilities owed by the Borrower to any Guarantor in connection with any
extension of credit or financial accommodation by any Guarantor to or for the
account of the Borrower, including but not limited to interest accruing at the
agreed contract rate after the commencement of a bankruptcy or similar
proceeding, are hereby subordinated to the Guaranteed Liabilities, and such
liabilities of the Borrower to such Guarantor, if the Administrative Agent so
requests, shall be collected, enforced and received by any Guarantor as trustee
for the Administrative Agent and shall be paid over to the Administrative Agent
on account of the Guaranteed Liabilities but without reducing or affecting in
any manner the liability of the Guarantor under the other provisions of this
Guarantee.

Section 8.07. Payments Generally. All payments by the Guarantors shall be made
in the manner, at the place and in the currency (the “Payment Currency”)
required by the Loan Documents and the Swap Agreement to which any Lender
Counterparty is a party, as the case may be; provided, however, that (if the
Payment Currency is other than Dollars) any Guarantor may, at its option (or, if
for any reason whatsoever any Guarantor is unable to effect payments in the
foregoing manner, such Guarantor shall be obligated to) pay to the
Administrative Agent at its principal office the equivalent amount in Dollars
computed at the selling rate of the Administrative Agent or a selling rate
chosen by the Administrative Agent, most recently in effect on or prior to the
date the Guaranteed Liability becomes due, for cable transfers of the Payment
Currency to the place where the Guaranteed Liability is payable. In any case in
which any Guarantor makes or is obligated to make payment in Dollars, the
Guarantor shall hold the Administrative Agent, the Lenders and the Lender
Counterparties harmless from any loss incurred by the Administrative Agent, any
Lender or any Lender Counterparty arising from any change in the value of
Dollars in relation to the Payment Currency between the date the Guaranteed
Liability becomes due and the date the Administrative Agent, such Lender or such
Lender Counterparty is actually able, following the conversion of the Dollars
paid by such Guarantor into the Payment Currency and remittance of such Payment
Currency to the place where such Guaranteed Liability is payable, to apply such
Payment Currency to such Guaranteed Liability.

 

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Section 8.08. Setoff. Each Guarantor agrees that, in addition to (and without
limitation of) any right of setoff, banker’s lien or counterclaim the
Administrative Agent, any Lender or any Lender Counterparty may otherwise have,
the Administrative Agent, such Lender or such Lender Counterparty shall be
entitled, at its option, to offset balances (general or special, time or demand,
provisional or final) held by it for the account of any Guarantor at any office
of the Administrative Agent, such Lender or such Lender Counterparty, in Dollars
or in any other currency, against any amount payable by such Guarantor under
this Guarantee which is not paid when due (regardless of whether such balances
are then due to such Guarantor), in which case it shall promptly notify such
Guarantor thereof; provided that the failure of the Administrative Agent, such
Lender, or such Lender Counterparty to give such notice shall not affect the
validity thereof.

Section 8.09. Formalities. Each Guarantor waives presentment, notice of
dishonor, protest, notice of acceptance of this Guarantee or incurrence of any
Guaranteed Liability and any other formality with respect to any of the
Guaranteed Liabilities or this Guarantee.

Section 8.10. Limitations on Guarantee. The provisions of the Guarantee under
this Article VIII are severable, and in any action or proceeding involving any
state corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Guarantee would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount of
such Guarantor’s liability under this Guarantee, then, notwithstanding any other
provision of this Guarantee to the contrary, the amount of such liability shall,
without any further action by the Guarantors, the Administrative Agent, any
Lender or any Lender Counterparty, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant
Guarantor’s “Maximum Liability”). This Section 8.10, with respect to the Maximum
Liability of the Guarantors, is intended solely to preserve the rights of the
Administrative Agent, Lenders and Lender Counterparties hereunder to the maximum
extent not subject to avoidance under applicable law, and no Guarantor nor any
other Person shall have any right or claim under this Section 8.10 with respect
to the Maximum Liability, except to the extent necessary so that none of the
obligations of any Guarantor hereunder shall be rendered voidable under
applicable law.

Section 8.11. Keepwell.

(a) Each Qualified ECP Guarantor hereby jointly and severally absolutely,
unconditionally and irrevocably undertakes to provide such funds or other
support as may be needed from time to time by each other Credit Party to honor
all of its obligations under this Agreement in respect of Swap Obligations
(provided, however, that each Qualified ECP Guarantor shall only be liable under
this Section 8.11 for the maximum amount of such liability that can be hereby
incurred without rendering its obligations under this Section 8.11, or

 

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otherwise under this Agreement, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any greater amount).
The obligations of each Qualified ECP Guarantor under this Section 8.11 shall
remain in full force and effect until this Agreement is terminated, all
Obligations are paid in full (other than contingent obligations for which no
claim has been made and liquidated that by the express terms of the Loan
Documents survive termination thereof and/or payment in full of the Obligations)
and all of the Lenders’ Commitments are terminated. Each Qualified ECP Guarantor
intends that this Section 8.11 constitute, and this Section 8.11 shall be deemed
to constitute, a “keepwell, support, or other agreement” for the benefit of each
other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity
Exchange Act.

(b) Notwithstanding any other provisions of this Agreement or any other Loan
Document, Obligations guaranteed by any Guarantor, or secured by the grant of
any Lien by such Guarantor under any Security Instrument, shall exclude all
Excluded Swap Obligations of such Guarantor.

