Exhibit 10.A
 
Execution Copy

$500,000,000
 
AMENDED AND RESTATED
 
CREDIT AGREEMENT
 
among
 
EL PASO PRODUCTION HOLDING COMPANY,
 
EL PASO PRODUCTION COMPANY,
 
EL PASO ENERGY RATON CORPORATION,
 
and
 
EL PASO PRODUCTION GOM INC.,
 
as Borrowers,
 
FORTIS CAPITAL CORP.,
 
as Administrative Agent, Joint Lead Arranger and Joint Bookrunner,
 
THE ROYAL BANK OF SCOTLAND plc,
 
as Joint Lead Arranger, Joint Bookrunner and Syndication Agent,
 
THE BANK OF NOVA SCOTIA,
 
as Joint Lead Arranger and Co-Documentation Agent,
 
SOCIETE GENERALE,
 
as Co-Documentation Agent,
 
WESTLB AG, NEW YORK BRANCH,
 
as Co-Documentation Agent,
 
and
 
The Several Lenders
 
from Time to Time Parties Hereto
 
Dated as of October 19, 2005
 

TABLE OF CONTENTS
 
Page
 

SECTION 1 DEFINITIONS

1

 

1.1.

Defined Terms

1

1.2. 

Other Definitional Provisions

18

 

 

 

SECTION 2 AMOUNT AND TERMS OF COMMITMENTS

19

2.1.

Commitments

19

2.2.

Procedure for Borrowing

19

2.3. 

Repayment of Loans

20

2.4. 

Evidence of Debt

21

 

 

 

SECTION 3 LETTERS OF CREDIT

21

3.1.

The L/C Commitment

21

3.2. 

Procedure for Issuance of Letters of Credit

21

3.3. 

Fees, Commissions and Other Charges

22

3.4. 

L/C Participations

22

3.5. 

Reimbursement Obligation of the Borrowers

23

3.6. 

Obligations Absolute

24

3.7. 

Letter of Credit Payments

24

3.8. 

L/C Applications

24

 

 

 

SECTION 4 GENERAL PROVISIONS

25

4.1.

Interest Rates and Payment Dates

25

4.2. 

Computation of Interest and Fees

25

4.3. 

Conversion and Continuation Options

26

4.4. 

Minimum Amounts Maximum Number of Tranches

26

4.5. 

Optional Prepayments and Commitment Reductions

26

4.6. 

Commitment Fee; Administrative Agent’s Fee; Other Fees

28

4.7. 

Inability to Determine Interest Rate

28

4.8. 

Pro Rata Treatment and Payments

29

4.9. 

Computation of Borrowing Base

29

4.10. 

Mandatory Prepayments

32

4.11.

Illegality

34

4.12. 

Requirements of Law

34

4.13. 

Taxes

35

4.14. 

Indemnity

36

4.15. 

Change of Lending Office

37

4.16. 

Collateral Security

37

4.17. 

Replacement of Lenders

39

 

 

 

SECTION 5 REPRESENTATIONS AND WARRANTIES

39

5.1.

Financial Condition

39

5.2. 

No Change

40

5.3. 

Corporate Existence; Compliance with Law

40

5.4. 

Corporate Power; Authorization; Enforceable Obligations

40

5.5. 

No Legal Bar

41

5.6. 

No Material Litigation

41

5.7. 

No Default

41

5.8. 

Ownership of Property; Liens

41

5.9. 

Intellectual Property

41

5.10. 

Taxes

42

5.11. 

Federal Reserve Regulations

42

5.12. 

ERISA

42

5.13.

Investment Company Act; Other Regulations

43

5.14. 

Subsidiaries

43

5.15. 

Purpose of Loans

43

5.16. 

Environmental Matters

43

5.17. 

No Material Misstatements

44

5.18. 

Insurance

44

5.19. 

Future Commitments

44

5.20. 

Security Documents

45

 

 

 

SECTION 6 CONDITIONS PRECEDENT

45

6.1.

Conditions to Closing Date of the Existing Credit Agreement

45

6.2

Conditions to Effective Date of This Agreement

48

6.3 

Conditions to Each Extension of Credit

50

6.4 

Determinations Under Section 6

50

 

 

 

SECTION 7 AFFIRMATIVE COVENANTS

50

7.1.

Financial Statements

50

7.2. 

Certificates; Other Information

51

7.3. 

Payment of Obligations

52

7.4. 

Conduct of Business and Maintenance of Existence; Compliance with Law and
Contractual Obligations

52

7.5. 

Maintenance of Properties; Insurance

52

7.6. 

Inspection of Property; Books and Records; Discussions

52

7.7. 

Notices

53

7.8. 

Environmental Laws

53

7.9. 

Additional Collateral

54

7.10. 

Maintenance and Operation of Properties

54

7.11. 

Collateral Coverage

55

7.12. 

Further Assurances

55

 

 

 

SECTION 8 NEGATIVE COVENANTS

55

8.1.

Financial Covenant Conditions

55

8.2. 

Limitation on Indebtedness

55

8.3. 

Limitation on Liens

56

8.4.

Limitation on Guarantee Obligations

59

8.5. 

Limitation on Fundamental Change

59

8.6. 

Limitation on Sale of Assets

60

8.7. 

Limitation on Dividends

60

8.8. 

Limitation on Investments, Loans and Advances

61

8.9. 

Limitation on Payments and Modifications of Debt Instruments, Other Documents

62

8.10. 

Limitation on Transactions with Affiliates

62

8.11. 

Limitation on Changes in Fiscal Year

63

8.12. 

Limitation on Negative Pledge Clauses

63

8.13. 

Limitation on Lines of Business

63

8.14. 

Forward Sales

63

8.15. 

Hedging Agreements

63

 

 

 

SECTION 9 EVENTS OF DEFAULT

64

 

 

 

SECTION 10 THE ADMINISTRATIVE AGENT

67

10.1. 

Appointment

67

10.2. 

Delegation of Duties

67

10.3. 

Exculpatory Provisions

67

10.4. 

Reliance by Administrative Agent

67

10.5. 

Notice of Default

68

10.6. 

Non-Reliance on Administrative Agent and Other Lenders

68

10.7. 

Indemnification

69

10.8. 

Administrative Agent in Its Individual Capacity

69

10.9. 

Successor Administrative Agent

69

10.10. 

Issuing Lender

70

10.11. 

Others

70

10.12. 

Hedging Arrangements

70

 

 

 

SECTION 11 MISCELLANEOUS

70

11.1. 

Amendments and Waivers

70

11.2.

Notices

71

11.3. 

No Waiver; Cumulative Remedies

73

11.4. 

Survival of Representations and Warranties

73

11.5. 

Payment of Expenses and Taxes

73

11.6. 

Successors and Assigns; Participations and Assignments

74

11.7. 

Adjustments; Set-off

77

11.8. 

Counterparts

78

11.9. 

Severability

78

11.10. 

Integration

78

11.11. 

GOVERNING LAW

78

11.12. 

Submission To Jurisdiction; Waivers

78

11.13. 

Acknowledgments

79

11.14. 

WAIVERS OF JURY TRIAL

79

11.15. 

Release of Borrowing Base Properties

79

11.16. 

Limitation on Interest

79

11.17. 

Joint and Several Obligations of Borrowers

80

11.18

Amendment and Restatements

81

11.19 

USA Patriot Act Notice

81

 

EXHIBITS

A Form of Note
B Form of Guarantee Agreement
C [Reserved]
D [Reserved]
E [Reserved]
F Form of Closing Certificate
G Form of Assignment and Acceptance

ANNEXES

I Borrowing Base Properties

 

--------------------------------------------------------------------------------

 
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 19, 2005 (this
“Agreement”), among EL PASO PRODUCTION HOLDING COMPANY, a Delaware corporation,
EL PASO PRODUCTION COMPANY, a Delaware corporation, and EL PASO ENERGY RATON
CORPORATION, a Delaware corporation, EL PASO PRODUCTION GOM INC., a Delaware
corporation (individually, a “Borrower” and collectively, the “Borrowers”),
Fortis Capital Corp. (“Fortis”), as administrative agent for the Lenders (in
such capacity, the “Administrative Agent”), as joint lead arranger (in such
capacity, a “Joint Lead Arranger”) and joint bookrunner (in such capacity, a
“Joint Bookrunner”), THE ROYAL BANK OF SCOTLAND plc (“RBS”), as joint lead
arranger (in such capacity, a “Joint Lead Arranger”) and joint bookrunner (in
such capacity, a “Joint Bookrunner”) and syndication agent (in such capacity,
the “Syndication Agent”), THE BANK OF NOVA SCOTIA (“BNS”), as joint lead
arranger (in such capacity, a “Joint Lead Arranger”) and co-documentation agent
(in such capacity, a “Documentation Agent”), SOCIETE GENERALE (“SocGen”), as
co-documentation agent (in such capacity, a “Documentation Agent”), WESTLB AG,
NEW YORK BRANCH (“WestLB”), as co-documentation agent (in such capacity, a
“Documentation Agent”), and the several banks, financial institutions and other
entities from time to time parties to this Agreement (collectively, the
“Lenders”).
 
WITNESSETH:
 
WHEREAS, the Borrowers, Fortis as Administrative Agent, Joint Lead Arranger,
Joint Bookrunner and a Lender, RBS as Joint Lead Arranger, Joint Bookrunner,
Syndication Agent and a Lender, and BNS as Joint Lead Arranger, Documentation
Agent and a Lender (Fortis, RBS and BNS are referred to as the “Existing
Lenders”), are parties to the Credit Agreement dated as of August 30, 2005 (the
“Existing Credit Agreement”);
 
WHEREAS, immediately prior to the execution of this Agreement, certain
additional Lenders (the “New Lenders”) have purchased and assumed certain of the
rights and interests of the Existing Lenders (the “Lender Assignments”);
 
WHEREAS, the Borrowers, the Administrative Agent, the Existing Lenders and the
New Lenders desire to amend and restate the Existing Credit Agreement for the
purpose of providing financing for the Borrowers’ oil and gas operations; and
 
WHEREAS, after giving effect to the Lender Assignments and the amendment and
restatement of the Existing Credit Agreement pursuant to the terms hereof, the
Commitment of each Lender hereunder will be as set forth on Schedule 1.1(a);
 
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
 
SECTION 1
 
DEFINITIONS
 
1.1. Defined Terms. As used in this Agreement, the following terms shall have
the following meanings:
 
“ABR Loans” - Loans the rate of interest applicable to which is based upon the
Alternate Base Rate.
 
“Administrative Agent” - as defined in the Preamble to this Agreement.
 
“Affiliate” - as to any Person, any other Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, “control” of
a Person means the power, directly or indirectly, either to (a) vote 10% or more
of the securities having ordinary voting power for the election of directors of
such Person or (b) direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
 
“Aggregate Credit Exposure” - as to any Lender at any time, an amount equal to
the sum of (a) the aggregate principal amount of all Loans made by such Lender
then outstanding and (b) such Lender’s Commitment Percentage of the Letter of
Credit Outstandings at such time. For purposes of the foregoing, and for the
avoidance of doubt, Loans shall not include the contingent obligations of the
Borrower or any Affiliate thereof owed to a Lender in connection with Commodity
Hedging Agreements.
 
“Agreement” - this Credit Agreement, as further amended, supplemented or
otherwise modified from time to time.
 
“Alternate Base Rate” - for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof: “Prime Rate”
shall mean the rate of interest per annum publicly announced from time to time
by Fortis as its prime rate in effect at its principal office in New York City
(the Prime Rate not being intended to be the lowest rate of interest charged by
Fortis in connection with extensions of credit to debtors); and “Federal Funds
Effective Rate” shall mean, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
 
“Applicable Margin” - for any day with respect to Eurodollar Loans and ABR
Loans, the applicable per annum rate set forth below opposite the Borrowing Base
Usage in effect on any such day:
 
Borrowing Base Usage
Eurodollar
Margin
Alternate
Base Rate
Margin
Less than or equal to 50%
1.25%
.25%
Greater than 50% and less than or equal to 75%
1.50%
.50%
Greater than 75% and less than or equal to 90%
1.75%
.75%
Greater than 90%
1.875%
.875%

“Assignee” - as defined in subsection 11.6(c).
 
“Available Commitment” - as to any Lender at any time, an amount, if positive,
equal to (a) the amount of such Lender’s Commitment in excess of (b) such
Lender’s Aggregate Credit Exposure.
 
“Available Distribution Amount” - with respect to any dividend or other
distribution, means (i) $50,000,000 minus (ii) the cumulative amount of all
dividends and distributions made after the Closing Date in excess of the amounts
described in subsection 8.7(c)(ii) and (iii).
 
“BNS” - as defined in the preamble of this Agreement.
 
“Borrower” and “Borrowers” - as defined in the preamble to this Agreement.
 
“Borrower Redetermination Notice” - a notice from the Borrower’s Representative
to the Administrative Agent requesting that the Administrative Agent redetermine
the Borrowing Base, which notice may be sent by the Borrower’s Representative at
any time, provided that no more than one such notice may be delivered by the
Borrower’s Representative between Scheduled Redetermination Dates.
 
“Borrowers’ Representative” - EPPHC, which is authorized to act on behalf of the
Borrowers under this Agreement.
 
“Borrowing Base” - at any time of determination, the amount then in effect as
determined in accordance with Section 4.9.
 
“Borrowing Base Availability” - as to any Lender at any time, an amount equal to
the excess, if any, of (a) such Lender’s Commitment Percentage of the Borrowing
Base in effect at such time over (b) such Lender’s Aggregate Credit Exposure.
 
“Borrowing Base Deficiency” - the amount by which the Aggregate Credit Exposure
of the Lenders exceeds the Borrowing Base then in effect.
 
“Borrowing Base Deficiency Notification Date” - the date on which any notice of
a Borrowing Base Deficiency is received by the Borrowers’ Representative.
 
“Borrowing Base Properties” - those Hydrocarbon Interests then owned by a
Borrower and subject to a Mortgage utilized by the Administrative Agent and the
Lenders as the basis for calculation of the Borrowing Base in the initial
Reserve Report prepared by Ryder Scott and delivered to the Administrative Agent
prior to the Closing Date, which description will be modified or supplemented
from time to time as properties are added or deleted in accordance with the
provisions of this Agreement. The Hydrocarbon Interests described in each
preparation of a supplemental Reserve Report delivered in connection with a
redetermination of the Borrowing Base pursuant to Section 4.9 hereof and subject
to a Mortgage shall constitute a restatement of the list of Borrowing Base
Properties. The Borrowing Base Properties as of the Closing Date are described
on Annex I hereto.
 
“Borrowing Base Usage” on any day means the percentage equivalent to the ratio
of (i) the sum of the aggregate principal amount of the Loans then outstanding
and Letter of Credit Outstandings on such day to (ii) the Borrowing Base in
effect on such day.
 
“Borrowing Date” - any Business Day specified in a notice pursuant to subsection
2.2 or 3.2 as a date on which the Borrower’s Representative requests the Lenders
to make Loans or the Issuing Lender to issue a Letter of Credit hereunder.
 
“Business Day” - any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain
closed; provided that, when used in connection with a Eurodollar Loan, the term
“Business Day” shall exclude any day on which banks are not open for dealings in
dollar deposits in the London interbank market.
 
“Capital Lease” - any lease of property, real or personal, the obligations of
the lessee in respect of which are required in accordance with GAAP to be
capitalized on the balance sheet of the lessee.
 
“Capital Stock” - any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, including,
without limitation, any preferred stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
 
“Cash Collateral” - cash or Cash Equivalents subject to a security agreement in
form and substance satisfactory to the Administrative Agent or letters of credit
issued in favor of the Administrative Agent by an issuer and on terms and
conditions satisfactory to the Administrative Agent, in an aggregate amount not
to exceed $25,000,000.
 
“Cash Equivalents” - (a) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed or insured by the United States
Government or any agency thereof, (b) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition
and overnight bank deposits of any Lender or of any commercial bank (i) having
capital and surplus in excess of $500,000,000 or (ii) which has a short-term
commercial paper rating which satisfies the requirements set forth in clause (d)
below, (c) repurchase obligations of any Lender or of any commercial bank
satisfying the requirements of clause (b) of this definition, having a term of
not more than 30 days with respect to securities issued, fully guaranteed or
insured by the United States Government or any agency thereof, (d) commercial
paper of a domestic issuer rated at least A-2 by Standard and Poor’s Ratings
Group (“S&P”) or P-2 by Moody’s Investors Service, Inc. (“Moody’s”), (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody’s, (f) securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition or
(g) shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition.
 
“Cash Management Program” - El Paso Corporation’s cash management program
applicable to the El Paso Corporation and its Subsidiaries, as in effect from
time to time.
 
“Change of Control” - except for the transactions contemplated pursuant to a
Reorganization Plan consented to by the Lenders and the transfer of the
ownership of EPPHC by El Paso Corporation to a wholly owned Subsidiary of El
Paso Corporation with no material liabilities or obligations which will own all
the outstanding Capital Stock of EPPHC, any Person or “group” (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) (i) shall have acquired beneficial ownership of 50% or more of any
outstanding class of Capital Stock having ordinary voting power in the election
of directors of any Borrower or (ii) shall obtain the power (whether or not
exercised) to elect a majority of any Borrower’s directors.
 
“Closing Date” - the date on which the conditions precedent to the effectiveness
of the Existing Credit Agreement set forth in subsection 6.1 were satisfied
(August 30, 2005).
 
“Code” - the Internal Revenue Code of 1986, as amended from time to time.
 