Section 8.12. Stay of Acceleration. If acceleration of the time for payment of
any of the Guaranteed Liabilities is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of this Agreement, any other Loan Document, or any
Swap Agreement with a Lender Counterparty shall nonetheless be payable by each
of the Guarantors hereunder forthwith on demand by the Administrative Agent made
at the written request of the Majority Lenders.

Article IX

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan (including any
payments required under Section 2.12) 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 clause (a) of this Article)
payable under this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of three (3) Business
Days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any Restricted Subsidiary in or in connection with this Agreement or
any amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder or in any Loan Document furnished pursuant to or in connection with
this Agreement or any amendment or modification thereof or waiver hereunder,
shall prove to have been incorrect in any material respect when made or deemed
made;

 

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(d) the Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 2.12, Section 6.02,
Section 6.03 (with respect to the Borrower or any Restricted Subsidiary’s
existence), Section 6.05 (with respect to insurance), Section 6.09,
Section 6.09, Section 6.26 (and in the case of any failure to deliver any
13-Week Forecast or other report required under Section 6.26 when due, such
failure shall continue unremedied for a period of three (3) Business Days) or in
Article VII;

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

(f) the Borrower or any Restricted Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable, and
which is not stayed by the filing of the voluntary petition to commence the
Bankruptcy Cases and is otherwise permitted to be paid under this Agreement and
by the DIP Orders;

(g) other than as a result of the filing of the Bankruptcy Cases and solely to
the extent not stayed by the automatic stay in the Bankruptcy Cases, any event
or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits 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 prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness to the extent such voluntary sale or transfer
of property is permitted hereunder;

(h) other than as a result of the filing of the Bankruptcy Cases, one or more
judgments for the payment of money in an aggregate amount in excess of
$5,000,000 shall be rendered against the Borrower or any Restricted Subsidiary
or any combination thereof and the same shall remain undischarged for a period
of forty-five (45) consecutive days during which execution shall not be
effectively stayed (including as a result of the automatic stay under the
Bankruptcy Cases), or any action shall be legally taken by a judgment creditor
to attach or levy upon any assets of the Borrower or any Restricted Subsidiary
to enforce any such judgment;

(i) an ERISA Event shall have occurred that, in the opinion of the Majority
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect;

(j) the Loan Documents after delivery thereof shall for any reason cease to be
in full force and effect and valid, binding and enforceable in accordance with
their terms against any Credit Party party thereto or shall be repudiated by any
of them, or any Credit Party shall so state in writing;

(k) any Change of Control occurs;

 

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(l) an order shall be entered dismissing a Bankruptcy Case or converting a
Bankruptcy Case to a case under Chapter 7 of the United States Bankruptcy Code;

(m) an order with respect to any of the Bankruptcy Cases shall be entered
appointing, without the prior written consent of Fairfax, (i) a trustee under
Section 1104 of the United States Bankruptcy Code or (ii) an examiner or any
other Person with enlarged powers relating to the operation of the business of
any Credit Party (i.e., powers beyond those set forth in Sections 1104(d) and
1106(a)(3) and (4) of the United States Bankruptcy Code) under
Section 1106(b)(3) and 1106(b)(4) of the United States Bankruptcy Code;

(n) an order shall be entered that is not stayed pending appeal granting relief
from the automatic stay in the Bankruptcy Cases to any creditor of a Credit
Party with respect to any claim against any property that, when taken together
with all other claims with respect to which orders entered on the docket of the
Bankruptcy Court that are not stayed pending appeal granting relief from the
automatic stay with respect to the Credit Parties’ Collateral, exceeds
$10,000,000;

(o) the Interim DIP Order is not entered by the Bankruptcy Court within three
(3) days of the Petition Date;

(p) the Final DIP Order is not entered by the Bankruptcy Court within forty-five
(45) days of the Petition Date;

(q) the Interim DIP Order or the Final DIP Order shall have been stayed, amended
or modified, reversed, or vacated without the express prior written consent of
Fairfax (and such consent has not been unreasonably withheld or delayed); or

(r) any Liens granted with respect to the DIP Facilities shall cease to be
valid, perfected and enforceable in all respects with the priority in the
applicable DIP Order;

then, and in every such event (other than an event with respect to the Borrower
or any Restricted Subsidiary described in clause (h) or (i) of this Article),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Majority Lenders (or at the
request of the Required Lenders under the circumstances described in clause
(g) of Article IX) shall, by notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder
(including, without limitation, the payment of cash collateral to secure the
total LC Exposure as provided in Section 2.07(j)), shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which

 

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are hereby waived by the Borrower. Without limiting the foregoing, upon the
occurrence and during the continuance of an Event of Default, the Administrative
Agent, the Issuing Bank and each Lender may protect and enforce its rights under
this Agreement and the other Loan Documents by any appropriate proceedings,
including proceedings for specific performance of any covenant or agreement
contained in this Agreement or any other Loan Document, and the Administrative
Agent, the Issuing Bank and each Lender may enforce payment of any Obligations
due and payable hereunder or enforce any other legal or equitable right and
remedies which it may have.