“Collateral Coverage Ratio” - the ratio of the Collateral Value to the greater
of (i) the Borrowing Base then in effect, and (ii) the outstanding Loans and
Letter of Credit Outstandings.
 
“Collateral Value” - (a) the PV-10 Value of the Borrowing Base Properties as of
the most recent Redetermination Date, plus (b) the PV-10 Value of Borrowing Base
Properties acquired since that date, plus (c) Cash Collateral, minus (d) the
PV-10 Value of Borrowing Base Properties subject to a Disposition since that
date.
 
“Collateral Value Deficiency” - if the Collateral Coverage Ratio is less than
1.5 to 1.0.
 
“Commitment” - as to any Lender, the obligation of such Lender to make Loans to
the Borrower 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 1.1(a) (which amount, with respect to all Lenders, shall equal
$500,000,000 as of the Closing Date), as such amount may be reduced from time to
time in accordance with the provisions of this Agreement.
 
“Commitment Fee Rate” - for any day, a rate per annum equal to 0.375%.
 
“Commitment Percentage” - as to any Lender at any time, the percentage which
such Lender’s Commitment then constitutes of the aggregate Commitments (or, at
any time after the Commitments shall have expired or terminated, the percentage
which such Lender’s Aggregate Credit Exposure then outstanding constitutes of
the Aggregate Credit Exposure then outstanding for all of the Lenders).
 
“Commitment Period” - the period from and including the date hereof to but not
including the Termination Date or such earlier date on which the Commitments
shall terminate as provided herein.
 
“Commitments” - the collective reference to the Commitments and the L/C
Commitment.
 
“Commodity Hedging Agreement” - a commodity hedging, basis hedging or purchase
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in commodity prices or exchanging of notional commodity
obligations, either generally or under specific contingencies.
 
“Commonly Controlled Entity” - an entity, whether or not incorporated, which is
under common control with the Borrower within the meaning of Section 4001 of
ERISA or is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
 
“Consolidated Interest Expense” - with respect to EPPHC and its Restricted
Subsidiaries on a consolidated basis for any period, the sum of (i) gross
interest expense (including all cash and accrued interest expense but excluding
cash fees related to credit facilities) of EPPHC and its Restricted Subsidiaries
for such period on a consolidated basis, including to the extent included in
interest expense in accordance with GAAP (x) the amortization of debt discounts
and other fees related to credit facilities of EPPHC and its Restricted
Subsidiaries, and (y) the portion of any payments or accruals with respect to
Capital Leases or non-volumetric production payments allocable to interest
expense and (ii) capitalized interest of EPPHC and its Restricted Subsidiaries
on a consolidated basis.
 
“Consolidated Net Income” - for any period, net income of EPPHC and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
 
“Continuing 70% Test” - as defined in subsection 4.16(d).
 
“Contractual Obligation” - as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
 
“Control” - 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.
 
“Debt Leverage Ratio” - as of any date, the ratio of Indebtedness of EPPHC and
its Restricted Subsidiaries on a consolidated basis as of such date to EBITDA of
EPPHC and its Restricted Subsidiaries on a consolidated basis for the 12-month
period ending on such date; provided, however, that for purposes of Section
8.2(j), such ratio shall be calculated using EBITDA for the four fiscal quarter
period most recently ended for which financial statements are available.
 
“Default” - any of the events specified in Section 9, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
 
“Disposition” - the sale, conveyance, transfer, lease or other disposition
(including, without limitation, through a sale and leaseback transaction or as a
result of casualty or condemnation) of any Property.
 
“Documentation Agents” - BNS, SocGen and WestLB.
 
“Dollars” and “$” - dollars in lawful currency of the United States of America.
 
“Domestic Restricted Subsidiary” - a Domestic Subsidiary that is a Restricted
Subsidiary.
 
“Domestic Subsidiary” - any Subsidiary organized under the laws of any
jurisdiction within the United States of America (including territories
thereof).
 
“EBITDA” - with respect to EPPHC and its Restricted Subsidiaries, for any
period, Consolidated Net Income for that period, plus, without duplication and
to the extent deducted from revenues in determining Consolidated Net Income for
that period, the sum of (a) the aggregate amount of Consolidated Interest
Expense for that period, (b) the aggregate amount of commissions, discounts,
points and other fees, including letter of credit fees paid during that period,
(c) the aggregate amount of income tax expense for that period, (d) all amounts
attributable to depreciation, depletion and amortization for that period, (e)
non-cash charges and non-cash expenses relating to (i) full cost ceiling test
write-downs and (ii) Hedging Agreements during that period, (f) distributions of
cash to EPPHC or any of its consolidated Subsidiaries by any entity accounted
for on the equity method, and minus the sum of (y) earnings of entities
accounted for on the equity method, and (z) to the extent added to revenues in
determining Consolidated Net Income for that period, all non-cash income and
unrealized noncash gains in respect of Hedging Agreements during that period, in
each case determined in accordance with GAAP and without duplication of amounts;
provided, however, that if any such Person shall have consummated any material
acquisition or Disposition during such period, EBITDA shall be determined on a
pro forma basis as if such acquisition or Disposition had occurred on the first
day of such period.
 
“Effective Date” - the date on which the conditions precedent to the
effectiveness of this Agreement set forth in Section 6.2 shall be satisfied
(October 19, 2005).
 
“Environmental Laws” - any and all laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, or other legally enforceable requirement (including,
without limitation, common law) of any foreign government, the United States, or
any state, local, municipal or other Governmental Authority with jurisdiction
over the operations of any Loan Party, regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment or of
human health, as has been, is now, or may at any time hereafter be, in effect.
 
“Environmental Permits” - any and all permits, licenses, registrations,
notifications, approvals, exemptions and any other authorization required under
any applicable Environmental Law.
 
“EPPHC” - El Paso Production Holding Company.
 
“ERISA” - the Employee Retirement Income Security Act of 1974, as amended from
time to time.
 
“Eurocurrency Reserve Requirements” - for any day as applied to a Eurodollar
Loan, the aggregate (without duplication) of the rates (expressed as a decimal)
of reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of such Board) maintained by a member
bank of such System.
 
“Eurodollar Base Rate” - with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to the rate per annum
for Dollar deposits with a maturity comparable to such Interest Period which
appears on page 3750 of the Dow Jones Market Service (formerly Telerate) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period; provided that if there shall no longer
exist a page 3750 of the Dow Jones Market Service (formerly Telerate) Page (or
if such page is not available on the relevant Business Day), the Eurodollar Base
Rate shall mean an interest rate per annum equal to the average (rounded upward,
if necessary, to the next 1/100th of 1%) of the respective rates per annum
notified to the Administrative Agent by the Reference Bank as the average of the
rates at which Dollar deposits (in an amount comparable to the amount of the
Lenders’ Eurodollar Loan to be outstanding during such Interest Period and for a
maturity comparable to such Interest Period) are offered to the Reference Bank
in immediately available funds by prime banks in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
 
“Eurodollar Loans” - Loans the rate of interest applicable to which is based
upon the Eurodollar Rate.
 
“Eurodollar Rate” - with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
 
Eurodollar Base Rate   
1.00 - Eurocurrency Reserve Requirements
 
“Event of Default” - any of the events specified in Section 9, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
 
“Excess Amount” - as defined in Section 4.5(e).
 
“Extension of Credit” - as to any Lender, the making of, or the issuance of, or
participation in, a Loan by such Lender, or the issuance of, or participation
in, a Letter of Credit by such Lender.
 
“Fee Letter” - the fee letter agreement among the Borrowers, Fortis, RBS and
BNS.
 
“Foreign Subsidiary” - any Subsidiary that is not a Domestic Subsidiary.
 
“Fortis” - as defined in the preamble of this Agreement.
 
“Free Cash Flow” - for any period, EBITDA for such period minus the sum of the
following: (1) all income tax expense of EPPHC and its consolidated Restricted
Subsidiaries for such period, but only to the extent actually paid in cash
during such period, (2) Consolidated Interest Expense for such period, but only
to the extent actually paid in cash during such period, and (3) 105% of, in each
case, any depreciation, depletion, exploration and amortization expense of EPPHC
and its consolidated Restricted Subsidiaries recorded for such period in
accordance with GAAP.
 
“GAAP” - generally accepted accounting principles in the United States of
America in effect from time to time, provided that for purposes of determining
compliance with the covenants contained in Section 8, “GAAP” shall mean
generally accepted accounting principles in the United States of America as in
effect on the date hereof and applied on a basis consistent with the application
used in the financial statements referred to in subsection 5.1.
 
“Governmental Authority” - any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of government.
 
“Guarantee Agreement” - the Guarantee Agreement to be executed and delivered by
each Guarantor substantially in the form of Exhibit B, as the same may be
amended, modified or supplemented from time to time.
 
“Guarantee Obligation” - as to any Person (the “guaranteeing person”), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the “primary obligations”)
of any other third Person (the “primary obligor”) in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person’s maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith. Obligations of the
Borrower or any Subsidiary pursuant to indemnities which (a) are granted in the
ordinary course of business, including, without limitation, (i) such obligations
in connection with stock purchase agreements or asset purchase and sale
agreements and (ii) such obligations in connection with the conduct of the Oil
and Gas Business in the ordinary course of business and (b) do not cover
Indebtedness of the types described in clauses (a) through (f) of the definition
of Indebtedness, shall not constitute “Guarantee Obligations” for purposes of
this Agreement.
 
“Guarantor” - each of EPPHC’s Domestic Restricted Subsidiaries that are not
Borrowers, and any other Subsidiary of EPPHC which incurs a Guarantee Obligation
with respect to the Indebtedness of the Borrowers.
 
“Hedge Parties” - a Lender or an Affiliate of a Lender that enters into a
Hedging Agreement with the Borrowers.
 
“Hedging Agreement” - any Interest Rate Protection Agreement, Commodity Hedging
Agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement concluded by the Borrowers.
 
“Hydrocarbon Interests” - all rights, titles, interests and estates now owned or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee or lease interests, farm
outs, overriding royalty and royalty interests, net profit interests, oil
payments, production payment interests and similar mineral interests, including
any reserved or residual interest of whatever nature.
 
“Hydrocarbons” - oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons, all products refined, separated, settled and
dehydrated therefrom and all products refined therefrom, including, without
limitation, kerosene, liquefied petroleum gas, refined lubricating oils, diesel
fuel, drip gasoline, natural gasoline, helium and sulfur.
 
“Indebtedness” - of any Person at any date, without duplication, (a) the
principal amount of indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices and accrued current liabilities incurred in
the ordinary course of business), (b) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Capital Leases and non-volumetric production
payment arrangements, (d) all obligations of such Person in respect of letters
of credit and acceptances issued or created for the account of such Person, (e)
all net obligations of such Person under Hedging Agreements, (f) all obligations
of others of the type referred to in clauses (a) through (e) above and which are
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof, except that
the amount of any nonrecourse obligation shall be deemed to be the lesser of the
value of the property securing such obligation and the amount of such obligation
so secured, (g) all Guarantee Obligations with respect to the items described in
clauses (a) through (e) above, (h) Guarantee Obligations with respect to
volumetric production payments, and (i) obligations of such Person to purchase
or repurchase securities, accounts or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property; provided, that for the purposes of calculating the Debt Leverage Ratio
under subsection 8.1(b) and subsection 8.2(j), the definition of Indebtedness
shall not include the obligations described in clause (e) above or production
payments.
 
“Indenture” - the Indenture dated as of May 23, 2003, between EPPHC and
Wilmington Trust Company, as amended, relating to the issuance of the Senior
Notes.
 
“Independent Auditors” - means PricewaterhouseCooper LLP or other independent
certified public accountants of nationally recognized standing reasonably
acceptable to the Required Lenders.
 
“Independent Engineer” - means Ryder Scott or another independent engineering
firm selected by EPPHC and reasonably acceptable to the Technical Banks.
 
“Insolvency” - with respect to any Multiemployer Plan, the condition that such
Plan is insolvent within the meaning of Section 4245 of ERISA.
 
“Insolvent” - pertaining to a condition of Insolvency.
 
“Intellectual Property” - as defined in Section 5.9 of this Agreement.
 
“Interest Coverage Ratio” - as of any date, the ratio of EBITDA of EPPHC and its
Restricted Subsidiaries for the 12-month period ending on such date to
Consolidated Interest Expense of EPPHC and its Restricted Subsidiaries for such
12-month period.
 
“Interest Payment Date” - (a) as to any ABR Loan, the last day of each March,
June, September and December, commencing September 30, 2005, the date of any
conversion from an ABR Loan to a Eurodollar Loan and the Termination Date, (b)
as to any Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period.
 
“Interest Period” - with respect to any Eurodollar Loan:
 
(i) initially, the period commencing on the borrowing or conversion date, as the
case may be, with respect to such Eurodollar Loan and ending one, two, three or
six (or, to the extent available to all of the Lenders, nine or twelve) months
thereafter, as selected by the Borrowers’ Representative in its notice of
borrowing or notice of conversion, as the case may be, given with respect
thereto; and
 
(ii) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two, three or
six (or, to the extent available to all of the Lenders, nine or twelve) months
thereafter, as selected by the Borrowers’ Representative by irrevocable notice
to the Administrative Agent not less than three Business Days prior to the last
day of the then current Interest Period with respect thereto;
 
(iii) provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
 
(1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end
on a day that is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
 
(2) any Interest Period pertaining to a Eurodollar Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month;
 
(3) the Borrowers’ Representative shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest Period
for such Loan; and
 
(4) any Interest Period that would otherwise extend beyond the Termination Date
shall end on the Termination Date.
 
“Interest Rate Protection Agreement” - an interest rate swap, cap or collar
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in interest rates or the exchange of notional interest
obligations, either generally or under specific contingencies.
 
“Investments” - as defined in subsection 8.8.
 
“ISP” - International Standby Practices, as the same may be amended from time to
time.
 
“Issuing Lender” - the Administrative Agent or any of its respective Affiliates,
in its capacity as issuer of a Letter of Credit, and any other Lender to whom
the Administrative Agent or any of its respective Affiliates assigns (with the
prior written consent of the Required Lenders) all or a portion of its
obligations to issue Letters of Credit hereunder.
 
“Joint Bookrunners” - Fortis and RBS.
 
“Joint Lead Arrangers” - Fortis, RBS and BNS.
 
“L/C Application” - as defined in subsection 3.2.
 
“L/C Commitment” - collectively, the Issuing Lender’s obligation to issue
Letters of Credit and the obligation of Participating Lenders to acquire L/C
Participating Interests therein pursuant to Section 3.
 
“L/C Participating Interest” - with respect to any Letter of Credit (a) in the
case of the Issuing Lender with respect thereto, its interest in such Letter of
Credit and any L/C Application relating thereto after giving effect to the
granting of participating interests therein, if any, pursuant hereto and (b) in
the case of each Participating Lender, its undivided participating interest in
such Letter of Credit and any L/C Application relating thereto.
 
“Lender Redetermination Notice” - a notice from the Required Lenders to the
Borrower’s Representative giving notice of their election to redetermine the
Borrowing Base, which notice may be sent by the Required Lenders at any time
they so elect, provided that such an election (excluding any mandatory
redetermination of the Borrowing Base made in connection with the issuance of
Subordinated Indebtedness pursuant to subsection 4.9(d)(iii), any Disposition of
Borrowing Base Properties described in subsection 8.6(c) or (d), the failure of
the Borrowers to comply with the Continuing 70% Test, the substitution as
Collateral of Oil and Gas Properties having a value in excess of 10% of the
PV-10 Value of the Borrowing Base Properties at such time, and the prepayment or
purchase of the Senior Notes in accordance with subsection 8.9(w)) can be made
by the Required Lenders no more than once between Scheduled Redetermination
Dates.
 
“Letters of Credit” - as defined in subsection 3.1(a).
 
“Letter of Credit Outstandings” - at any time, the sum of (a) the aggregate
amount available for drawing under Letters of Credit then outstanding and (b)
the aggregate amount of drawings under Letters of Credit which have not then
been reimbursed pursuant to subsection 3.5.
 
“Lien” - any mortgage, pledge, hypothecation, assignment for security purposes,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing), but excluding set-off arrangements.
 
“Loans” - as defined in subsection 2.1(a).
 
“Loan Documents” - the collective reference to this Agreement, any Notes, the
L/C Applications, the Fee Letter, the Guarantee Agreements, the Security
Documents and any Hedging Agreement between a Borrower and any Hedge Party
(including, any Hedging Agreement between a Borrower and any commercial bank or
other financial institution that was at the time such Hedging Agreement was
entered into a Lender or an Affiliate of a Lender).
 
“Loan Parties” - the collective reference to the Borrowers, each Guarantor and
any other Subsidiary that at the time of determination is a party to any Loan
Document.
 
“Material Adverse Effect” - a material adverse effect on (a) the business,
assets, liabilities, property, or financial condition of a Borrower and its
Subsidiaries taken as a whole, (b) the ability of a Borrower or any of the other
Loan Parties to perform their respective obligations under the Loan Documents,
or (c) the validity or enforceability of this or any of the other Loan Documents
or the rights and remedies of the Administrative Agent or the Lenders hereunder
or thereunder.
 
“Materials of Environmental Concern” - any petroleum products or any hazardous
or toxic substances, materials, or wastes, defined or regulated as such in or
under any Environmental Law, including, without limitation, asbestos or asbestos
containing material, polychlorinated biphenyls, urea-formaldehyde insulation,
and any other substance that is regulated under any Environmental Law.
 
“Monthly Date” - the last Business Day of each calendar month.
 
“Mortgage” - each mortgage, deed of trust, assignment or security agreement
executed by the Borrowers in form and substance reasonably satisfactory to the
Administrative Agent which purports to create a Lien in favor of the
Administrative Agent, in each case as amended, supplemented or otherwise
modified from time to time.
 
“Multiemployer Plan” - a Plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
 
“Net Proceeds” - with respect to any Disposition by the Borrowers or any
Subsidiary, an amount equal to the gross proceeds in cash (including cash
equivalents and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such
Disposition, net of taxes, attorneys’ fees, accountants’ fees, brokerage,
consultant and other fees and expenses actually incurred in connection with such
Disposition, including any sums retained in escrow at such closing.
 
“Non-Excluded Taxes” - as defined in subsection 4.13(a).
 
“Non-U.S. Lender” - as defined in subsection 4.13(b).
 
“Note” - as defined in subsection 2.4.
 
“Obligations” - the collective reference to the unpaid principal of and interest
on the Loans and the Reimbursement Obligations and all other obligations and
liabilities of the Borrowers (including, without limitation, amounts owing under
any Loan Document, including any Hedging Agreement, and interest accruing at the
then applicable rate provided in this Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in this Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrowers,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to the Administrative Agent or any of the Lenders or their
Affiliates under the Loan Documents.
 
“Oil and Gas Business” - (a) the acquisition, exploration, exploitation,
development, operation and disposition of interests in Oil and Gas Properties
and Hydrocarbons, (b) the gathering, marketing, treating, processing, storage,
selling and transporting of any production from such interests or Oil and Gas
Properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons, (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of Hydrocarbons, (d) any business relating to
oilfield sales and service, and (e) any activity that is ancillary or necessary
or desirable to facilitate the activities described in clauses (a) through (d)
of this definition.
 
“Oil and Gas Properties” - Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Governmental Authority having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all pipelines,
gathering lines, compression facilities, tanks and processing plants; all
interests held in royalty trusts whether presently existing or hereafter
created; all Hydrocarbons in and under and which may be produced, saved,
processed or attributable to the Hydrocarbon Interests, the lands covered
thereby and all Hydrocarbons in pipelines, gathering lines, tanks and processing
plants and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above, including any and all real
property, now owned or hereafter acquired, used or held for use in connection
with the operating, working or development of any of such Hydrocarbon Interests
or Property and including any and all surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing; in each case whether
now owned or hereafter acquired directly or indirectly.
 
“Participants” - as defined in subsection 11.6(b).
 
“Participating Lender” - with respect to any Letter of Credit, any Lender (other
than the Issuing Lender with respect to such Letter of Credit) with respect to
its L/C Participating Interest in such Letter of Credit.
 
“PBGC” - the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
 
“Permitted Liens” - as defined in Section 8.3.
 
“Person” - an individual, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint venture, limited liability
company, Governmental Authority or other entity of whatever nature.
 
“Plan” - at a particular time, any employee benefit plan which is subject to
Title IV of ERISA and in respect of which a Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.
 
“Price Criteria” - certain price assumptions determined by the Technical Banks
in their sole discretion utilized in the determination of future revenues from
oil and gas production.
 
“Properties” - any kind of facility, fixture, property or asset, whether real,
personal or mixed, or tangible or intangible owned, leased or operated by the
Borrowers or a Guarantor.
 
“Proved Reserves” - the estimated quantities of crude oil, condensate, natural
gas and natural gas liquids that geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions (i.e., prices and
costs as of the date the estimate is made), as determined in accordance with
Rule 4-10 of Regulation S-X promulgated by, and other applicable requirements
of, the United States Securities and Exchange Commission.
 
“PV 10 Value” - with respect to any Oil and Gas Properties, the then present
value of such Properties agreed to by the Technical Banks utilizing a 10%
discount rate and the Price Criteria furnished by the Administrative Agent to
EPPHC thirty (30) days prior to the delivery of the then relevant Reserve Report
under Section 4.9.
 
“RBS” - as defined in the preamble to this Agreement.
 
“Redetermination Date” - each date that the redetermined Borrowing Base becomes
effective subject to the notice requirements specified in subsection 4.9.
 
“Reference Bank” - Fortis Bank S.A./N.V.
 
“Register” - as defined in subsection 11.6(d).
 
“Regulation U” - Regulation U of the Board of Governors of the Federal Reserve
System as in effect from time to time.
 
“Regulations T and X” - the corresponding regulation of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
or other regulation or official interpretation of said Board of Governors, and
all official rulings and interpretations thereunder or thereof.
 
“Reimbursement Obligations” - the obligation of the Borrowers to reimburse the
Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of
Credit issued by the Issuing Lender in accordance with the terms of this
Agreement and the related L/C Applications.
 
“Reorganization” - with respect to any Multiemployer Plan, the condition that
such plan is in reorganization within the meaning of Section 4241 of ERISA.
 
“Reorganization Plan” - a plan for the corporate restructuring of El Paso
Corporation and its Subsidiaries, including the Borrowers and the Guarantor.
 
“Reportable Event” - any of the events set forth in Section 4043(b) of ERISA,
other than those events as to which the thirty-day notice period is waived under
29 C.F.R. Part 4043.
 
“Required Lenders” - at any time while no Loans are outstanding, Lenders having
at least sixty-six and two-thirds percent (66-2/3%) of the aggregate
Commitments, and, at any time while Loans are outstanding, Lenders holding at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate
principal amount of the Loans (without regard to any sale by a Lender of a
participation in any Loan under Section 11.6(b)).
 
“Requirement of Law” - as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
 
“Reserve Report” - a report in form and substance satisfactory to the Technical
Banks, separately stated with respect to (i) all Oil and Gas Properties owned
directly or indirectly by the Loan Parties valued in accordance with Rule 4-10
of Regulation S-X promulgated by, and other applicable requirements of, the
United States Securities and Exchange Commission, (ii) all Borrowing Base
Properties owned directly or indirectly by the Borrowers valued using the Price
Criteria furnished by the Administrative Agent to the Borrowers’ Representative,
and (iii) all Oil and Gas Properties owned directly or indirectly by the
Borrowers valued using the Price Criteria furnished by the Administrative Agent
to the Borrowers’ Representative, setting forth, among other things, (a) the
PV-10 Value of such Properties, (b) the Proved Reserves attributable to such
Properties, and (c) a projection of the rate of production and net income of the
Proved Reserves attributable to such Properties as of the date of such Reserve
Report.
 
“Responsible Officer” - of any Loan Party, the president, the chief financial
officer, treasurer or controller of such Loan Party.
 
“Restricted Subsidiary” - each Subsidiary of EPPHC that is not a Borrower or an
Unrestricted Subsidiary. As of the date of this Agreement, the following
Subsidiaries of EPPHC are Restricted Subsidiaries: Medicine Bow Energy
Corporation, Medicine Bow Operating Company and MBOW Four Star Corporation. Each
such Restricted Subsidiary is a Domestic Restricted Subsidiary and thus a
Guarantor.
 
“Ryder Scott” - Ryder Scott Company, L.P.
 
“Scheduled Redetermination Dates” - April 30 and October 31 of each year.
 
“Secured Parties” - the Lenders under this Agreement and a Lender or any
Affiliate of a Lender party to a Hedging Agreement with any Borrower. The term
Secured Parties shall also include a former Lender or an Affiliate of a former
Lender that is party to a Hedging Agreement with any Borrower, provided that
such former Lender or Affiliate was a Lender hereunder or an Affiliate of a
Lender hereunder at the time it entered into such Hedging Agreement.
 
“Security Documents” - the collective reference to the Mortgages and all other
security documents hereafter delivered to the Administrative Agent granting a
Lien on any asset or assets of any Person to secure the obligations and
liabilities of the Borrowers hereunder and under any of the other Loan Documents
or to secure any guarantee of any such obligations and liabilities.
 
“Senior Notes” - the 7¾% Senior Notes due 2013 issued by EPPHC pursuant to the
Indenture.
 
“Single Employer Plan” - any Plan which is covered by Title IV of ERISA, but
which is not a Multiemployer Plan.
 
“SocGen” - as defined in the preamble to this Agreement.
 
“Subordinated Indebtedness” - any Indebtedness of the Borrowers contractually
subordinated to the prior payment in full of the Loans, Reimbursement
Obligations and any other obligations hereunder in a manner acceptable to the
Required Lenders as evidenced by their written approval.
 
“Subsidiary” - as to any Person, a corporation, partnership or other entity of
which more than 50% of the total voting power of shares of stock or other equity
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to vote in the election of directors, a managing general partner,
or majority of general partners or other managers or trustees thereof, is at the
time owned or controlled, directly or indirectly by such Person or one or more
of the other Subsidiaries of such Person (or a combination thereof). Unless
otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in
this Agreement shall refer to any direct or indirect Subsidiary or Subsidiaries
of EPPHC.
 
“Syndication Agent” - RBS.
 
“Technical Banks” - Fortis, RBS and BNS.
 
“Termination Date” - August 30, 2010.
 
“Tranche” - the collective reference to Eurodollar Loans the then current
Interest Periods with respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall originally have been made
on the same day); Tranches may be identified as “Eurodollar Tranches”
 
“Transferee” - as defined in subsection 11.6(f).
 
“Type” - as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
 
“Uniform Customs” - the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be amended from time to time.
 
“Unrestricted Subsidiary” - any Subsidiary of EPPHC other than a Loan Party
which is designated in writing by EPPHC to the Administrative Agent as an
Unrestricted Subsidiary, provided that no Subsidiary may be so designated by
EPPHC if it is a Restricted Subsidiary under the Indenture.
 
“WestLB” - as defined in the preamble to this Agreement.
 
1.2. Other Definitional Provisions. (a) Unless otherwise specified therein, all
terms defined in this Agreement shall have the defined meanings when used in any
Loan Document or any certificate or other document made or delivered pursuant
hereto or thereto.
 
(a) As used herein and in any Loan Document, and any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms relating
to the Borrower or any Subsidiary of the Borrower not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP. References
in any Loan Document to financial statements shall be deemed to include all
related schedules and notes thereto.
 
(b) The words “hereof,”“herein” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
 
(c) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
 
(d) References in any Loan Document to knowledge of any Loan Party of events or
circumstances shall be deemed to refer to events or circumstances of which an
officer of such Loan Party has actual knowledge.
 
(e) Any determinations as to EPPHC and its Restricted Subsidiaries on a
consolidated basis shall be made by excluding the assets, liabilities and
results of operations of Unrestricted Subsidiaries (but including any investment
in such Unrestricted Subsidiaries) and including the effects of any transactions
between EPPHC and Restricted Subsidiaries, on the one hand, and such
Unrestricted Subsidiaries, on the other hand.
 
SECTION 2
 
AMOUNT AND TERMS OF COMMITMENTS
 
2.1. Commitments. (a) Subject to the terms and conditions hereof, including,
without limitation, the satisfaction of the conditions precedent set forth in
Section 6 hereof, each Lender severally agrees to make Loans (“Loans”) to the
Borrowers from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed the amount of such
Lender’s Commitment, provided that no Lender shall make any Loans if, after
giving effect thereto, the sum of such Lender’s Loans and Commitment Percentage
of Letter of Credit Outstandings (in each case, after giving effect to the Loans
requested to be made and the Letters of Credit requested to be issued on such
date) exceeds the lesser of (i) such Lender’s Commitment and (ii) such Lender’s
Commitment Percentage of the Borrowing Base then in effect. During the
Commitment Period, the Borrowers may use the Commitments by borrowing, prepaying
the Loans in whole or in part, and reborrowing, all in accordance with the terms
and conditions hereof.
 
(a) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or
(iii) a combination thereof, as determined by the Borrower’s Representative and
notified to the Administrative Agent in accordance with subsections 2.2 and 4.3,
provided that no Loan shall be made as a Eurodollar Loan after the day that is
one month prior to the Termination Date.
 
2.2. Procedure for Borrowing. The Borrowers may borrow under the Commitments
during the Commitment Period on any Business Day, provided that the Borrower’s
Representative shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 12:00 noon, New
York City time, (a) three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Loans initially are to be Eurodollar Loans
or (b) on the requested Borrowing Date if the requested Loans are ABR Loans),
specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Each borrowing
under the Commitments shall be in an amount equal to (x) in the case of ABR
Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if
the then Available Commitments, or the amount of outstanding Eurodollar Loans
after any repayment of any Eurodollar Loans, are less than $5,000,000, such
lesser amount) and (y) in the case of Eurodollar Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrower’s Representative, the Administrative Agent shall promptly notify
each Lender thereof. Each Lender will make the amount of its pro rata share of
each borrowing available to the Administrative Agent for the account of the
Borrower at the office of the Administrative Agent specified in subsection 11.2
prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the
Borrower’s Representative in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrowers by the
Administrative Agent crediting the account of the Borrowers specified in the
borrowing notice with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
 
2.3. Repayment of Loans. (a) The Borrowers hereby unconditionally promise to pay
to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan of such Lender on the Termination Date (or such
earlier date on which the Loans become due and payable pursuant to Section 9).
The Borrowers hereby further agree to pay interest on the unpaid principal
amount of the Loans from time to time outstanding from the date hereof to but
not including the date the Loans are paid in full at the rates per annum, and on
the dates, set forth in subsection 4.1.
 
(a) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing indebtedness of the Borrowers to such Lender resulting
from each Loan of such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
 
(b) The Administrative Agent shall maintain the Register pursuant to subsection
11.6(d), and a subaccount therein for each Lender, in which shall be recorded
(i) the amount of each Loan made hereunder, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrowers and each Lender’s share thereof.
 
(c) The entries made in the Register and the accounts of each Lender maintained
pursuant to subsection 11.6(d) shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations of the
Borrowers therein recorded; provided, however, that the failure of the
Administrative Agent or any Lender to maintain the Register or any such account,
or any error therein, shall not in any manner affect the obligation of the
Borrowers to repay (with applicable interest) the Loans made to the Borrowers by
such Lender in accordance with the terms of this Agreement.
 
2.4. Evidence of Debt. Upon the request of any Lender, the Borrowers will
execute and deliver to such Lender a promissory note of the Borrowers evidencing
the Loans of such Lender, substantially in the form of Exhibit A with
appropriate insertions as to date and principal amount (a “Note”).
 
SECTION 3
 
LETTERS OF CREDIT
 
3.1. The L/C Commitment. (a) Subject to the terms and conditions hereof,
including, without limitation, the satisfaction of the conditions precedent set
forth in Section 6 hereof, the Issuing Lender, in reliance on the agreements of
the other Lenders set forth in subsection 3.4(a), agrees to issue letters of
credit (the “Letters of Credit”) for the account of any Borrower or any
Subsidiary or Affiliate of a Borrower in which EPPHC has a direct or indirect
investment, on any Business Day during the Commitment Period in such form as may
be approved from time to time by the Issuing Lender; provided that the Issuing
Lender shall not issue any Letter of Credit if, after giving effect to such
issuance and after giving effect to any Loans requested to be made or Letters of
Credit requested to be issued on such date the sum of the Loans and Letter of
Credit Outstandings would exceed the lesser of (x) the Commitments and (y) the
Borrowing Base then in effect. Each Letter of Credit shall (i) be issued to
support obligations of any Borrower or any Subsidiary or Affiliate of a Borrower
in which EPPHC has a direct or indirect investment, contingent or otherwise,
which finance the working capital and business needs of such Borrower or
Subsidiary or Affiliate in which EPPHC has a direct or indirect investment, and
(ii) shall expire no later than the earlier of (x) one year (or such later date
agreed to by the Issuing Lender) after the date of issuance and (y) five
Business Days prior to the Termination Date, provided that any Letter of Credit
with a one-year tenor may provide for the extension thereof for additional
one-year periods (which shall in no event extend beyond the date referred to in
clause (y) above). Each Letter of Credit shall be denominated in Dollars.
 
(a) Each Letter of Credit shall be subject to the Uniform Customs or, at the
option of the Issuing Lender, the ISP, and, to the extent not inconsistent
therewith, the laws of the State of New York.
 
(b) The Issuing Lender shall not at any time be obligated to issue any Letter of
Credit hereunder if such issuance would conflict with, or cause the Issuing
Lender or any Participating Lender to exceed any limits imposed by, any
applicable Requirement of Law.
 
3.2. Procedure for Issuance of Letters of Credit. The Borrowers’ Representative
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender and the Administrative Agent at their
respective addresses for notices specified herein a letter of credit application
in the Issuing Lender’s then customary form (an “L/C Application”) completed to
the satisfaction of the Issuing Lender, and such other certificates, documents
and other papers and information as may be customary and as the Issuing Lender
may reasonably request. Upon receipt of any L/C Application, the Issuing Lender
will process such L/C Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures. Upon receipt by the Issuing Lender of
confirmation from the Administrative Agent that issuance of such Letter of
Credit will not contravene subsection 3.1, the Issuing Lender shall promptly
issue the Letter of Credit requested thereby (but in no event shall the Issuing
Lender be required to issue any Letter of Credit earlier than one Business Day
after its receipt of the L/C Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrowers’ Representative.
The Issuing Lender shall furnish a copy of such Letter of Credit to the
Borrower’s Representative and the Administrative Agent promptly following the
issuance thereof, and, thereafter, the Administrative Agent shall promptly
furnish a copy thereof to the Lenders.
 