Notwithstanding the foregoing, any exercise of remedies under this Agreement or
any other Loan Document is subject to the requirement that the Administrative
Agent provide five (5) Business Days’ prior written notice to the Debtors,
counsel for the Debtors, the Office of the U.S. Trustee, and counsel for any
official committee of unsecured creditors appointed in the Bankruptcy Cases in
accordance with the terms of the DIP Order, during which period the Borrower may
seek an emergency hearing before the Bankruptcy Court for the purpose of
determining whether an Event of Default has occurred. During the five
(5) Business Day notice period, the Borrower may use proceeds of the Loans or
cash collateral of the Lenders to (i) fund operations in accordance with
Section 6.26, including the Permitted Variances, and (ii) fund the Carve Out.

Article X

The Administrative Agent

Each of the Lenders and the 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, together with such actions and
powers as are reasonably incidental thereto.

The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with any Credit Party or other Affiliate thereof as if
it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. 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,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative Agent is required
to exercise in writing as directed by the Majority Lenders or the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 11.02), and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Credit Party 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 not be liable for any action taken or

 

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not taken by it with the consent or at the request of the Majority Lenders or
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 11.02) or in the
absence of its own gross negligence or willful misconduct. 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 the Administrative Agent 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, (ii) the contents of any
certificate, report or other document delivered hereunder or in connection
herewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, (v) the creation, perfection or priority of
Liens on the Collateral or the existence of the Collateral or (vi) the
satisfaction of any condition set forth in Article V or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

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

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Majority Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent which shall be a bank with an
office in Chicago, Illinois or New York, New York, or an Affiliate of any such
bank. Upon the acceptance of its appointment as Administrative Agent hereunder
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder.

 

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The fees payable by the Borrower to a successor Administrative Agent shall be
the same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the Administrative Agent’s resignation
hereunder, the provisions of this Article and Section 11.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.

Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to
release any Collateral that it is permitted to be sold or released pursuant to
the terms of the Loan Documents. Each Lender and the Issuing Bank hereby
authorizes the Administrative Agent to execute and deliver to the Borrower, at
the Borrower’s sole cost and expense, any and all releases of Liens, termination
statements, assignments or other documents reasonably requested by the Borrower
in connection with any sale or other disposition of Collateral to the extent
such sale or other disposition is permitted by the terms of Section 7.03 or is
otherwise authorized by the terms of the Loan Documents.

Article XI

Miscellaneous

Section 11.01. Notices.

(a) Except in the case of notices and other communications expressly permitted
to be given by telephone or electronic mail (and subject to paragraph
(b) below), 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 EXCO Resources, Inc., 12377 Merit Drive, Suite 1700,
Dallas, Texas 75251, Attention: Tyler S. Farquharson, Vice President, Chief
Financial Officer and Treasurer, Officer Telecopy No. (214) 368-2087, E-mail:
tfarquharson@EXCOResources.com, with a copy to EXCO Resources, Inc., 12377 Merit
Drive, Suite 1700, Dallas, Texas 75251, Attention: Heather L. Lamparter, Vice
President, General Counsel and Secretary, Telecopy No. (214) 368-2087, E-mail:
hlamparter@EXCOResources.com. For purposes of delivering the documents pursuant
to Section 6.01(a), Section 6.01(b) and Section 6.01(d), the website address is
www.excoresources.com;

 

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(ii) if to the Administrative Agent, to Habmlin Watsa Investment Counsel Ltd.,
95 Wellington Street West, Suite 802, Toronto, Ontario, Canada M5J 2N7,
Attention: Paul Rivett, Telecopy No.: (416) 367-4946, E-mail: privet@hwic.ca,
with a copy to Hamblin Watsa Investment Counsel Ltd., 95 Wellington Street West,
Suite 802, Toronto, Ontario, Canada M5J 2N7, Attention: Derek Bulas, Telecopy
No.: (416) 367-4946, E-mail: dbulas@fairfax.ca;

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

All such notices and other communications (i) sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received or (ii) sent by facsimile shall be deemed to have been given
when sent, provided that if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next Business Day for the recipient.

(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 unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or the Borrower may, in their
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. All such notices and other communications (i) sent to an e-mail
address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function,
as available, return e-mail or other written acknowledgement), provided that if
not given during the normal business hours of the recipient, shall be deemed to
have been given at the opening of business on the next Business Day for the
recipient, and (ii) posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.
Documents required to be delivered pursuant to Section 6.01(a) or (b) (to the
extent any such documents are included in materials otherwise filed with the
SEC) or Section 6.01(e) may be delivered electronically and if so delivered,
shall be deemed to have been delivered on the date (i) on which the Borrower
posts such documents, or provides a link thereto on Borrower’s website on the
Internet at http://www.petd.com/, or (ii) on which such documents are posted on
Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); or
(iii) on which the Borrower provides to the Administrative Agent by electronic
mail electronic versions (i.e., soft copies) of such documents (delivery of the
compliance certificate required to be delivered pursuant to Section 6.01(c) also
being deemed delivered on such date if included within such electronic mail
under this clause (iii)); provided, the Borrower shall upon the request of the
Administrative Agent provide to the Administrative Agent paper copies of any
such electronically delivered certificate); provided further, that the Borrower
shall notify the Administrative Agent (by telecopier or electronic mail) of the
posting of any such documents pursuant to clause (i) or (ii) above and provide
to the Administrative Agent by electronic mail electronic versions (i.e., soft

 

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copies) of such documents. Except as expressly provided in the foregoing clause
(b) the Administrative Agent shall have no obligation to request the delivery or
to maintain copies of the documents referred to above, and in any event shall
have no responsibility to monitor compliance by the Borrower with any such
request for delivery, and each Lender shall be solely responsible for requesting
delivery to it or maintaining its copies of such documents.