3.3. Fees, Commissions and Other Charges. (a) The Borrowers shall pay to the
Administrative Agent, for the account of (i) the Issuing Lender and the
Participating Lenders, a letter of credit commission with respect to each Letter
of Credit, computed for the period from the date such Letter of Credit is issued
to the date upon which the next payment is due under this subsection (and,
thereafter, from the date of payment under this subsection to the date upon
which the next payment is due under this subsection) at the rate per annum equal
to the Applicable Margin in effect from time to time for Eurodollar Loans of the
daily aggregate amount available to be drawn under such Letter of Credit during
such period, and (ii) the Issuing Lender, a letter of credit commission with
respect to each Letter of Credit in an amount equal to .125% per annum of the
daily aggregate amount available to be drawn under such Letter of Credit. The
letter of credit commissions payable pursuant to clause (i) and (ii) above shall
be payable quarterly in arrears on the last day of each March, June, September
and December, commencing September 30, 2005, and on the Termination Date.
 
(a) In addition to the foregoing fees and commissions, the Borrowers shall pay
to the Issuing Lender (i) a fee of $750 for issuing each Letter of Credit, and
(ii) a fee of $250 for amending any Letter of Credit.
 
(b) The Administrative Agent shall, promptly following its receipt thereof,
distribute to the Issuing Lender and the Participating Lenders all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
 
3.4. L/C Participations. (a) Effective on the date of issuance of each Letter of
Credit issued after the Closing Date, the Issuing Lender irrevocably agrees to
grant and hereby grants to each Participating Lender, and each Participating
Lender irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Issuing Lender, on the terms and conditions hereinafter
stated, for such Participating Lender’s own account and risk an undivided
interest equal to such Participating Lender’s Commitment Percentage in the
Issuing Lender’s obligations and rights under each Letter of Credit issued by
the Issuing Lender and the amount of each draft paid by the Issuing Lender
thereunder. Each Participating Lender unconditionally and irrevocably agrees
with the Issuing Lender that, if a draft is paid under any Letter of Credit for
which such Issuing Lender is not reimbursed in full by the Borrowers in
accordance with the terms of this Agreement, such Participating Lender shall pay
to the Administrative Agent, for the account of the Issuing Lender, upon demand
at the Administrative Agent’s address specified in subsection 11.2, an amount
equal to such Participating Lender’s Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed. On the date that any
Assignee becomes a Lender party to this Agreement in accordance with subsection
11.6, participating interests in any outstanding Letters of Credit held by the
transferor Lender from which such Assignee acquired its interest hereunder shall
be proportionately reallotted between such Assignee and such transferor Lender.
Each Participating Lender hereby agrees that its obligation to participate in
each Letter of Credit, and to pay or to reimburse the Issuing Lender for its
participating share of the drafts drawn or amounts otherwise paid thereunder, is
absolute, irrevocable and unconditional and shall not be affected by any
circumstances whatsoever (including, without limitation, the occurrence or
continuance of any Default or Event of Default), and that each such payment
shall be made without offset, abatement, withholding or other reduction
whatsoever.
 
(a) If any amount required to be paid by any Participating Lender to the Issuing
Lender pursuant to subsection 3.4(a) in respect of any unreimbursed portion of
any draft paid by the Issuing Lender under any Letter of Credit is paid to the
Issuing Lender within three Business Days after the date such payment is due,
such Participating Lender shall pay to the Administrative Agent, for the account
of the Issuing Lender, on demand, an amount equal to the product of (i) such
amount, times (ii) the daily average Federal Funds Effective Rate during the
period from and including the date such draft is paid to the date on which such
payment is immediately available to the Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by any
Participating Lender pursuant to subsection 3.4(a) is not in fact made available
to the Administrative Agent, for the account of the Issuing Lender, by such
Participating Lender within three Business Days after the date such payment is
due, the Issuing Lender shall be entitled to recover from such Participating
Lender, on demand, such amount with interest thereon calculated from such due
date at the rate per annum applicable to ABR Loans hereunder. A certificate of
the Issuing Lender submitted to any Participating Lender with respect to any
amounts owing under this subsection shall be conclusive in the absence of
manifest error.
 
(b) Whenever, at any time after the Issuing Lender has paid a draft under any
Letter of Credit and has received from any Participating Lender its pro rata
share of such payment in accordance with subsection 3.4(a), the Issuing Lender
receives any reimbursement on account of such unreimbursed portion, or any
payment of interest on account thereof, the Issuing Lender will pay to the
Administrative Agent, for the account of such Participating Lender, its pro rata
share thereof; provided, however, that in the event that any such payment
received by the Issuing Lender shall be required to be returned by the Issuing
Lender, such Participating Lender shall return to the Administrative Agent for
the account of the Issuing Lender, the portion thereof previously distributed to
it.
 
3.5. Reimbursement Obligation of the Borrowers. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender shall notify the
Borrowers and the Administrative Agent of the date and the amount thereof. The
Borrowers agree to reimburse the Issuing Lender (whether with their own funds or
with proceeds of the Loans) on each date on which the Issuing Lender pays a
draft so presented under any Letter of Credit for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment. Each such payment shall be
made to the Issuing Lender at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds. Each
unreimbursed drawing under any Letter of Credit shall constitute a request by
the Borrowers, subject to the provisions of Section 2.1, to the Administrative
Agent for ABR Loans in the amount of such drawing. The borrowing date with
respect to any such ABR Loans shall be the date of the remittance by the Issuing
Bank of the proceeds of such drawing. If ABR Loans are not available on the date
when the Issuing Lender pays a draft, interest shall be payable on any and all
amounts remaining unpaid by the Borrowers under this subsection from the date of
payment of the applicable draft to but excluding the date of payment in full
thereof, (x) for the period commencing on the date of payment of the applicable
draft to the date which is 3 days thereafter, at the rate which would be payable
on ABR Loans at such time and (y) thereafter, at the rate which would be payable
on ABR Loans at such time plus 2%.
 
3.6. Obligations Absolute. The Borrowers’ obligations under this Section 3 shall
be absolute and unconditional under any and all circumstances and irrespective
of any set-off, counterclaim or defense to payment which the Borrowers or any
other Person may have or have had against the Issuing Lender or any other Lender
or any beneficiary of a Letter of Credit. The Borrowers also agree with the
Issuing Lender that the Issuing Lender shall not be responsible for, and the
Borrowers’ obligations under subsection 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrowers and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrowers against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Issuing Lender’s gross negligence or willful misconduct.
The Borrowers agree that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in the Uniform Commercial Code
of the State of New York, including, without limitation, Article 5 thereof,
shall be binding on the Borrowers and shall not result in any liability of such
Issuing Lender to the Borrowers.
 
3.7. Letter of Credit Payments. Without limitation of subsection 3.6, the
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
 
3.8. L/C Applications. To the extent that any provision of any L/C Application,
including any reimbursement provisions contained therein, related to any Letter
of Credit is inconsistent with the provisions of this Section 3, the provisions
of this Section 3 shall prevail.
 
SECTION 4
 
GENERAL PROVISIONS
 
4.1. Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the Eurodollar Rate determined for such Interest Period plus
the Applicable Margin in effect on such day.
 
(a) Each ABR Loan shall bear interest for each day at a rate per annum equal to
the Alternate Base Rate in effect on such day plus the Applicable Margin in
effect on such date.
 
(b) If all or a portion of (i) any principal of any Loan, (ii) any interest
payable thereon, (iii) any commitment fee or (iv) any other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of any such overdue interest, commitment fee or other
amount, the Alternate Base Rate plus the Applicable Margin in effect on such
date plus 2%, in each case from the date of such non-payment to but excluding
the date such overdue principal, interest, commitment fee or other amount is
paid in full (as well after as before judgment).
 
(c) Interest shall be payable in arrears on each Interest Payment Date, provided
that interest accruing pursuant to subsection 4.1(c) shall be payable from time
to time on demand.
 
4.2. Computation of Interest and Fees. (a) Whenever, in the case of ABR Loans,
it is calculated on the basis of the Prime Rate, interest shall be calculated on
the basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and, otherwise, interest and fees shall be calculated on the basis of a
360-day year for the actual days elapsed (including the first day and excluding
the last day). The Administrative Agent shall as soon as practicable notify the
Borrowers’ Representative and the Lenders of each determination of a Eurodollar
Rate. Any change in the interest rate on a Loan resulting from a change in the
Alternate Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrowers’ Representative and the Lenders of the effective date and the amount
of each such change in interest rate.
 
(a) Each determination of an interest rate by the Administrative Agent pursuant
to any provision of this Agreement shall be conclusive and binding on the
Borrowers and the Lenders in the absence of manifest error. The Administrative
Agent shall, at the request of the Borrowers’ Representative, deliver to the
Borrowers a statement showing the quotations and calculations used by the
Administrative Agent in determining any interest rate pursuant to subsection
4.1(a), (b) and (c).
 
4.3. Conversion and Continuation Options. (a) The Borrowers may elect from time
to time to convert Eurodollar Loans to ABR Loans by having the Borrowers’
Representative give the Administrative Agent at least one Business Day’s prior
irrevocable notice of such election, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrowers’ Representative may elect from time to time to
convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days’ prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the initial
Interest Period or Interest Periods therefor. Upon receipt of any such notice
the Administrative Agent shall promptly notify each Lender thereof. All or any
part of outstanding Eurodollar Loans and ABR Loans may be converted as provided
herein, provided that (i) no Loan may be converted into a Eurodollar Loan when
any Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined that such a conversion is not
appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the
date that is one month prior to the Termination Date.
 
(a) Any Eurodollar Loans may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrowers’
Representative giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term “Interest Period” set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to the Termination Date and
provided, further, that if the Borrowers’ Representative shall fail to give such
notice or if such continuation is not permitted such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
 
4.4. Minimum Amounts Maximum Number of Tranches. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the Loans
comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. In no event shall there be more than
six (6) Eurodollar Tranches outstanding at any time.
 
4.5. Optional Prepayments and Commitment Reductions. (a) The Borrowers may, on
the last day of any Interest Period with respect thereto, in the case of
Eurodollar Loans, or at any time and from time to time, in the case of ABR
Loans, prepay the Loans, in whole or in part, without premium or penalty, upon
at least one Business Day’s irrevocable notice to the Administrative Agent in
the case of ABR Loans, and upon at least three Business Days’ irrevocable notice
to the Administrative Agent in the case of Eurodollar Loans, in each case
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, in each case if of a
combination thereof, the amount allocable to each. Upon receipt of any such
notice the Administrative Agent shall promptly notify each Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with any amounts payable
pursuant to subsection 4.14. Partial prepayments of Eurodollar Loans shall be in
an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof.
 
(a) Subject to subsection 4.5(c), the Borrowers shall have the right, upon not
less than three Business Days’ notice to the Administrative Agent, to terminate
the Commitments or, from time to time, to reduce the amount of the Commitments.
Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple
of $1,000,000 in excess thereof and shall reduce permanently the Commitments
then in effect. Termination of the Commitments shall also terminate the
obligation of the Issuing Lender to issue Letters of Credit.
 
(b) In the event of the termination by the Borrowers of all Commitments, the
Borrowers shall on the date of such termination repay or prepay all of its
outstanding Loans (together with accrued and unpaid interest on the Loans and
any amounts payable pursuant to subsection 4.14 and any other amounts payable
hereunder), reduce the Letter of Credit Outstandings to zero and cause all
Letters of Credit to be canceled and returned to the Issuing Lender (or shall
cash collateralize the Letter of Credit Outstandings (or provide supporting
letters of credit from an institution reasonably acceptable to the
Administrative Agent) on terms and pursuant to documentation reasonably
satisfactory to the Issuing Lender and the Administrative Agent). In the event
of any partial reduction of the Commitments, then (i) at or prior to the
effective date of such reduction, the Administrative Agent shall notify the
Borrowers’ Representative and the Lenders of the Aggregate Credit Exposure of
all the Lenders and (ii) if the Aggregate Credit Exposure of all the Lenders
would exceed the aggregate Commitments after giving effect to such reduction,
then, prior to giving effect to such reduction, the Borrowers shall, on the date
of such reduction, then, repay or prepay Loans and, second, reduce the Letter of
Credit Outstandings (or cash collateralize the Letter of Credit Outstandings (or
provide supporting letters of credit from an institution reasonably acceptable
to the Administrative Agent) on terms and pursuant to documentation reasonably
satisfactory to the Issuing Lender and the Administrative Agent), in an
aggregate amount sufficient to eliminate such excess.
 
(c) The Loans shall be repaid, and the Letter of Credit Outstandings shall be
reduced or cash collateralized, to the extent required by subsection 4.10. All
such prepayments and cash collateralization shall be made in accordance with
this subsection 4.5.
 
(d) In the event the amount of any prepayment of the Loans required to be made
above shall exceed the aggregate principal amount of the outstanding ABR Loans
(the amount of any such excess being called the “Excess Amount”), the Borrowers
shall have the right, in lieu of making such prepayment in full, to prepay all
the outstanding applicable ABR Loans and to deposit an amount equal to the
Excess Amount with, and in the event that Letter of Credit Outstandings are
required to be cash collateralized, the Borrowers shall deposit an amount equal
to the aggregate amount of Letter of Credit Outstandings to be cash
collateralized with, the Administrative Agent in a cash collateral account
maintained (pursuant to documentation reasonably satisfactory to the
Administrative Agent) by and in the sole dominion and control of the
Administrative Agent. Any amounts so deposited shall be held by the
Administrative Agent as collateral for the obligations of the Borrowers under
this Agreement and applied to the prepayment of the applicable Eurodollar Loans
at the end of the current Interest Periods applicable thereto or Letter of
Credit Outstandings, as the case may be, or, during an Event of Default, to
payment of any obligations under this Agreement (including obligations in
respect of the Letters of Credit). On any Business Day on which (i) collected
amounts remain on deposit in or to the credit of such cash collateral account
after giving effect to the payments made on such day pursuant to this subsection
4.5(e) and (ii) the Borrowers’ Representative shall have delivered to the
Administrative Agent a written request or a telephonic request (which shall be
promptly confirmed in writing) that such remaining collected amounts be invested
in the Cash Equivalent specified in such request, the Administrative Agent shall
use its reasonable efforts to invest such remaining collected amounts in such
Cash Equivalent, provided, however, that the Administrative Agent shall have
continuous dominion and full control over any such investments (and over any
interest that accrues thereon) to the same extent that it has dominion and
control over such cash collateral account and no Cash Equivalent shall mature
after the end of the Interest Period for which it is to be applied. The
Borrowers shall not have the right to withdraw any amount from such cash
collateral account until the applicable Eurodollar Loans and accrued interest
thereon and Letter of Credit Outstandings are paid in full or if a Default or
Event of Default then exists or would result. Any prepayment or
collateralization pursuant to this subsection 4.5(e) shall be applied in the
order set forth in clause (ii) of the second sentence of subsection 4.5(c).
 
4.6. Commitment Fee; Administrative Agent’s Fee; Other Fees. (a) The Borrowers
agree to pay to the Administrative Agent for the account of each Lender a
commitment fee for the period from and including, for each Lender, the Closing
Date to but not including the Termination Date, computed at the Commitment Fee
Rate on the average daily amount of the lesser of (i) the Available Commitment
of such Lender and (ii) the Borrowing Base Availability with respect to such
Lender, during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December (subject to
Section 4.8) (commencing on September 30, 2005) and on the Termination Date or
such earlier date as the Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof. Commitment
fees shall be nonrefundable when paid unless payment was made in error.
 
(a) The Borrowers shall pay to the Administrative Agent the fees set forth in
the Fee Letter.
 
(b) The Borrowers shall pay to the Lenders such additional fees as may be agreed
to by the Borrowers and the Lenders.
 
4.7. Inability to Determine Interest Rate. If prior to the first day of any
Interest Period:
 
(a) the Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or
 
(b) the Administrative Agent shall have received notice from the Required
Lenders that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
 
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrowers have the right
to convert Loans to Eurodollar Loans.
 
4.8. Pro Rata Treatment and Payments. (a) Each borrowing by the Borrowers from
the Lenders hereunder, each payment by the Borrowers on account of any
commitment fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro rata according to the respective Commitment Percentages of the
Lenders. Each payment (including each prepayment) by the Borrowers on account of
principal of and interest on the Loans shall be made pro rata according to the
respective outstanding principal amounts of the Loans then held by the Lenders.
All payments (including prepayments) to be made by the Borrowers hereunder,
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent’s office specified in subsection
11.2, in Dollars and in immediately available funds. The Administrative Agent
shall distribute such payments to the Lenders promptly upon receipt in like
funds as received. If any payment hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
 
(a) Unless the Administrative Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make the amount that would
constitute its Commitment Percentage of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender’s Commitment Percentage of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days after such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans hereunder, on demand, from the Borrowers.
 
4.9. Computation of Borrowing Base. (a) Borrowing Base. The Borrowing Base in
effect from time to time shall represent the maximum principal amount (subject
to the aggregate amount of the Commitments) of Loans and Letter of Credit
Outstandings that the Lenders will allow to remain outstanding during the
Commitment Period. The Borrowing Base will be determined by the Technical Banks
in their sole discretion based upon the total assets, cashflow and liabilities
of the Borrowers and upon the value of Proved Reserves attributable to the
Borrowing Base Properties of the Borrowers determined by the Technical Banks in
their sole discretion, and will be determined by the Technical Banks in
accordance with paragraph (d) of this subsection 4.9, subject to approval by
Required Lenders or all of the Lenders, as the case may be. Until the
Commitments are no longer in effect, all Letters of Credit have terminated and
all of the Loans and all other obligations under this Agreement are paid in
full, this Agreement shall be subject to the then effective Borrowing Base.
 