(c) Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto.

Section 11.02. Waivers; Amendments.

(a) No failure or delay by the Administrative Agent, the Issuing Bank or any
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent, the Issuing Bank and the Lenders hereunder and under
any other Loan Document 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 consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by this Section, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing,
the making of a Loan or issuance of a Letter of Credit shall not be construed as
a waiver of any Default, regardless of whether the Administrative Agent, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.

(b) Neither this Agreement nor any other Loan Document nor any other provision
hereof or thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Credit Party or Credit
Parties that are party thereto and the Majority Lenders or the Required Lenders,
as applicable, by the Credit Party or Credit Parties that are party thereto and
the Administrative Agent with the consent of the Majority Lenders (or Fairfax,
as expressly provided in this Agreement or other Loan Document); provided that
no such agreement shall:

(i) increase the Commitment of any Lender without the written consent of such
Lender (including any such Lender that is a Defaulting Lender);

(ii) increase the Borrowing Base or modify any component thereof or provisions
related thereto that would have the effect of increasing the Borrowing Base, in
each case without the consent of each Lender (other than any Defaulting Lender,
provided that the Commitment of any Defaulting Lender (i.e., such Defaulting
Lender’s Applicable Percentage of the Borrowing Base) may not be increased
without the consent of such Defaulting Lender

(iii) reduce or forgive the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce or forgive any interest or fees
payable hereunder, without the written consent of each Lender (including any
such Lender that is a Defaulting Lender other than fees to which such Defaulting
Lender is not entitled to receive as a result of being a Defaulting Lender)
affected thereby;

 

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(iv) postpone or waive any payment of the principal amount of any Loan or LC
Disbursement, or postpone the scheduled date of expiration of any Letter of
Credit beyond the Maturity Date, or any date for the payment of any interest,
fees or other Obligations hereunder, or reduce the amount of, waive or excuse
any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender (including any such
Lender that is a Defaulting Lender) affected thereby (it being understood that
waiver of a mandatory prepayment of the Loans shall constitute a postponement or
waiver of a payment or scheduled date of expiration);

(v) change Section 2.02(b), Section 2.02(c), Section 2.11, Section 2.12(e),
Section 2.12(f), Section 2.19(a), Section 2.19(b), Section 2.19(c) or
Section 2.19(e) in a manner that would alter the manner in which payments are
shared, without the written consent of each Lender (including any such Lender
that is a Defaulting Lender);

(vi) change clause (b) of the definition of Obligations, Section 2.19(b) or
Section 11.02(b)(vi) without the consent of each Lender adversely affected
thereby (including any such Lender that is a Defaulting Lender) and the consent
of each Person that is adversely affected thereby 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;

(vii) change any of the provisions of this Section 11.02(b), Section 11.02(c),
Section 11.03(a), Section 11.04(e) or the definition of “Majority Lender”,
“Required Lenders”, or any other provision of any Loan Document specifying the
number or percentage of Lenders (or Lenders of any Class) required to waive,
amend or modify any rights thereunder or make any determination or grant any
consent thereunder, without the written consent of each Lender (including any
such Lender that is a Defaulting Lender) directly affected thereby;

(viii) release any Guarantor from its obligation under its Guaranty (except as
otherwise permitted herein or in the other Loan Documents), without the written
consent of each Lender (other than any Defaulting Lender);

(ix) change or waive any of the provisions of Sections 5.01 and 5.02, without
the written consent of each Lender (other than any Defaulting Lender);

(x) without the consent of Lenders holding at least a majority of the
outstanding Commitments, amend, modify or waive any provision in Section 5.02 or
waive any Default or Event of Default (or amend any Loan Document to effectively
waive any Default or Event of Default) if the effect of such amendment,
modification or waiver is that the Lenders shall be required to fund Loans when
such Lenders would otherwise not be required to do so; or

 

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(xi) without the consent of each Lender, (I) except as provided in Article X or
in any Security Instrument, release all or substantially all of the Collateral
(II) permit any transaction which, after giving effect thereto and any related
prepayments of the Loans (and cash collateralization of Letters of Credit),
would give rise to a Borrowing Base Deficiency, (III) permit Liens or claims
pari passu or senior to those in respect of the Obligations other than as
provided in the DIP Orders and the definition of Permitted Encumbrances as in
effect on the date hereof (or modified pursuant to this Section 11.02(b), (IV)
waive, amend or modify any provisions of Article III or any defined terms
therein to make such provisions less restrictive on the Borrower, (V) permit
payments of any prepetition Indebtedness other than as provided in the DIP
Orders, (VI) deliver the Carve Out Trigger Notice (as defined in the DIP Orders)
or (VII) waive, amend or modify the covenant contained in Section 7.11 or the
definition of Minimum Liquidity to reduce the minimum amount required
thereunder.

provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent or the Issuing Bank hereunder
(including the rights of the Administrative Agent and the Issuing Bank under
Section 2.21) without the prior written consent of the Administrative Agent or
the Issuing Bank, as the case may be. The Administrative Agent may also amend
Schedule 2.01(A) to reflect assignments entered into pursuant to Section 11.04.