(a) Reserve Reports. The Borrowers’ Representative shall, at its own expense,
furnish to the Administrative Agent and each Lender (i) prior to March 31 of
each year, a Reserve Report prepared by the Independent Engineer, dated no
earlier than the immediately preceding December 31, (ii) prior to September 30
of each year, a Reserve Report prepared by the engineers employed by the
Borrowers dated no earlier than the immediately preceding June 30 and (iii)
within 30 days following the delivery of a Borrower Redetermination Notice or a
Lender Redetermination Notice, a Reserve Report prepared by the engineers
employed by the Borrowers and, if requested by the Required Lenders or the
Administrative Agent, within 90 days following the delivery of such notice a
Reserve Report prepared by the engineers employed by the Borrowers and audited
by the Independent Engineer, in each case certified by a Responsible Officer of
the Borrower’s Representative. If the Borrowers fail to deliver a Reserve Report
within the time period provided for, then the Administrative Agent and the
Lenders shall have the right to rely on the last Reserve Report previously
delivered by the Borrowers with any such adjustments and taking into account any
additional information as the Technical Banks may deem appropriate in their sole
discretion. Concurrently with the delivery of the Reserve Reports, the Borrowers
shall furnish to the Administrative Agent and each Lender a certificate of a
Responsible Officer showing any material additions to or material deletions from
the Oil and Gas Properties and the Borrowing Base Properties listed in the
Reserve Report, which additions or deletions were made by the Borrowers since
the date of the previous Reserve Report.
 
(b) Redetermination of the Borrowing Base. The Technical Banks shall redetermine
the Borrowing Base in their sole discretion, and the Administrative Agent shall
notify the Borrowers’ Representative and the Lenders of the Technical Banks’
redetermination of the Borrowing Base (i) with respect to regularly scheduled
Reserve Reports, (A) on or before April 30 (in the case of Reserve Reports due
on March 31) and (B) on or before October 31 (in the case of Reserve Reports due
on September 30), and (ii) with respect to a Lender Redetermination Notice or a
Borrower Redetermination Notice as promptly as practicable following delivery to
the Administrative Agent of all information (including Reserve Reports)
requested from the Borrowers, or if no such information is delivered by
Borrowers following such request, then at such time as the Administrative Agent
determines is practicable but, in any case, no later than 30 days after delivery
of such information or, if such information is not timely delivered, 30 days
after the date such information was required to be delivered. Within 15 days
after receipt from the Administrative Agent of the amount of a redetermination
of the Borrowing Base, each Lender shall notify the Administrative Agent in
writing stating whether or not such Lender agrees with that redetermination.
Failure of any Lender to give such notice within such period of time shall not
be deemed to constitute an acceptance of such redetermination. The Borrowing
Base may be decreased from the then effective Borrowing Base with the consent of
Required Lenders but may only be increased from the then effective Borrowing
Base with the consent of all of the Lenders. If Required Lenders or all of the
Lenders, as the case may be, agree with that redetermination, then the
Administrative Agent promptly shall notify the Borrowers’ Representative of the
Borrowing Base as so redetermined. Redeterminations made in connection with
regularly scheduled Reserve Reports shall become effective (and shall remain
effective until the Borrowing Base is again redetermined as provided in this
subsection (c)) on May 15 (in the case of Reserve Reports due on March 31) and
November 15 (in the case of Reserve Reports due on September 30), and other
redeterminations shall become effective upon written notice from the
Adminstrative Agent to the Borrowers’ Representative and the Lenders of the
redetermined Borrowing Base. If Required Lenders or all of the Lenders, as the
case may be, have not approved in writing the Borrowing Base within the 15 day
period following their receipt of the proposed amount from the Administrative
Agent, the Borrowing Base shall be set at the amount of the then current
Borrowing Base and the Borrowing Base shall remain at such level until Required
Lenders or all of the Lenders, as the case may be, utilizing the procedure
outlined herein, agree on a new Borrowing Base and the Administrative Agent
shall give notice thereof to the Borrowers. Each redetermination provided for by
this subsection 4.9(c) shall be made in accordance with the provisions of
subsection 4.9(d).
 
(c) Criteria. All determinations and redeterminations by the Technical Banks
provided for in this subsection 4.9 (and any determinations and decisions by
either or both of the Technical Banks and Required Lenders or all of the
Lenders, as the case may be, in connection therewith, including effecting any
redetermination of the value of any component contained in a Reserve Report)
shall be made by the Technical Banks and the Lenders in their sole discretion
based upon the application by the Technical Banks and the Lenders of their
respective oil and gas lending criteria as they customarily used at the time of
determination in assigning collateral value to oil and gas properties for
similarly situated customers of the Technical Banks and the Lenders.
 
(d) Subordinated Indebtedness. At least thirty (30) days prior to the incurrence
of Subordinated Indebtedness, the Borrower which proposes to incur such
Subordinated Indebtedness shall so notify the Administrative Agent. Following
the receipt of such notice the Required Banks shall have the right to serve a
Lender Redetermination Notice on the Borrowers’ Representative, which Lender
Redetermination Notice shall not count towards the maximum number of such
Notices which the Required Lenders may otherwise serve between Scheduled
Redetermination Dates.
 
(e) Mandatory Reductions. If, following the Disposition of any Borrowing Base
Property pursuant to Section 8.6(d), the Collateral Coverage Ratio is less than
1.5 to 1.0, the Borrowing Base shall automatically be reduced by the amount of
the PV-10 Value of such Properties, unless such Borrowing Base Property is
contemporaneously replaced by a Borrower with substitute Borrowing Base Property
of at least equal PV-10 Value or, pending delivery of such Borrowing Base
Property, with Cash Collateral equal to or greater than such PV-10 Value.
 
(f) Initial Borrowing Base. The initial Borrowing Base hereunder shall be
$500,000,000.00.
 
4.10. Mandatory Prepayments.(a) Borrowing Base Deficiency. Upon the occurrence
of a Borrowing Base Deficiency, the Administrative Agent shall notify the
Borrowers’ Representative of such Borrowing Base Deficiency. Within ten (10)
days from and after the Borrowing Base Deficiency Notification Date, the
Borrowers’ Representative shall notify the Administrative Agent that the
Borrowers elect to take one of the following actions:
 
(i) Execute and deliver to the Administrative Agent supplemental or additional
Security Documents, in form and substance reasonably satisfactory to the
Administrative Agent and its counsel, securing payment of the Notes and the
other Obligations and covering additional Hydrocarbon Interests directly owned
by any Borrower which are not then designated as Borrowing Base Properties and
which are of a type and nature, and having a value (determined by the
Administrative Agent in its sole discretion using the standards applicable to a
Borrowing Base Redetermination), in addition to other Borrowing Base Properties
reasonably satisfactory to the Administrative Agent and the Required Lenders,
sufficient to eliminate the Borrowing Base Deficiency;
 
(ii) Make a payment with respect to the Obligations (which shall be applied, or
held for application, as the case may be, by the Administrative Agent to the
payment of the aggregate unpaid principal amount of those Loans then outstanding
and then Letter of Credit Outstandings) in an aggregate principal amount
sufficient to eliminate such Borrowing Base Deficiency within thirty (30) days
after the Borrowing Base Deficiency Notification Date;
 
(iii) Execute and deliver additional Security Documents, as provided in clause
(i) above, sufficient to eliminate a portion of the Borrowing Base Deficiency
and make a payment as provided in clause (ii) above in an aggregate principal
amount sufficient to eliminate the balance of the Borrowing Base Deficiency; or
 
(iv) Make six (6) consecutive prepayments of principal of the outstanding Loans,
each of which shall be in an amount equal to 1/6th of the amount of the
Borrowing Base Deficiency, commencing on the first Monthly Date following
delivery of the notice of Borrower’s election, and continuing on each Monthly
Date thereafter until such Deficiency has been eliminated by such prepayments,
addition of properties to the Borrowing Base Properties or a combination of the
foregoing.
 
(b) Security Documents. If the Borrowers elect to execute and deliver
supplemental or additional Security Documents to the Administrative Agent
pursuant to Section 4.10(a)(i) or (a)(iii) above, it shall provide the
Administrative Agent and each Lender with descriptions of the additional assets
to be collaterally assigned (together with current valuations satisfactory to
the Technical Banks or engineering reports as to the new Properties, Security
Documents, and, if necessary to comply with the Continuing 70% Test, title
evidence applicable thereto, each of which shall be in form and substance
reasonably satisfactory to the Administrative Agent), within twenty (20) days
after the Borrowing Base Deficiency Notification Date, except that title
evidence may be furnished within ninety (90) days after such Date. If the
Borrower’s Representative fails to take any of the actions described above
within the relevant period, then without any necessity for notice to the
Borrowers or any other person, the Borrowers shall become obligated to pay
Obligations in an aggregate principal amount equal to the applicable Borrowing
Base Deficiency within three (3) days after the end of the relevant period.
 
(c) Collateral Value Deficiency. If at any time the Collateral Coverage Ratio is
less than 1.5 to 1.0 (the “Collateral Deficiency Date”), the Borrowers’
Representative shall either:
 
(i) Give notice to the Administrative Agent that the Borrowers elect to make a
payment with respect to the Obligations (which shall be applied, or held for
application, as the case may be, by the Administrative Agent to the payment of
the aggregate unpaid principal amount of those Loans then outstanding and then
Letter of Credit Outstandings) in an aggregate principal amount necessary to
comply with the Collateral Coverage Ratio at such time whereupon the Commitments
shall be so reduced with immediate effect and the Borrowers shall make such
prepayment on or before the date that is thirty (30) days after the related
Collateral Deficiency Date;
 
(ii) Certify to the Administrative Agent that the Borrowers have good and
defensible title, free of any Liens other than Permitted Liens, to Proved
Reserves in an amount which, if subject to one or more Mortgages, would result
in the Borrowers being in compliance with such Collateral Coverage Ratio. Within
ten (10) days after such certification, the Technical Banks shall either (x)
determine that such properties, if subject to a Mortgage, would result in the
Borrowers being in compliance with such Collateral Coverage Ratio, in which
case, the Borrowers shall within twenty (20) days of such certification, and in
any event, no later than within thirty (30) days of the Collateral Deficiency
Date, deliver a Mortgage (or a satisfactory amendment to an existing Mortgage)
to the Administrative Agent with respect to each of such properties, executed
and delivered by a duly authorized officer of each party thereto and accompanied
by such other documentation as the Administrative Agent shall reasonably request
(including, without limitation, legal opinions in form and substance
satisfactory to the Administrative Agent relating thereto), or (y) determine
that such properties, if subject to a Mortgage, would not result in the
Borrowers being in compliance with such Collateral Coverage Ratio, in which
case, the Borrowers shall make the prepayments specified in subsection (i) of
this Section 4.10(c) within thirty (30) days of the Collateral Deficiency Date;
 
(iii) Effect a reduction of the Commitments pursuant to Section 4.5;
 
(iv) Pending delivery of the Mortgages, provide Cash Collateral if sufficient to
eliminate the Collateral Value Deficiency; or
 
(v) Any combination of the actions referred to in clauses (i) - (iv) the effect
of which in combination is to restore the Collateral Coverage Ratio to not less
than 1.5 to 1.0.
 
4.11. Illegality. Notwithstanding any other provision herein, if the adoption of
or any change in any Requirement of Law or in the interpretation or application
thereof after the date hereof shall make it unlawful for any Lender to make or
maintain Eurodollar Loans as contemplated by this Agreement (a) the commitment
of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as
such and convert ABR Loans to Eurodollar Loans shall forthwith be canceled and
(b) such Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.14.
 
4.12. Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof after the
date hereof or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
 
(i) shall subject any Lender to any tax of any kind whatsoever with respect to
this Agreement, any Note, any Letter of Credit, any L/C Application or any
Eurodollar Loan made by it, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes covered by subsection
4.13, changes in the rate or computation of tax on the overall net income of
such Lender, franchise taxes imposed in lieu of net income taxes and doing
business taxes);
 
(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender which
is not otherwise included in the determination of the Eurodollar Rate hereunder,
or
 
(iii) shall impose on such Lender any other condition;
 
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrowers shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
 
(b) If any Lender shall have determined that the adoption of or any change in
any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof shall have the effect of reducing the rate of return on such
Lender’s or such corporation’s capital as a consequence of its obligations
hereunder or under any Letter of Credit to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s or such corporation’s
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, the Borrowers shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
 
(c) If any Lender becomes entitled to claim any additional amounts pursuant to
this subsection, it shall promptly notify the Borrowers’ Representative (with a
copy to the Administrative Agent) of the event by reason of which it has become
so entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrowers’ Representative (with a
copy to the Administrative Agent) shall be conclusive in the absence of manifest
error. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
 
4.13. Taxes. (a) All payments made by the Borrowers under this Agreement and any
Notes shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes, franchise taxes (imposed in lieu of net income
taxes) and doing business taxes imposed on the Administrative Agent or any
Lender as a result of a present or former connection between the Administrative
Agent or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (“Non-Excluded Taxes”) are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrowers shall not be required to
increase any such amounts payable to any Non-U.S. Lender if such Non-U.S. Lender
fails to comply with the requirements of paragraph (b) of this subsection.
Whenever any Non-Excluded Taxes are payable by the Borrowers, as promptly as
possible thereafter the Borrowers shall send to the Administrative Agent for
their own account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the Borrowers showing
payment thereof. If, when the Borrowers are required by this subsection 4.13(a)
to pay any Non-Excluded Taxes, the Borrowers fail to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fail to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrowers shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
 
    (a) Each Lender (or Transferee) that is not a citizen or resident of the
United States of America, a corporation, partnership or other entity created or
organized in or under the laws of the United States of America, or any estate or
trust that is subject to federal income taxation regardless of the source of its
income (a “Non-U.S. Lender”) shall deliver to the Borrowers’ Representative and
the Administrative Agent (or, in the case of a Participant, to the Lender from
which the related participation shall have been purchased) two copies of either
U.S. Internal Revenue Service Form W-8BEN, Form W-8ECI or successors forms, and
is otherwise exempt from IRS interest withholding obligations, or, in the case
of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of “portfolio
interest,” a Form W-8, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8, an annual certificate
representing that such Non-U.S. Lender (i) is not a “bank” for purposes of
Section 881(c) of the Code (and is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated as a bank
in any filing with or submission made to any Governmental Authority or rating
agency), (ii) is not a 10% shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrowers and (iii) is not a controlled foreign
corporation related to the Borrowers (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from U.S. federal withholding tax on all payments by
the Borrowers under this Agreement and the other Loan Documents, along with such
other additional forms as the Borrowers, the Administrative Agent (or, in the
case of a Participant, the Lender from which the related participation shall
have been purchased) may reasonably request to establish the availability of
such exemption. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation), and if a Person cannot deliver such forms because such Person is
not exempt from U.S. federal withholding tax under the Code as described above,
then such Person shall not become a Lender or Transferee hereunder or a party
hereto.
 
4.14. Indemnity. The Borrowers agree to indemnify each Lender and to hold each
Lender harmless from any loss or expense which such Lender may sustain or incur
(other than through such Lender’s gross negligence or willful misconduct) as a
consequence of (a) default by the Borrowers in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrowers’ Representative has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrowers in making any prepayment of a Eurodollar
Loan after the Borrowers’ Representative has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of or a conversion of Eurodollar Loans on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification may include
an amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or converted, or not so borrowed,
converted or continued, for the period from the date of such prepayment or
conversion or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the percentage added to the
Eurodollar Rate pursuant to subsection 4.1 (a) to the extent included therein)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
 
4.15. Change of Lending Office. Each Lender agrees that if it makes any demand
for payment under subsection 4.12 or 4.13(a), or if any adoption or change of
the type described in subsection 4.11 shall occur with respect to it, it will
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its sole discretion) to designate a different lending
office if the making of such a designation would reduce or obviate the need for
the Borrowers to make payments under subsection 4.12 or 4.13(a), or would
eliminate or reduce the effect of any adoption or change described in subsection
4.11.
 
4.16. Collateral Security.    
 
    (a) Closing Date. To secure the performance by the Borrowers of the
Obligations hereunder and under the Notes, the Security Documents and any
Hedging Agreement, whether now or hereafter incurred, matured or unmatured,
direct or contingent, including extensions, modifications, renewals and
increases thereof, and substitutions therefore, the Borrowers shall, as of the
Closing Date, have, pursuant to the Mortgages granted and assigned to the
Administrative Agent, for the ratable benefit of the Secured Parties, a first
priority Lien, subject only to Permitted Liens, on Borrowing Base Properties.
 
(b) Subsequently Acquired Property. If the Borrowers shall, following the
Closing Date, acquire additional Oil and Gas Properties that are proposed to be
Borrowing Base Properties, the Borrowers shall grant security interests and
mortgage Liens to the Administrative Agent, for the ratable benefit of the
Secured Parties, in and on any such property to the extent provided in Section
7.10 hereof.
 
(c) Form of Security Documents. The granting and assigning of such security
interests and Liens by the Borrowers shall be pursuant to the Security Documents
in form and substance reasonably satisfactory to the Administrative Agent.
 
(d) Title Work. As of the Closing Date, the Borrowers shall have furnished to
the Administrative Agent title documents reasonably satisfactory to the
Administrative Agent with respect to the title and Lien status of at least 50%
of the PV-10 Value of the Borrowing Base Properties, and within 120 days after
the Closing Date, 70% of the PV-10 Value of the Borrowing Base Properties. The
Borrowers shall furnish to the Administrative Agent title documents reasonably
satisfactory to the Administrative Agent with respect to the title and Lien
status of a sufficient number of Properties so that the Administrative Agent
shall at all times have title documents with respect to at least 70% of the
PV-10 Value of the Borrowing Base Properties of the Borrowers (the “Continuing
70% Test”). If at any time after the Closing Date, the Borrowers fail to provide
title documents reasonably satisfactory to the Administrative Agent for a
sufficient number of Borrowing Base Properties to meet the Continuing 70% Test,
such failure shall not constitute an Event of Default, but the Technical Banks
may redetermine the Borrowing Base by written notice to the Borrowers’
Representative as required to bring the Borrowers into compliance with the
Continuing 70% Test until such title documents are provided. Without regard to
whether the Borrowers provide satisfactory title documents with respect to a
particular Oil and Gas Property owned by such Person, such Oil and Gas Property
shall, if necessary to meet the requirements of Section 7.10 hereof, be
encumbered by a Mortgage in favor of the Administrative Agent for the ratable
behalf of the Secured Parties, and shall be included in the collateral.
 
(e) Security for Hedge Parties. The Administrative Agent and the Lenders agree
that upon execution and delivery of a Hedging Agreement by a Hedge Party, such
Hedge Party shall possess a pari passu Lien in the collateral provided in the
Security Documents and the cash proceeds therefrom as security for the
obligations of the Borrowers under such Hedging Agreement.
 
(f) Substitution of Collateral. The Borrowers shall have the right, subject to
the consent of the Technical Banks, such consent not to be unreasonably
withheld, to substitute Oil and Gas Properties of a Borrower for Oil and Gas
Properties subject to a Mortgage, or, pending delivery of the Mortgage on such
Properties, to substitute Cash Collateral for such Properties, provided that:
 
(i) The Borrower’s Representative provides notice of substitution to the
Administrative Agent fifteen (15) days prior to the proposed substitution date;
 
(ii) Neither an Event of Default nor a Borrowing Base Deficiency exists on the
proposed substitution date;
 
(iii) The Oil and Gas Properties proposed to be substituted for the Oil and Gas
Properties subject to a Mortgage are of a type and nature similar to the Oil and
Gas Properties subject to a Mortgage;
 
(iv) The substitution of the Oil and Gas Properties will not result in a
decrease in the Borrowing Base as determined by the Technical Banks in their
sole discretion;
 
(v) The substitution of the Oil and Gas Properties will not result in the
Collateral Coverage Ratio being less than 1.5 to 1; and
 
(vi) The Borrower provides the supplemental or additional Security Documents
referred to in Section 4.10(b) hereof.
 
If the Oil and Gas Properties being substituted have a value in excess of 10% of
the PV-10 Value of the Borrowing Base Properties at such time, the Borrowing
Base shall be redetermined prior to the date of such substitution in accordance
with the procedures set forth in subsection 4.9 which would have applied had a
Borrower Redetermination Notice or a Lender Redetermination Notice been
delivered.
 
(g) If the conditions set forth in Section 4.16(f) have been satisfied, then
upon request by EPPHC, the Administrative Agent will release its lien on any
Borrowing Base Property being exchanged for other Borrowing Base Property
pursuant to Section 4.16(f).
 
4.17. Replacement of Lenders. If (i) any Lender requests compensation under
Section 4.12, or (ii) if any Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 4.13, or (iii) if any Lender defaults in its obligation to
fund Loans hereunder or (iv) any Lender refuses to grant its approval with
respect to any matter requiring the approval of all Lenders and such matter
shall have been approved by Lenders having Commitments in excess of 66-2/3% of
the aggregate Commitments, then the Borrowers’ Representative may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 11.6), all its interests,
rights and obligations under this Agreement to an assignee identified by the
Borrowers’ Representative that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (1) the
Borrowers’ Representative shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (2) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans, 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 Borrowers (in the
case of all other amounts) and (3) in the case of any such assignment resulting
from a claim for compensation under Section 4.12 or payments required to be made
pursuant to Section 4.13, 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 Borrowers’ Representative
to require such assignment and delegation cease to apply.
 
SECTION 5
 
REPRESENTATIONS AND WARRANTIES
 
To induce the Administrative Agent and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit, each
Borrower hereby represents and warrants to the Administrative Agent and each
Lender that:
 
5.1. Financial Condition. (a) (i) The audited consolidated balance sheet of
EPPHC and its consolidated Subsidiaries at December 31, 2004 and the related
audited consolidated statements of income, cash flows and stockholder’s equity
for the fiscal year ended on such date, together with the related notes and
schedules thereto, reported on by Pricewaterhouse Coopers LLP, and (ii) the
unaudited consolidated balance sheet of EPPHC and its consolidated Subsidiaries
as at March 31, 2005, and June 30, 2005, in each case, together with the related
unaudited consolidated statements of income, cash flows, and stockholder’s
equity for each of the fiscal quarters then ended, in each case copies of which
have heretofore been furnished or made available to each Lender, present fairly
in all material respects the consolidated financial position of EPPHC and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the respective periods
then ended, in conformity with GAAP (subject, in the case of clause (ii), to
customary year-end audit adjustments and reduced footnote disclosure).
 
(a) All such financial statements referred to in subsection 5.1(a), including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). On the Closing Date, neither EPPHC nor any of its consolidated
Subsidiaries have any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease, outstanding debt or Lien other than
Permitted Liens or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction,
which is not disclosed in the financial statements referred to in subsection
5.1(a) or in the notes thereto to the extent required by GAAP.
 
5.2. No Change. Since the date of EPPHC’s most recent audited annual
consolidated financial statements, there has been no development, circumstance
or event which has had or could reasonably be expected to have a Material
Adverse Effect.
 
5.3. Corporate Existence; Compliance with Law. Each of the Borrowers (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its Property, to lease the Property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of Property or
the conduct of its business requires such qualification except to the extent
that the failure to be so qualified and in good standing could not reasonably be
expected to have, in the aggregate, a Material Adverse Effect and (d) is in
compliance with all applicable Requirements of Law (including, without
limitation, Environmental Laws) except to the extent that the failure to comply
therewith could not reasonably be expected to have, in the aggregate, a Material
Adverse Effect.
 
5.4. Corporate Power; Authorization; Enforceable Obligations. Each Borrower has
the corporate power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and to borrow hereunder and
has taken all necessary corporate action to authorize the execution, delivery
and performance of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or the delivery, performance, validity or enforceability of
the Loan Documents to which any Borrower is a party other than the filings of
the Mortgages and UCC-1 financing statements and those which have been obtained
and are in full force and effect. This Agreement has been, and each other Loan
Document to which the Borrower is a party will be, duly executed and delivered
on behalf of any Borrower. This Agreement constitutes, and each other Loan
Document to which any Borrower is a party when executed and delivered will
constitute, a legal, valid and binding obligation of any Borrower enforceable
against such Borrower in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
 
5.5. No Legal Bar. The execution, delivery and performance of the Loan
Documents, the granting of the Liens under the Security Documents, the
borrowings hereunder and the use of the proceeds thereof will not violate any
applicable Requirement of Law or Contractual Obligation of the Borrower,
including but not limited to Sections 4.03 and 4.10 of the Indenture, and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective Properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation, other than any Lien created pursuant to the
Security Documents.
 
5.6. No Material Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the knowledge
of any Borrower, threatened by or against any Borrower or against any of its
respective Properties or revenues (a) with respect to any of the Loan Documents
or any of the transactions contemplated hereby or thereby, or (b) which could
reasonably be expected to have a Material Adverse Effect.
 
5.7. No Default. No Borrower is in default under or with respect to any of its
Contractual Obligations in any respect which could reasonably be expected to
have a Material Adverse Effect. Each Borrower is in compliance in all material
respects with each covenant applicable to it under the Loan Documents, and no
Default or Event of Default has occurred and is continuing or would occur as a
result of the execution and delivery of the Agreement and the Loan Documents.
 
5.8. Ownership of Property; Liens. Each Loan Party has good and defensible title
to all of its Oil and Gas Properties which are not personal property and good
title to all such Oil and Gas Properties which are personal property and
material to the Loan Parties taken as a whole, except for (i) such imperfections
of title as do not in the aggregate materially detract from the value thereof
to, or the use thereof in, the business of the Loan Parties, or, in the case of
Oil and Gas Properties which are not Borrowing Base Properties, such
imperfections do not have a Material Adverse Effect on such Loan Party, (ii) Oil
and Gas Properties and interests therein disposed of since the date of the most
recent Reserve Report as permitted by subsection 8.6 hereof, and (iii) Permitted
Liens. The Borrower specified in the Reserve Report is entitled to receive a
decimal share of all Hydrocarbons produced from, or allocated to, each Borrowing
Base Property equal to not less than the net revenue interest set forth in the
most recent Reserve Report with respect to such Borrowing Base Property. There
are no “back-in” or “reversionary” interests held by third parties which could
materially reduce the interest of the Borrowers in such Borrowing Base
Properties except as expressly set forth in such Reserve Report. The ownership
of the Borrowing Base Properties by the Borrowers shall not in any material
respect obligate any Borrower to bear the costs and expenses relating to the
maintenance, development or operations of each such Borrowing Base Property in
an amount in excess of the working interest of such Borrower in each Borrowing
Base Property set forth in the most recent Reserve Report unless there is a
corresponding increase in net revenue interest.
 
5.9. Intellectual Property. Each Borrower owns, or is licensed to use, all
trademarks, tradenames, copyrights, technology, know-how and processes necessary
for the conduct of its business as currently conducted except for those the
failure to own or license which could not reasonably be expected to have a
Material Adverse Effect (the “Intellectual Property”). No claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Borrower know of any valid basis for any
such claim which could reasonably be expected to have a Material Adverse Effect.
The use of such Intellectual Property by each Borrower and its Subsidiaries does
not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
 
5.10. Taxes. Each Borrower has filed all material tax returns which, to the
knowledge of such Borrower, are required to be filed by it and has paid or
caused to be paid all taxes shown on said returns and all assessments, fees and
other governmental charges levied upon it or upon any of its Property or income
which are due and payable, other than such taxes, assessments, fees and other
governmental charges, if any, as are being diligently contested in good faith
and by appropriate proceedings and with respect to which there have been
established adequate reserves on the books of the Borrower in accordance with
GAAP. To the knowledge of the Borrower, no material tax lien has been filed, and
no material claim is being asserted, with respect to any such taxes or
assessments, fees or other governmental charges.
 
5.11. Federal Reserve Regulations. No part of the proceeds of any Loans will be
used for “purchasing” or “carrying” any “margin stock” within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. If requested by the Administrative Agent, the Borrowers will furnish
to the Administrative Agent a statement to the foregoing effect in conformity
with the requirements of FR Form U-1 referred to in said Regulation U. The Loans
and other transactions contemplated hereunder will not violate the provisions of
Regulations T and X.
 
5.12. ERISA. Neither a Reportable Event nor an “accumulated funding deficiency”
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Single Employer Plan,
and each Single Employer Plan has complied with the applicable provisions of
ERISA and the Code, except for noncompliance which could not reasonably be
expected to result in any material liability to the Borrowers or any Commonly
Controlled Entity. No distress termination within the meaning of Section 4041(c)
of ERISA or termination instituted by the PBGC (within the meaning of Section
4042 of ERISA), of a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such five-year period. The present value
of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefits
by an amount that could reasonably be expected to result in a Material Adverse
Effect. Except as set forth in Schedule 5.12, neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or is Insolvent that could reasonably be expected to result in a
Material Adverse Effect.
 
5.13. Investment Company Act; Other Regulations. No Borrower is (a) an
“investment company,” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended, or (b) a
“holding company” as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935. No Borrower is subject to regulation under
any Federal or State statute or regulation (other than Regulation X of the Board
of Governors of the Federal Reserve System) which limits its ability to incur
Indebtedness.
 
5.14. Subsidiaries. The Persons listed on Schedule 5.14 constitute all the
Subsidiaries of the Borrowers at the date hereof. Such Schedule shall indicate
which Subsidiaries are considered Restricted Subsidiaries and Domestic
Restricted Subsidiaries.
 
5.15. Purpose of Loans. The proceeds of the Loans and the Letters of Credit will
be used for (a) working capital and for the general corporate purposes of the
Borrowers, (b) the conduct by Borrowers of their Oil and Gas Business, including
(without limiting the generality of the foregoing) the exploration,
exploitation, development and acquisition of Oil and Gas Properties, (c) the
acquisition of the Capital Stock of Medicine Bow Energy Corporation, and (d) 
the payment of transaction expenses.
 
5.16. Environmental Matters. Except as set forth on Schedule 5.16, and other
than exceptions to any of the following that could not, in the aggregate,
reasonably be expected to give rise to a Material Adverse Effect or materially
adversely affect the value of the Borrowing Base Properties taken as a whole:
 
(a) each Borrower: (i) is, and within the period of all applicable statutes of
limitation has been in compliance with all applicable Environmental Laws; (ii)
holds all Environmental Permits (each of which is in full force and effect)
required for any of its current or planned operations or for any Property owned,
leased, or otherwise operated by it; and (iii) is, and within the period of all
applicable statutes of limitation has been, in compliance with all of its
Environmental Permits; and no officer of such Borrower has knowledge of any
reason why its Environmental Permits will not timely be renewed or any new
Environmental Permits will not timely be obtained subject to the conditions and
terms that may be applied to them by the relevant Governmental Authorities.
 
(b) Materials of Environmental Concern have not been transported, disposed of,
emitted, discharged, or otherwise released or threatened to be released, to or
at any real Property presently or formerly owned, leased or operated by any
Borrower or at any other location, which could reasonably be expected to (i)
give rise to liability of any Borrower under any applicable Environmental Law or
(ii) interfere with any Borrower’s continued operations.
 
(c) no judicial, administrative, or arbitral proceeding (including any notice of
violation or alleged violation) under or relating to any Environmental Law to
which any Borrower is, or to the knowledge of the Borrowers will be, named as a
party is pending or, to the knowledge of the Borrowers threatened.
 
(d) no Borrower has received any written request for information, or been
notified that it is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation, and Liability Act or any
similar Environmental Law, or with respect to any Materials of Environmental
Concern.
 
(e) no Borrower has entered into or agreed to any consent decree, order, or
settlement, nor is subject to any judgment, decree, or order, in any judicial,
administrative, arbitral, or other forum, relating to compliance with or
liability under any Environmental Law.
 
(f) no Borrower has assumed or retained, by contract or operation of law, any
liabilities of any kind, fixed, contingent or otherwise, under any Environmental
Law other than in conformity with standard industry practice.
 
5.17. No Material Misstatements. (a) All written information, reports, financial
statements, exhibits and schedules (including, without limitation, EPPHC’s
report on Form 10-K for the year ended December 31, 2004, as filed with the
Securities and Exchange Commission) furnished to the Administrative Agent or any
Lender by or on behalf of the Borrowers in connection with the negotiation of
any Loan Document or included therein or delivered pursuant thereto, when taken
as a whole, did not contain, and as they may be amended, supplemented or
modified from time to time, will not contain, as of the date such statements
were made, any untrue statements of a material fact and as of such date did not
omit, and as they may be amended, supplemented or modified from time to time,
will not omit, to state as of the date such statements were made, any material
fact necessary in order to make the statements contained therein, in the light
of the circumstances under which they were, are or will be made, not materially
misleading.
 
(a) All projections and estimates concerning the Borrowers that are or have been
made available to the Administrative Agent or any Lender by or on behalf of the
Borrowers have been or will be prepared based on good faith estimates and based
upon assumptions believed by the Borrowers to be reasonable in all material
respects at the time of such preparation.
 
(b) The leases contributing to the Borrowers’ interests in those wells listed on
Schedule 5.17(c) hereto (which wells are further identified under the same
identifying name in Borrowers’ Reserve Report dated as of June 30, 2005) are
described on Exhibit “A” to one or more of the instruments constituting or
otherwise covered by the Mortgages. Further, those title materials referenced on
Schedule 5.17(c) as relating to any particular well listed thereon relate to
such well.
 
5.18. Insurance. Each Borrower carries and maintains with respect to its
insurable properties insurance (including, to the extent consistent with past
practices, self-insurance) with financially sound and reputable insurers of the
types, to such extent and against such risks as is customary with companies in
the same or similar businesses.
 
5.19. Future Commitments. As of the Closing Date, except as set forth on
Schedule 5.19, on a net basis there are no material gas imbalances, material
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
any Loan Party (or, in the case of Oil and Gas Properties operated by operators
other than a Borrower, to the Borrowers’ knowledge after reasonable
investigation) which would require such Loan Party to deliver Hydrocarbons
produced from Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor.
 
5.20. Security Documents. (a) The provisions of the Mortgages will be effective
to grant to the Administrative Agent, for the ratable benefit of the Secured
Parties, legal, valid and enforceable mortgage liens on all of the right, title
and interest of the Borrowers in the Borrowing Base Property described therein.
When such Mortgages have been recorded in the appropriate recording office they
will constitute perfected first liens on, and security interest in, such
property, subject only to Permitted Liens.
 
(a) The provisions of the Mortgages will be effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the personal property collateral
described therein and proceeds thereof and, upon the filing of UCC-1 Financing
Statements with the secretary of state of each jurisdiction of formation for
each of the Borrowers, the Mortgages shall constitute a fully perfected first
priority lien on, and security interest in, all right, title and interest of the
applicable Borrower in such collateral and the proceeds thereof, in each case
prior and superior in right to any other Person, subject only to Permitted
Liens.
 
SECTION 6
 
CONDITIONS PRECEDENT
 
6.1. Conditions to Closing Date of the Existing Credit Agreement. The Closing
Date of the Existing Credit Agreement occurred upon, and the obligations of the
Lenders to make Extensions of Credit hereunder were subject to, the satisfaction
of the following conditions precedent:
 
(a) Loan Documents. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent) (i) this
Agreement, executed and delivered by a Responsible Officer of the Borrowers,
(ii) the Guarantee Agreement (if applicable), executed and delivered by a
Responsible Officer of each Guarantor thereto and (iii) a Note payable to the
order of each Lender requesting a Note in the amount of its Commitment.
 