(c) [Reserved].

(d) Notwithstanding anything to the contrary contained in this Section 11.02,
the Administrative Agent may, with the consent of the Borrower only, amend,
modify or supplement this Agreement or any of the other Loan Documents to
correct any clerical errors or cure any ambiguity, omission, mistake, defect or
inconsistency.

Section 11.03. Expenses; Indemnity; Damage Waiver.

(a) The Borrower shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Administrative Agent, each Lender and their respective
Affiliates, including the reasonable fees, charges and disbursements of counsel
for the Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby, including the
Bankruptcy Cases, including without limitation, in connection with the
enforcement or protection of the rights of the Administrative Agent, the Issuing
Bank or any Lender thereunder.

 

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(b) THE CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE 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, PENALTIES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS
OF ONE OUTSIDE COUNSEL (IN ADDITION TO ANY REASONABLY NECESSARY LOCAL COUNSEL IN
EACH APPLICABLE JURISDICTION, ANY NECESSARY BANKRUPTCY CONFLICTS COUNSEL(S), AND
SOLELY IN THE CASE OF A CONFLICT OF INTEREST, ONE ADDITIONAL COUNSEL IN EACH
RELEVANT JURISDICTION THAT IS MATERIAL TO EACH GROUP OF SIMILARLY SITUATED
AFFECTED INDEMNITEES) FOR ALL INDEMNITEES, 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 AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS OR ANY OTHER
TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN OR LETTER OF CREDIT OR THE USE
OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING BANK TO HONOR A
DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN
CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER
OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY
SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR
ANY SUBSIDIARY, OR (IV) 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; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE
AVAILABLE TO THE 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 any Credit Party fails to pay any amount required to be
paid by it to the Administrative Agent or the Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender’s
Applicable Percentage of such unpaid amount with respect to the amounts to be
paid to the Issuing Bank and such Lender’s Applicable Percentage of such unpaid
amount with respect to amounts to be paid to the Administrative Agent (in each
case, determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent or the Issuing Bank in its capacity as such.

 

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(d) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE CREDIT PARTIES SHALL
NOT ASSERT, AND HEREBY WAIVE, 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 OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE
TRANSACTIONS, ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREOF.

(e) To the extent permitted by applicable law, no party hereto shall assert, and
each hereby waives, any claim against any Indemnitee or any party hereto, 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 or any agreement or instrument contemplated
hereby, any Loan or the use of the proceeds thereof. For the avoidance of doubt,
the parties hereto acknowledge and agree that a claim for indemnity under
Section 11.03(b), to the extent covered thereby, is a claim of direct or actual
damages and nothing contained in the foregoing sentence shall limit the Credit
Parties’ indemnification obligations to the extent such special, indirect,
consequential or punitive damages are included in any third party claim in
connection with which such Indemnitee is otherwise entitled to indemnification
hereunder.

(f) All amounts due under this Section shall be payable not later than ten
(10) days after written demand therefor.

Section 11.04. 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 the Issuing Bank that issues any
Letter of Credit), except that (i) no Credit Party may 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 such Credit
Party 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. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the 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 paragraph (b)(ii) below, any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld or delayed) of:

 

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(A) the Borrower, provided that the Borrower shall be deemed to have consented
to any such assignment of all or any portion of a Revolver B Loan unless it
shall object thereto by written notice to the Administrative Agent within ten
(10) Business Days after having received notice thereof and provided further
that no consent of the Borrower shall be required for an assignment to a Lender,
an Affiliate of a Lender, a Federal Reserve Bank or central bank having
jurisdiction over such Lender, an Approved Fund or, if an Event of Default has
occurred and is continuing, any other assignee;

(B) the Administrative Agent; provided that (i) no consent of the Administrative
Agent shall be required for assignments to a Lender or an Affiliate of any
Lender and (ii) such assigning Lender shall provide the Administrative Agent
notice within five (5) Business Days of an assignment effected to a Lender or an
Affiliate of any Lender without the consent of the Administrative Agent; and

(C) the Issuing Bank (which consent may be conditioned upon the provision of
cash collateral from such assignee), provided that no consent of the Issuing
Bank shall be required for an assignment of all or any portion of a Revolver B
Loan.

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

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender,
an Approved Fund or an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans of any Class, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000, 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 in respect of such
Lender’s Commitment and such Lender’s Loans under this Agreement, provided that
this clause shall not be construed to prohibit the assignment of a proportionate
part of all the assigning Lender’s rights and obligations in respect of one
Class of Commitments or Loans;

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

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

 

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For the purposes of this Section 11.04(b), the term “Approved Fund” has the
following meaning:

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

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, 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 2.16, Section 2.17, Section 2.18 and Section 11.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 11.04 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 paragraph (c) of this Section except that any attempted
assignment or transfer by any Lender that does not comply with clause (C) of
Section 11.04(b)(ii) shall be null and void.

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment and Applicable Percentage of, and
principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive absent manifest error, and the Credit Parties,
the Administrative Agent, the 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 Credit Parties,
the Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section any
written consent to such assignment required by paragraph (b) of this Section,
the Administrative Agent shall accept such Assignment and Assumption and record
the information contained therein in the Register; provided that if either the
assigning Lender or the assignee shall have failed to make any payment required
to be made by it pursuant to Section 2.07(d) or Section 2.07(e), Section 2.08,
Section 2.19(d) or Section 11.03(c), the

 

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Administrative Agent shall have no obligation to accept such Assignment and
Assumption and record the information therein in the Register unless and until
such payment shall have been made in full, together with all accrued interest
thereon. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.

(c)

(i) Any Lender may, without the consent of the Borrower, the Administrative
Agent or the Issuing Bank, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing 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 first proviso to
Section 11.02(b) that affects such Participant. The Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18
(subject to the requirements and limitations therein, including the requirements
under Section 2.18(f) (it being understood that the documentation required under
Section 2.18(f) shall be delivered to the participating Lender)) to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to clause (b) of this Section; provided that such Participant
(A) agrees to be subject to the provisions of Sections 2.17 and 2.18 as if it
were an assignee under clause (b) of this Section; and (B) shall not be entitled
to receive any greater payment under Section 2.16 or 2.18, with respect to any
participation, than its participating Lender would have been entitled to
receive, except to the extent such entitlement to receive a greater payment
results from a Change in Law that occurs after the Participant acquired the
applicable participation.

(ii) To the extent permitted by law, each Participant also shall be entitled to
the benefits of Section 11.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.19(c) as though it were a Lender.
Each Lender that sells a participation shall, acting solely for this purpose as
a non-fiduciary agent of the Borrower, maintain a register on which it enters
the name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the Loans or other obligations under
this Agreement (the “Participant Register”); provided that no Lender shall have
any obligation to disclose all or any portion of the Participant Register to any
Person (including the identity of any Participant or any information relating to
a Participant’s interest in any Commitments, Loans, Letters of Credit or its
other obligations under any Loan Document) except to the extent that such
disclosure is necessary to establish that such Commitment, Loan, Letter of
Credit or other obligation is

 

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in registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be conclusive absent
manifest error, and such Lender shall treat each person whose name is recorded
in the Participant Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary. For the avoidance
of doubt, the Administrative Agent (in its capacity as Administrative Agent)
shall have no responsibility for maintaining a Participant Register.

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

(e) Notwithstanding the foregoing in this Section 11.04, and subject to
Section 2.20(c), for so long as any of (i) ESAS or any of its Affiliates
(collectively, the “ESAS Lenders”), (ii) Cove Key or any of its Affiliates
(collectively, the “Cove Key Lenders”) or (iii) JPMorgan Chase Bank, N.A.
(including any of its Affiliates, collectively, “JPM”) is a Lender, if Fairfax
or any of its Affiliates (collectively, the “Fairfax Lenders”) agrees to assign
all or a portion of its Loans or Commitments, or to sell any participation to a
Participant, in each case, to a Person that is not Fairfax or an Affiliate of
Fairfax (such Person, a “Purchaser”), such Fairfax Lender (the “Assigning
Fairfax Lender(s)”) agrees and acknowledges that it shall not make such
assignment or sell such participation unless (i) at least fifteen (15) days
prior to the closing of such assignment or participation, as the case may be,
the Purchaser has made a written offer to the ESAS Lenders, the Cove Key Lenders
and JPM to purchase all or a portion of the Loans and Commitments of, or to
purchase participations from, as the case may be, the ESAS Lenders, the Cove Key
Lenders and JPM, respectively, in a pro rata amount as such Loans and
Commitments or participations, as the case may be, being assigned or sold by the
Assigning Fairfax Lender and (ii) if such offer is accepted by any ESAS Lender,
the Cove Key Lenders and/or JPM within fifteen (15) days of its receipt of such
offer, the Purchaser enters into an assignment agreement or participation
agreement, as the case may be, with the ESAS Lenders, the Cove Key Lenders
and/or JPM, as applicable, substantially simultaneously with its entering into
an assignment agreement or participation agreement, as the case may be, with the
Assigning Fairfax Lender. The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that it shall grant
any consent required by it under the terms of this Agreement in order to
effectuate the foregoing agreements. Any purported assignment made, and any
participation sold, in violation of this Section 11.04 shall be null and void.

Section 11.05. Survival. All covenants, agreements, representations and
warranties made by the Credit Parties herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement 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, the 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

 

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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 2.16, Section 2.17,
Section 2.18 and Section 11.03 and Article X 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 or any
provision hereof.

Section 11.06. Counterparts; Integration; Effectiveness; DIP Order Controlling.
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. This Agreement
and any separate letter agreements with respect to fees payable to the
Administrative Agent or any Lender constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES 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. TO THE EXTENT THERE ARE ANY
INCONSISTENCIES BETWEEN THE TERMS OF THIS AGREEMENT OR ANY LOAN DOCUMENT AND THE
DIP ORDERS, THE PROVISIONS OF THE DIP ORDERS SHALL GOVERN. Except as provided in
Section 5.01, 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 or other electronic means shall be effective as
delivery of a manually executed counterpart of this Agreement.

Section 11.07. Severability. Any provision of this Agreement 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; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 11.08. 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 at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of any Credit Party now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
and Section 8.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.