(b) Security Documents. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent) (i)
Mortgages, executed and delivered by the Borrowers, covering the Borrowing Base
Properties, together with the title work referred to in Section 4.16(d) above,
and (ii) acknowledgment copies or other evidence of the proper filing of
financing statements (Form UCC-1) under the Uniform Commercial Code of all
jurisdictions to the extent necessary or desirable or required, in the
reasonable judgment of the Administrative Agent, to perfect the security
interests created or purported to be created by the Mortgages.
 
(c) Closing Certificate. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent), a
certificate of the Borrowers, dated the Closing Date, substantially in the form
of Exhibit F, with appropriate insertions and attachments, satisfactory in form
and substance to the Administrative Agent, executed by a Responsible Officer of
the Borrowers.
 
(d) Corporate Proceedings of the Loan Parties. The Administrative Agent shall
have received (with the number of original counterparts requested by the
Administrative Agent), a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Loan Documents to which it is a party, (ii) the borrowings contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to the Loan
Documents, certified by the Secretary or an Assistant Secretary of each Loan
Party as of the Closing Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
 
(e) Loan Party Incumbency Certificates. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent), a certificate of each Loan Party, dated the Closing Date,
as to the incumbency and signature of the officers of such Loan Party executing
any Loan Document reasonably satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Borrower.
 
(f) Corporate Documents. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent), true and
complete copies of the certificate of incorporation and by-laws of each Loan
Party, certified as of the Closing Date as complete and correct copies thereof
by the Secretary or an Assistant Secretary of such Loan Party. The
Administrative Agent shall have received certificates from the appropriate
Governmental Authority certifying as to the good standing, existence and
authority of each of the Loan Parties in all jurisdictions where required by the
Administrative Agent.
 
(g) Legal Opinions.
 
(i) The Administrative Agent shall have received the executed legal opinion of
Andrews Kurth LLP, counsel to the Borrowers, in form and substance reasonably
acceptable to the Administrative Agent.
 
(ii) The Administrative Agent shall have received such legal opinions as shall
cover such other matters incident to the transactions contemplated by this
Agreement and the other Loan Documents as the Administrative Agent may
reasonably require.
 
(h) Consents, Licenses and Approvals. All governmental and third party approvals
(including consents) necessary or, in the discretion of the Administrative
Agent, advisable in connection with continuing operations of the Borrowers and
the execution, delivery and performance of the Loan Documents shall have been
obtained and be in full force and effect, and all 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 this Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby. The Administrative Agent shall have received, with a
counterpart for each Lender, a certificate of the Loan Parties as to the
foregoing.
 
(i) Due Diligence. The Administrative Agent and the Lenders shall have completed
satisfactory due diligence review of the assets, liabilities, business,
operations and condition (financial or otherwise) of the Borrowers, including,
but not limited, to a review of their Oil and Gas Properties, and all legal,
financial, accounting, governmental, environmental, tax and regulatory matters,
and fiduciary aspects of the proposed financing.
 
(j) Legal Structure and Capitalization. The Administrative Agent and the Lenders
shall be satisfied with the organization, corporate and legal structure and
capitalization of the Borrowers and their Subsidiaries.
 
(k) Projections; Financial Statements. The Administrative Agent and the Lenders
shall have received true and correct copies of the business and financial plan
of EPPHC and its Subsidiaries for the fiscal year ending December 31, 2006 (the
“Projections”), in form and substance satisfactory to the Administrative Agent.
The Administrative Agent and the Lenders shall have received true and correct
copies of the financial statements referred to in Section 5.1(a).
 
(l) Fees. The Technical Banks and the Lenders shall have received all fees and
expenses required to be paid on or before the Closing Date pursuant to the Fee
Letter and other arrangements and for which invoices have been presented.
 
(m) Representations and Warranties. Each of the representations and warranties
made by each Borrower in or pursuant to the Loan Documents shall be true and
correct on and as of such date as if made on and as of such date (unless such
representations and warranties are stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct as
of such earlier date).
 
(n) No Default. No Default or Event of Default shall have occurred and be
continuing on such date.
 
(o) No Material Adverse Effect. No event or events which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect
shall have occurred since December 31, 2004.
 
(p) Insurance Certificates. Certificate(s) of insurance naming the
Administrative Agent as loss payee to the extent of the Borrowing Base
Properties or additional insured evidencing insurance which meets the
requirements of this Agreement and the Security Documents and which is in
amount, form and substance and from an issuer satisfactory to the Administrative
Agent.
 
(q) Lien Searches. Results of lien, tax and judgment searches of the UCC Records
of the Secretary of State and applicable counties of the States of Delaware and
Texas from a source acceptable to the Administrative Agent and reflecting no
Liens against any of the Borrowing Base Properties as to which perfection of a
Lien is accomplished by the filing of a financing statement other than in favor
of the Administrative Agent, other than Permitted Liens.
 
(r) Additional Matters. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions contemplated hereby
or thereby as it shall reasonably request.
 
6.2. Conditions to Effective Date of This Agreement. The Effective Date of this
Agreement shall occur upon, and the Indebtedness of the Borrowers under the
Existing Credit Agreement shall be deemed to be Indebtedness of the Borrowers
outstanding under this Agreement upon, the satisfaction of the following
conditions precedent:
 
(a) Loan Documents. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent) (i) this
Agreement, executed and delivered by a Responsible Officer of the Borrowers,
(ii) a confirmation of Guarantee Agreements, executed and delivered by a
Responsible Officer of each Guarantor thereto and (iii) a Note payable to the
order of each Lender requesting a Note in the amount of its Commitment.
 
(b) Security Documents. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent) (i) (a)
Mortgage, executed and delivered by the Borrowers, covering the Borrowing Base
Properties located in Rusk County, Texas (the Minden Field), together with the
title work referred to in Section 4.16(d) above, and (ii) acknowledgment copies
or other evidence of the proper filing of financing statements (Form UCC-1)
under the Uniform Commercial Code of all jurisdictions to the extent necessary
or desirable or required, in the reasonable judgment of the Administrative
Agent, to perfect the security interests created or purported to be created by
the Mortgage.
 
(c) Closing Certificate. The Administrative Agent shall have received (with the
number of original counterparts requested by the Administrative Agent), a
certificate of the Borrowers, dated the Closing Date, substantially in the form
of Exhibit F, with appropriate insertions and attachments, satisfactory in form
and substance to the Administrative Agent, executed by a Responsible Officer of
the Borrowers.
 
(d) Corporate Proceedings of the Loan Parties. The Administrative Agent shall
have received (with the number of original counterparts requested by the
Administrative Agent), a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Loan Documents to which it is a party, (ii) the borrowings contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to the Loan
Documents, certified by the Secretary or an Assistant Secretary of each Loan
Party as of the Closing Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
 
(e) Loan Party Incumbency Certificates. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent), a certificate of each Loan Party, dated the Closing Date,
as to the incumbency and signature of the officers of such Loan Party executing
any Loan Document reasonably satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Borrower.
 
(f) Legal Opinions.
 
(i) The Administrative Agent shall have received the executed legal opinion of
Andrews Kurth LLP, counsel to the Borrowers, in form and substance reasonably
acceptable to the Administrative Agent.
 
(ii) The Administrative Agent shall have received such legal opinions as shall
cover such other matters incident to the transactions contemplated by this
Agreement and the other Loan Documents as the Administrative Agent may
reasonably require.
 
(g) Due Diligence. The Administrative Agent and the Lenders shall have completed
satisfactory due diligence review of the assets, liabilities, business,
operations and condition (financial or otherwise) of the Borrowers, including,
but not limited, to a review of their Oil and Gas Properties, and all legal,
financial, accounting, governmental, environmental, tax and regulatory matters,
and fiduciary aspects of the proposed financing.
 
(h) Fees. The Technical Banks and the Lenders shall have received all fees and
expenses required to be paid on or before the Closing Date pursuant to the Fee
Letter and other arrangements and for which invoices have been presented.
 
(i) Representations and Warranties. Each of the representations and warranties
made by each Borrower in or pursuant to the Loan Documents shall be true and
correct on and as of such date as if made on and as of such date (unless such
representations and warranties are stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct as
of such earlier date).
 
(j) No Default. No Default or Event of Default shall have occurred and be
continuing on such date.
 
(k) No Material Adverse Effect. No event or events which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect
shall have occurred since August 30, 2005.
 
(l) Additional Matters. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions contemplated hereby
or thereby as it shall reasonably request.
 
6.3. Conditions to Each Extension of Credit. The agreement of each Lender to
make any Extension of Credit requested to be made by it on any date (including,
without limitation, its initial Loans) is subject to the satisfaction of the
following conditions precedent:
 
(a) Representations and Warranties. Each of the representations and warranties
made by each Loan Party in or pursuant to the Loan Documents shall be true and
correct on and as of such date as if made on and as of such date (unless such
representations and warranties are stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct as
of such earlier date).
 
(b) No Default. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the Extensions of Credit
requested to be made on such date.
 
(c) Maintenance of Borrowing Base. After giving effect to the Extensions of
Credit requested to be made on any date, the Aggregate Credit Exposure of the
Lenders shall not exceed the Borrowing Base then in effect.
 
(d) Maintenance of Collateral Coverage Ratio. The Collateral Coverage Ratio
shall be at least 1.5 to 1.0.
 
(e) Material Adverse Effect. No event or events which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect
shall have occurred and is continuing since the date of the previous Extension
of Credit.
 
Each request for a Loan by, and Letter of Credit issued on behalf of, the
Borrowers hereunder shall constitute a representation and warranty by the
Borrowers as of the date thereof that the conditions contained in (a), (b), (c),
(d) and (e) of this subsection have been satisfied.
 
6.4. Determinations Under Section 6. For purposes of determining compliance with
the conditions specified in Section 6.1, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to the Lenders if such Lender has executed and delivered its
signature page to this Agreement to the Administrative Agent.
 
SECTION 7
 
AFFIRMATIVE COVENANTS
 
Each Borrower hereby agrees that, so long as the Commitments remain in effect,
any Loan, or Letter of Credit or Note remains outstanding and unpaid or any
amount is owing to any Lender or the Administrative Agent hereunder or under any
other Loan Document, such Borrower shall and (except in the case of delivery of
financial information, reports and notices) shall cause each Guarantor to:
 
7.1. Financial Statements. Furnish to the Administrative Agent and to each of
the Lenders:
 
(a) as soon as available, but in any event within ninety (90) days after the end
of each fiscal year of EPPHC, a copy of EPPHC’s Form 10-K, as filed;
 
(b) as soon as available, but in any event not later than forty-five (45) days
after the end of each of the first three quarterly fiscal periods of each fiscal
year of EPPHC, a copy of EPPHC’s Form 10-Q, as filed;
 
all financial statements in such reports shall be complete and correct in all
material respects and shall be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except for such changes in GAAP as approved by the Independent Auditors or a
Responsible Officer, as the case may be, and disclosed therein).
 
(c) The electronic posting of any financial reports, notices or other items
required to be furnished pursuant to Sections 7.1 or 7.2 on a website
(www.elpaso.com) established by El Paso and accessible by the Lenders shall
constitute delivery for all purposes of Sections 7.1 or 7.2 provided that EPPHC
shall provide each Lender with notice that a financial report has been posted on
such website.
 
7.2. Certificates; Other Information. Furnish to the Administrative Agent and to
each of the Lenders:
 
(a) concurrently with the delivery of the financial statements referred to in
subsections 7.1(a) and (b), (i) a certificate of a Responsible Officer of EPPHC
stating that, to the best of such officer’s knowledge, during such period the
Borrowers have observed or performed all of their covenants (and setting forth
the calculations used to determine compliance with the covenants set forth in
subsection 8.1) and other agreements, and satisfied every condition, contained
in this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate, and (ii) if there
are any Unrestricted Subsidiaries, such financial statements restated to show
the financial condition and results of EPPHC and its Restricted Subsidiaries;
 
(b) within five days after the same are filed, copies of all financial
statements and reports on Form 8-K, if any, and all definitive proxy statements
which EPPHC may make to, or file with, the Securities and Exchange Commission or
any successor or analogous Governmental Authority;
 
(c) promptly upon receipt thereof, copies of all final reports and management
letters submitted to EPPHC by the Independent Auditors in connection with any
interim or special audit of the books or operations of EPPHC made by such
Auditors;
 
(d) together with any Reserve Report delivered pursuant to Section 4.9(b), (i) a
schedule identifying as of June 30 or December 31, as applicable, each Hedging
Agreement as to which the Borrowers are bound, and setting forth the names of
the parties thereto and of any guarantees thereof, and (ii) a schedule
demonstrating that the Collateral Coverage Ratio is at least 1.5 to 1.0, such
schedule to set forth the location and filing information of the recorded
Mortgages and the PV-10 Value of the Borrowing Base Properties;
 
(e) within 30 days following the end of each fiscal year, annual cash flow
projections for the subsequent fiscal year of EPPHC and its Restricted
Subsidiaries, including quarterly production volumes, revenues, expenses, taxes
and budgeted capital expenditures; and
 
(f) promptly, such additional financial and other information concerning the
Borrowers as any Lender (acting through the Administrative Agent) may from time
to time reasonably request.
 
7.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent (following the lapse of any applicable
cure period), as the case may be, all of its obligations of whatever nature,
including, without limitation, taxes, assessments, fees and other governmental
charges, except where (x) the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the applicable
Loan Party, or (y) the failure to pay, discharge or otherwise satisfy such
obligations, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
 
7.4. Conduct of Business and Maintenance of Existence; Compliance with Law and
Contractual Obligations. Continue to engage in business of the same general type
as now conducted by it and preserve, renew and keep in full force and effect its
corporate existence; take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except as otherwise permitted by subsection 8.5 and comply with all
Contractual Obligations and Requirements of Law, in each case except to the
extent that failure to comply therewith could not reasonably be expected to
have, in the aggregate, a Material Adverse Effect.
 
7.5. Maintenance of Properties; Insurance. Maintain all Properties useful and
necessary in its business in accordance with past practices and customary
industry norms, (x) ordinary wear and tear and (y) casualty events which could
not reasonably be expected to have a Material Adverse Effect excepted; maintain
or cause to maintain with financially sound and reputable insurance companies
(or through self-insurance), property damage and liability insurance of such
types, in such amounts and against such risks as is customary to be maintained
by companies engaged in the same or a similar business in the same general area;
and furnish to the Administrative Agent, upon written request, full information
as to the insurance carried.
 
7.6. Inspection of Property; Books and Records; Discussions. Keep proper books
of records and account in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any Borrowing Base Properties
operated by it (provided the Lender’s representatives shall comply with all
safety procedures and precautions required by the Borrowers while on any Oil and
Gas Properties of any Borrower), and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
requested through the Administrative Agent and to discuss the business,
operations, properties and financial and other condition of the Borrowers with
officers of the Borrowers and with their Independent Auditors, in the presence
of a Responsible Officer of the Borrowers.
 
7.7. Notices. Promptly give notice to the Administrative Agent of:
 
(a) an officer of the Borrower obtaining knowledge of the occurrence of any
Event of Default that is continuing;
 
(b) an officer of the Borrower obtaining knowledge of any (i) material default
or event of default under any material Contractual Obligation of any Loan Party
or (ii) material litigation, investigation or proceeding which may exist at any
time between any Loan Party and any Governmental Authority;
 
(c) an officer of the Borrower obtaining knowledge of any litigation or
proceeding affecting any of Borrowers involving in the aggregate a liability (to
the extent not paid or covered by insurance) of $25,000,000.00 or more which
could reasonably be expected to result in an adverse judgment not covered by
insurance or in which injunctive or similar relief is sought;
 
(d) the following events, as soon as possible and in any event within 30 days
after a Borrower knows thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of any
other action by the PBGC or the Borrower or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
 
(e) the acquisition or creation of any Subsidiary, including whether EPPHC
designates such Subsidiary as an Unrestricted Subsidiary; and
 
(f) an officer of the Borrower obtaining knowledge of any event or circumstance
which has had or may reasonably be expected to have a Material Adverse Effect.
 
Each notice pursuant to this subsection shall be accompanied by a statement of
the officer setting forth details of the occurrence referred to therein and
stating what action the Borrower has taken or proposes to take with respect
thereto.
 
7.8. Environmental Laws. (a) Except as set forth in Schedule 5.17 or as,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (i) comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits necessary for its
operations as conducted and as planned; and (ii) take all reasonable efforts to
ensure that all of its tenants, subtenants, contractors, subcontractors, and
invitees comply with all Environmental Laws, and obtain, comply with and
maintain any and all Environmental Permits, applicable to any of them.
 
(a) Except as set forth in Schedule 5.17 or to the extent that the failure to
comply could not reasonably be expected to give rise to a Material Adverse
Effect, comply with all orders and directives of all Governmental Authorities
regarding Environmental Laws, other than such orders and directives as to which
an appeal or other appropriate action to contest such order or directive has
been timely and properly taken in good faith.
 
(b) Prior to acquiring any ownership or leasehold interest in real property or
other interest in any real property that could give rise to the Borrower being
subject to potential significant liability under or violations of any
Environmental Law, which potential liabilities or violations, if incurred, could
reasonably be expected to have a Material Adverse Effect: (i) notify the
Administrative Agent; and (ii) if requested by the Administrative Agent, provide
to the Administrative Agent a written report by an environmental consultant
reasonably acceptable to the Administrative Agent assessing the presence or
potential presence of significant levels of any Materials of Environmental
Concern on, under, in, or about the property, or of other conditions that could
give rise to potentially significant liability or violations of any
Environmental Law.
 