 

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Section 11.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

(b) ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY
IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE LITIGATED IN BANKRUPTCY COURT AND, IF THE BANKRUPTCY COURT
DOES NOT HAVE (OR ABSTAINS FROM) JURISDICTION, COURTS HAVING SITUS IN HOUSTON,
HARRIS COUNTY, TEXAS OR THE BOROUGH OF MANHATTAN, NEW YORK, NEW YORK. THE
BORROWER HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE BANKRUPTCY
COURT AND, IF THE BANKRUPTCY COURT DOES NOT HAVE (OR ABSTAINS FROM) JURISDICTION
OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS
OR THE BOROUGH OF MANHATTAN, NEW YORK, NEW YORK, AND HEREBY WAIVES ANY RIGHTS IT
MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE ADMINISTRATIVE AGENT OR ANY LENDER IN ACCORDANCE WITH
THIS SECTION. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT,
THE ISSUING BANK OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.

(c) EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN
PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN
THE MANNER PROVIDED FOR NOTICES IN SECTION 11.01. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.

Section 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE

 

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TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

Section 11.11. 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 11.12. Confidentiality. Each of the Administrative Agent, the 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 any self-regulatory authority or
agency possessing investigative powers and the ability to sanction members for
non-compliance, (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, (e) in connection with the exercise of any remedies hereunder or any
suit, action or proceeding relating to this Agreement or the enforcement of
rights hereunder, (f) subject to an agreement containing provisions
substantially the same as, or otherwise consistent with, those of this Section,
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 or
derivative transaction relating to the Credit Parties and their obligations,
(g) with the consent of the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes available to the Administrative Agent, the Issuing Bank
or any Lender on a nonconfidential basis from a source other than a Credit
Party. For the purposes of this Section, “Information” means all information
received from any Credit Party relating to any Credit Party or its business,
other than any such information that is available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
any Credit Party and other information pertaining to this Agreement routinely
provided by arrangers to data service providers, including league table
providers, that serve the lending industry; provided that, in the case of
information received from any Credit Party 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 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. In addition, the Administrative Agent and each Lender
may disclose the existence of this Agreement and the information about this
Agreement to service providers to the Administrative Agent and the Lenders in
connection with the administration and management of this Agreement and the
other Loan Documents.

 

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Section 11.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender. Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit accounts (formerly Tex.
Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to
any Loan, nor shall this Agreement or any Loan be governed by or be subject to
the provisions of such Chapter 346 in any manner whatsoever.

Section 11.14. USA PATRIOT Act. Each Lender that is subject to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies each Credit Party that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies each Credit Party, which information includes the name and
address of each Credit Party and other information that will allow such Lender
to identify each Credit Party in accordance with the Act. The Borrower shall,
upon the request of the Administrative Agent or any Lender, provide all
documentation and other information that the Administrative Agent or such Lender
reasonably requires to comply with its ongoing obligations under applicable
“know your customer” and anti-money laundering rules and regulations, including
the Act.

Section 11.15. Flood Insurance Regulation. Notwithstanding any provision in any
Mortgage to the contrary, in no event is any Building (as defined in the
applicable Flood Insurance Regulation) or Manufactured (Mobile) Home (as defined
in the applicable Flood Insurance Regulation) included in the definition of
“Mortgaged Properties” and no Building or Manufactured (Mobile) Home shall be
encumbered by any such Mortgage. As used herein, “Flood Insurance Regulations”
shall mean (i) the National Flood Insurance Act of 1968 as now or hereafter in
effect or any successor statute thereto, (ii) the Flood Disaster Protection Act
of 1973 as now or hereafter in effect or any successor statue thereto, (iii) the
National Flood Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as
the same may be amended or recodified from time to time, and (iv) the Flood
Insurance Reform Act of 2004 and any regulations promulgated thereunder.

Section 11.16. No Fiduciary Duty. In connection with all aspects of each
transaction contemplated hereby (including in connection with any amendment,
waiver or other modification hereof or of any other Loan Document), the Borrower
and each other Credit Party acknowledges and agrees that: (i) (A) the arranging
and other services regarding this Agreement provided by the Administrative Agent
and the Lenders and their Affiliates (collectively, solely for purposes of this
Section 11.16, the “Lenders”) are arm’s-length commercial transactions between
the Borrower, each other Credit Party and their respective Affiliates, on the
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Administrative Agent and the Lenders, on the other hand, (B) each of the
Borrower and the other Credit Parties has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate, and (C) the
Borrower and each other Credit Party is capable of evaluating, and understands
and accepts, the terms, risks and conditions of the transactions contemplated
hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, each
other Agent and each Lender is and has been acting solely as a principal and,
except as expressly agreed in writing by the relevant parties, has not been, is
not, and will not be acting as an advisor, agent or fiduciary for the Borrower,
any other Credit Party or any of their respective Affiliates, or any other
Person and (B) neither the Administrative Agent, any other Agent nor any Lender
has any obligation to the Borrower, any other Credit Party or any of their
respective Affiliates with respect to the transactions contemplated hereby
except those obligations expressly set forth herein and in the other Loan
Documents; and (iii) the Administrative Agent and the Lenders and their
respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Borrower, the other Credit
Parties and their respective Affiliates, and neither the Administrative Agent,
any other Agent nor any Lender has any obligation to disclose any of such
interests to the Borrower, any other Credit Party or any of their respective
Affiliates. The Lenders may have economic interests that conflict with those of
the Credit Parties and their respective Subsidiaries and their stockholders
and/or their affiliates. Each Credit Party, for itself and on behalf of its
Subsidiaries, agrees that nothing in this Agreement or the Loan Documents or
otherwise will be deemed to create an advisory, fiduciary or agency relationship
or fiduciary or other implied duty between any Lender, on the one hand, and any
Credit Party or its Subsidiaries, their stockholders or their affiliates, on the
other. To the fullest extent permitted by law, each of the Borrower and each
other Credit Party hereby waives and releases any claims that it may have
against the Administrative Agent or any Lender with respect to any breach or
alleged breach of agency or fiduciary duty in connection with any aspect of any
transaction contemplated hereby. Each Credit Party, for itself and its
Subsidiaries, agrees that it will not claim that any Lender has rendered
advisory services of any nature or respect, or owes a fiduciary or similar duty
to such Credit Party or Subsidiary, in connection with such transaction or the
process leading thereto.

Section 11.17. No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans hereunder are solely
for the benefit the Borrower and the other Credit Parties, and no other Person
(including, without limitation, any Subsidiary of the Borrower, any obligor,
contractor, subcontractor, supplier or materialman) shall have any rights,
claims, remedies or privileges hereunder or under any other Loan Document
against the Administrative Agent, any other Agent, any Issuing Bank or any
Lender for any reason whatsoever. There are no third party beneficiaries except
as specifically set forth in this Agreement.

Section 11.18. Acknowledgement and Consent to Bail-In of EEA Financial
Institutions . Notwithstanding anything to the contrary in any Loan Document or
in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document, to the extent such liability is
unsecured, may be subject to the write-down and conversion powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by:

 

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(a) the application of any Write-Down and Conversion Powers by an EEA Resolution
Authority to any such liabilities arising hereunder which may be payable to it
by any party hereto that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if
applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other
instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the
exercise of the write-down and conversion powers of any EEA Resolution
Authority.

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131

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

BORROWER: EXCO RESOURCES, INC. By:  

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:   Vice President and Chief Financial Officer
and Treasurer GUARANTORS: EXCO HOLDING (PA), INC. EXCO PRODUCTION COMPANY (PA),
LLC EXCO PRODUCTION COMPANY (WV), LLC EXCO RESOURCES (XA), LLC EXCO SERVICES,
INC. EXCO MIDCONTINENT MLP, LLC EXCO PARTNERS GP, LLC EXCO PARTNERS OLP GP, LLC
EXCO HOLDING MLP, INC. EXCO LAND COMPANY, LLC By:  

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:  

Vice President and Chief Financial Officer

    and Treasurer

EXCO OPERATING COMPANY, LP By: EXCO Partners OLP GP, LLC its general partner By:
 

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:   Vice President and Chief Financial   Officer
and Treasurer

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EXCO GP PARTNERS OLD, LP By:   EXCO Partners GP, LLC its general partner By:  

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:   Vice President, Chief Financial Officer and
    Treasurer RAIDER MARKETING GP, LLC By:  

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:   Vice President, Chief Financial Officer and
    Treasurer RAIDER MARKETING, LP By:   Raider Marketing GP, LLC its general
partner By:  

/s/ Tyler Farquharson

Name:   Tyler Farquharson Title:   Vice President, Chief Financial Officer and
    Treasurer

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HAMBLIN WATSA INVESTMENT COUNSEL

LTD., as Administrative Agent

By:  

/s/ Paul Rivett

Name:   Paul Rivett Title:   Chief Operating Officer

--------------------------------------------------------------------------------

ALLIED WORLD ASSURANCE COMPANY,

LTD, as a Lender

By:  

/s/ Wesley D. Dupont

Name:   Wesley D. Dupont Title:   Director

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ODYSSEY REINSURANCE COMPANY, as a Lender, by its Investment Manager, HAMBLIN
WATSA INVESTMENT COUNSEL LTD. By:  

/s/ Paul Rivett

Name:   Paul Rivett Title:   Chief Operating Officer

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ZENITH INSURANCE COMPANY, as a Lender, by its Investment Manager, HAMBLIN WATSA
INVESTMENT COUNSEL LTD. By:  

/s/ Paul Rivett

Name:   Paul Rivett Title:   Chief Operating Officer

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JPMorgan Chase Bank, N.A., as Issuing Bank and as a Lender By:  

/s/ Arthur Flynn, Jr.

Name:   Arthur Flynn, Jr. Title:   Attorney-in-fact

--------------------------------------------------------------------------------

Chase Lincoln First Commercial Corporation, as a Lender By:  

/s/ Christopher Cestaro

Name:   Christopher Cestaro Title:   Authorized Signatory

--------------------------------------------------------------------------------

Energy Strategic Advisory Services LLC, as a Lender By:  

/s/ Jonathan Siegler

Name:   Jonathan Siegler Title:   Chief Financial Officer

--------------------------------------------------------------------------------

ESAS New Holdings LLC, as a Lender By:  

/s/ Jonathan Siegler

Name:   Jonathan Siegler Title:   Chief Financial Officer

--------------------------------------------------------------------------------

COVE KEY MASTER FUND LP, as a Lender By:  

/s/ John Kiani

Name:   John Kiani Title:   Co-Founder

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COVE KEY BLUESCAPE HOLDINGS LP, as a Lender By:  

/s/ John Kiani

Name:   John Kiani Title:   Co-Founder