7.9. Additional Collateral. (a) With respect to any Person that, subsequent to
the Closing Date, becomes a Domestic Restricted Subsidiary, promptly (i) cause
such Person to become a party to a Guarantee Agreement and (ii) if requested by
the Administrative Agent, deliver to the Administrative Agent legal opinions as
to the validity and enforceability of such Subsidiary’s guarantee, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
 
(a) With respect to a Borrower that, subsequent to the Closing Date, acquires
any Properties that are proposed to be Borrowing Base Properties, promptly
execute and deliver to the Administrative Agent Mortgages or amendments to
Mortgages presently in force granting security interests and Liens to the
Administrative Agent, for the ratable benefit of the Secured Parties, in such
Properties.
 
7.10. Maintenance and Operation of Properties. Except to the extent that the
failure to comply could not reasonably be expected to have a Material Adverse
Effect and consistent with the standards of a reasonably prudent operator under
the same circumstances:
 
(a) Maintain, develop, and operate the Oil and Gas Properties that are operated
by any Loan Party in a good and workmanlike manner, and observe and comply with
all of the terms and provisions, express or implied, of all oil and gas leases
relating to such Properties so long as the oil and gas leases are capable of
producing Hydrocarbons in quantities and at prices providing for continued
efficient and profitable operation of business;
 
(b) Comply in all material respects with all contracts and agreements applicable
to or relating to Oil and Gas Properties of any Loan Party or the production and
sale of Hydrocarbons therefrom;
 
(c) At all times, maintain, preserve, and keep all operating equipment used with
respect to the Oil and Gas Properties that are operated by any Loan Party in
proper repair, working order and condition, and make all necessary or
appropriate repairs, renewals, replacements, additions and improvements thereto
so that the efficiency of the operating equipment shall at all times be properly
preserved and maintained, provided that no item of operating equipment need be
so repaired, renewed, replaced, added to or improved, if such Loan Party shall
in good faith determine that the action is not necessary for such Person’s
continued efficient and profitable operation of business.
 
(d) With respect to Oil and Gas Properties which are operated by operators other
than a Loan Party, seek to enforce the operators’ contractual obligations to
maintain, develop, and operate such Properties subject to the applicable
operating agreements to the extent it is commercially reasonable to do so.
 
(e) If and when any of the wells located on the Oil and Gas Properties of any
Loan Party ceases producing Hydrocarbons in paying quantities and is of no
further use and a Loan Party is required to do so under any agreement or law,
said Loan Party will plug and abandon, or cause to be plugged and abandoned, any
and all such wells in accordance in all material respects with applicable local,
state and/or federal laws and regulations then in force and regulating the
plugging of Hydrocarbon wells.
 
7.11. Collateral Coverage. At all times the Borrower will maintain a Collateral
Coverage Ratio of at least 1.5 to 1.0. Failure to maintain a Collateral Coverage
Ratio of at least 1.5 to 1.0 shall not be considered a Default or an Event of
Default provided the Borrower complies with Section 4.10(c) on a timely basis.
 
7.12. Further Assurances. Upon the request of the Administrative Agent, promptly
perform or cause to be performed any and all acts and execute or cause to be
executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Oil and Gas Properties subject to the Mortgages that
are duly perfected in accordance with all applicable Requirements of Law.
 
SECTION 8
 
NEGATIVE COVENANTS
 
Each Borrower hereby agrees that, so long as the Commitments remain in effect,
any Loan, Letter of Credit or any Note remains outstanding and unpaid or any
amount is owing to any Lender or the Administrative Agent hereunder or under any
other Loan Document, such Borrower shall not, and shall not (except with respect
to subsection 8.1) permit any Guarantor, to:
 
8.1. Financial Covenant Conditions
 
(a) Interest Coverage Ratio. Permit the Interest Coverage Ratio as of the last
day of any fiscal quarter of EPPHC to be less than 2.0 to 1.0.
 
(b) Debt Leverage Ratio. Permit the Debt Leverage Ratio as of the last day of
any fiscal quarter of EPPHC to be greater than 4.50 to 1.0, for the period of
the first four consecutive fiscal quarters ended following the Closing Date, and
4.0 to 1.0 with respect to each fiscal quarter ending thereafter.
 
8.2. Limitation on Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
 
(a) Indebtedness of the Borrower or any Guarantor under any Loan Document;
 
(b) Indebtedness outstanding on the date hereof and listed on Schedule 8.2
(including, without limitation, the Senior Notes) and any refinancings,
refundings, renewals or extensions thereof on terms and conditions not more
restrictive than the original Indebtedness;
 
(c) Indebtedness of any Borrower under Hedging Agreements entered into in the
ordinary course of business of such Borrower and not for speculative purposes,
including Commodity Hedging Agreements permitted under subsection 8.15;
 
(d) Indebtedness of any Loan Party issued or owed to any other Loan Party,
provided that no Default, Event of Default, Borrowing Base Deficiency, or
Collateral Value Deficiency exists on the date that such Indebtedness is
created;
 
(e) [Reserved]
 
(f) Obligations in respect of completion bonds, performance bonds, bid bonds,
appeal bonds, surety bonds, insurance obligations or bonds and similar bonds and
obligations incurred by any Loan Party in the ordinary course of business and
any guarantees or letters of credit functioning as or supporting any of the
foregoing bonds or obligations;
 
(g) Subordinated Indebtedness that is issued on terms which are satisfactory to
the Administrative Agent and the Required Lenders with respect to provisions
regarding maturity, covenants, events of default and subordination language,
provided that after giving effect to the issuance of such Subordinated
Indebtedness, the Borrower is in compliance with the covenants contained in
subsection 8.1 hereof;
 
(h) Guarantee Obligations permitted by subsection 8.4;
 
(i) Indebtedness incurred to finance the acquisition of equipment, provided that
the amount of such Indebtedness does not exceed the purchase price of such
equipment as applicable; and
 
(j) Indebtedness of any Loan Party created, incurred or assumed after the date
hereof not otherwise permitted pursuant to this subsection 8.2, provided that
(i) after taking into account the aggregate principal amount of such
Indebtedness, the Debt Leverage Ratio on the day such Indebtedness is incurred
shall not be greater than 3.5 to 1.0, and (ii) on the day such Indebtedness is
incurred no Default, Event of Default, Borrowing Base Deficiency, or Collateral
Value Deficiency shall have occurred and be continuing.
 
8.3. Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon
any of their property, assets or revenues, whether now owned or hereafter
acquired, except for the following (and each of the following are collectively
referred to herein as “Permitted Liens”):
 
(a) Liens for taxes, assessments or other governmental charges or levies not yet
due or which are being contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto are maintained on the books
of the Borrower or any Loan Parties, in conformity with GAAP;
 
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, landlords’,
repairmen’s or other like Liens arising in the ordinary course of business
securing obligations which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings, which
proceedings would have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Lien;
 
(c) pledges or deposits made in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other social security
legislation;
 
(d) deposits and letters of credit made to secure the performance of bids,
tenders, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance and return-of-money bonds and
other obligations of a like nature incurred in the ordinary course of business;
 
(e) easements, rights-of-way, servitudes, permits, reservations, exceptions,
covenants and other restrictions as to the use of real property and other
similar encumbrances incurred in the ordinary course of business which, with
respect to all of the foregoing, do not secure the payment of Indebtedness of
the type described in clauses (a)-(d) of the definition thereof and which do not
materially detract from the value of the Property subject thereto or materially
interfere with the ordinary conduct of the business of any Loan Party;
 
(f) Liens in existence on the date hereof listed on Schedule 8.3, provided that
no such Lien encumbers Borrowing Base Property and is amended after the date of
this Agreement to cover any additional Property or to secure additional
Indebtedness and that the amount of Indebtedness secured thereby is not
increased;
 
(g) Liens created pursuant to the Security Documents and other Liens created
after the date hereof and securing Indebtedness hereunder or under any other
Loan Document;
 
(h) Liens reserved in customary oil, gas and/or mineral leases for royalties,
bonus or rental payments and for compliance with the terms of such leases and
Liens reserved in customary operating agreements, farm-out and farm-in
agreements, exploration agreements, development agreements and other similar
agreements for compliance with the terms of such agreements, to the extent that
(x) any such Lien referred to in this clause (h) does not materially impair the
use or value of the property subject to such Lien for the purposes for which
such property is held, and (y) in the case of customary operating agreements,
farm-out and farm-in agreements, exploration agreements, development agreements
and other similar agreements, the amount of any obligations secured thereby that
are delinquent, that are not diligently contested in good faith and for which
adequate reserves are not maintained by the Borrower or any Guarantor, as the
case may be, do not exceed, at any time outstanding, the amount owing by the
Borrower or any Guarantor, as applicable, for ninety (90) days’ billed operating
expenses or other expenditures attributable to such entity’s interest in the
Property covered thereby;
 
(i) defects, irregularities and deficiencies in the title of any rights of way
or other Property of any Loan Party which in the aggregate do not materially
impair the use of such rights of way or other property for the purposes for
which such rights of way and other Property are held by such Loan Party, and
defects, irregularities and deficiencies in title to any property of any Loan
Party of the Borrower, which defects, irregularities or deficiencies have been
cured by possession under applicable statutes of limitation;
 
(j) royalties, overriding royalties, revenue interests, net revenue interests,
production payments and advance payment obligations (other than obligations in
respect of advance payments received in connection with the incurrence of
Indebtedness), provided that the value of the Oil and Gas Properties shown on
the Borrower’s Reserve Reports is net of such Liens;
 
(k) any Lien securing Indebtedness, neither assumed nor guaranteed by any Loan
Party nor on which it customarily pays interest, existing upon real estate or
rights in or relating to real estate acquired by any Loan Party for substation,
metering station, pump station, storage gathering line, transmission line,
transportation line, distribution line or for right-of-way purposes, and any
Liens reserved in leases for rent and for compliance with the terms of the
leases in the case of leasehold estates, to the extent that any such Lien
referred to in this paragraph (k) does not materially impair the use or value of
the property subject to such Lien for the purposes for which such property is
held;
 
(l) judgment and other similar Liens arising in connection with court
proceedings, provided that the judgment relating thereto shall have been stayed
or bonded pending appeal, provided that no such Lien shall encumber any
Borrowing Base Property;
 
(m) Liens arising out of all presently existing and future division and transfer
orders, advance payment agreements, processing contracts, gas processing plant
agreements, operating agreements, gas balancing or deferred production
agreements, pooling, unitization or communitization agreements, pipeline,
gathering or transportation agreements, platform agreements, drilling contracts,
injection or repressuring agreements, cycling agreements, construction
agreements, salt water or other disposal agreements, leases or rental
agreements, farm-out and farm-in agreements, exploration and development
agreements, and any and all other contracts or agreements covering, arising out
of, used or useful in connection with or pertaining to the exploration,
development, operation, production, sale, use, purchase, exchange, storage,
separation, dehydration, treatment, compression, gathering, transportation,
processing, improvement, marketing, disposal or handling of any property of any
Loan Party, provided that such agreements are entered into in the ordinary
course of business and when entered into contain terms customary for such
agreements in the industry and provided further that no Liens described in this
paragraph (m) shall be granted or created in connection with the incurrence of
Indebtedness;
 
(n) customary preferential rights to purchase and calls on productions by
sellers relating to any of the Borrowing Base Properties;
 
(o) any Liens existing on any Oil and Gas Properties prior to the acquisition
thereof by any Loan Party or existing on any Property of any Person that becomes
a Loan Party prior to the time such Person becomes a Loan Party; provided that
(i) such Liens are not created in contemplation of or in connection with such
acquisition or such Person becoming a Loan Party, as the case may be, (ii) such
Liens shall not encumber any other Oil and Gas Properties of the Loan Party
making such acquisition, (iii) such Liens shall not encumber any Borrowing Base
Properties, and (iv) the Indebtedness secured by such Liens may remain
outstanding pursuant to Section 8.2(j);
 
(p) any Liens securing Indebtedness of any Loan Party incurred pursuant to
Section 8.2(j) to finance the acquisition of any Oil and Gas Properties or any
Person owning Oil and Gas Properties, provided that (i) such Liens are created
substantially simultaneously with such acquisition or within 180 days
thereafter, (ii) such Liens shall not at any time encumber any other Oil and Gas
Properties other than the Oil and Gas Properties so acquired or the Oil and Gas
Properties of the Person so acquired, as the case may be, (iii) such Liens shall
not encumber any Borrowing Base Properties, and (iv) the Indebtedness secured by
such Liens, together with any existing Liens encumbering such Oil and Gas
Properties does not exceed 60% of the purchase price (plus assumed debt) of
acquiring such Oil and Gas Properties or such Person, as the case may be;
 
(q) [Reserved]
 
(r) Liens not expressly permitted by this subsection 8.3 securing any
Indebtedness permitted by subsection 8.2(c), (i) or (j) provided that (i) no
such Lien shall encumber any Borrowing Base Properties, and (ii) at the time of
incurrence, the outstanding principal amount of the Indebtedness secured by such
Liens may not exceed 10% of the PV-10 Value of the Loan Parties’ Oil and Gas
Properties.
 
8.4. Limitation on Guarantee Obligations. Create, incur, assume or suffer to
exist any Guarantee Obligation except (a) Guarantee Obligations in existence on
the date hereof and listed on Schedule 8.4, (b) Guarantee Obligations arising
under the Loan Documents, (c) Guarantee Obligations with respect to Indebtedness
permitted by subsection 8.2 (other than subsection (h) thereof), (d) Guarantee
Obligations incurred by any Loan Party with respect to any obligations or
liabilities of a Loan Party, so long as the incurring of such obligations or
liabilities is not prohibited by Section 8.2 hereof, and (e) Guarantee
Obligations issued by any Loan Party in the ordinary course of business of
obligations of other Persons (other than in respect of Indebtedness) in
connection with current oil and gas drilling, oil and gas production, oil and
gas transportation, crude oil purchasing, oil and gas exploration or other
similar programs or operations, and (f) Guarantee Obligations of a Person
existing at the time such Person becomes a Subsidiary that were not created in
contemplation of such event, so long as the incurrence of such obligations or
liabilities is not prohibited by Section 8.2 hereof.
 
8.5. Limitation on Fundamental Change. Enter into any merger, consolidation or
amalgamation as a constituent party, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or make any material change in its present method of
conducting business except:
 
(a) any Subsidiary of EPPHC (including a Foreign Subsidiary) may be merged or
consolidated with or into a Loan Party (provided that such Loan Party shall be
the continuing or surviving corporation);
 
(b) any Subsidiary of EPPHC may sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to a Loan
Party;
 
(c) any Guarantor may merge into any other Loan Party or may dissolve and
transfer all of its assets and liabilities to another Loan Party;
 
(d) any Borrower may merge into any other Borrower; or
 
(e) transactions contemplated pursuant to a Reorganization Plan consented to by
the Lenders.
 
8.6. Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or
otherwise dispose of any of their Oil and Gas Properties (including, without
limitation, receivables and leasehold interests), whether now owned or hereafter
acquired, except:
 
(a) the sale of inventory (including Hydrocarbons or other mineral products or
surplus) in the ordinary course of business;
 
(b) Dispositions of Oil and Gas Properties not constituting Proved Reserves
pursuant to farm-ins and farm-outs and transfers of royalty interests,
overriding royalty interests, net revenue interests and other similar transfers,
all pursuant to exploration and development activity in the ordinary course of
business of the Borrowers and their Subsidiaries;
 
(c) the Disposition of Oil and Gas Properties not constituting Borrowing Base
Properties, provided that if the aggregate PV-10 Value (determined by reference
to the most recent Reserve Report) of such Disposition and other Dispositions
since the most recent Redetermination Date minus the PV-10 Value of all Oil and
Gas Properties not constituting Borrowing Base Properties acquired by the Loan
Parties since such Redetermination Date exceeds an amount equal to 10% of the
PV-10 Value of the Loan Parties’ Oil and Gas Properties, the Technical Banks may
elect to redetermine the Borrowing Base in accordance with the procedures set
forth in subsection 4.9 as if a Borrower Redetermination Notice had been
provided prior to such Disposition;
 
(d) the Disposition of any Borrowing Base Properties, provided that if the
aggregate PV-10 Value (determined by reference to the most recent Reserve
Report) of such Dispositions between Borrowing Base Redeterminations exceeds
$25,000,000.00, the Borrowing Base shall automatically be redetermined prior to
such Disposition in accordance with the procedures set forth in subsection 4.9
as if a Borrower Redetermination Notice had been provided prior to such
Disposition. In any event, the Disposition of Borrowing Base Property may result
in a mandatory reduction in the Borrowing Base pursuant to subsection 4.9(f).
 
8.7. Limitation on Dividends. Declare or pay any dividend on (other than
dividends payable solely in common stock of any Borrower), or make any payment
on account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, defeasance, retirement or other acquisition of any
shares of any class of Capital Stock of any Loan Party or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of such Loan Party,
except that:
 
(a) a Loan Party may declare and pay dividends to or make other distributions to
another Loan Party;
 
(b) EPPHC may declare and pay dividends or make other distributions of property
from the net proceeds received by EPPHC from the issuance or sale of its Capital
Stock;
 
(c) provided no Default, Event of Default, Borrowing Base Deficiency or
Collateral Value Deficiency shall have occurred and be continuing, EPPHC may
declare and pay dividends or make other distributions of property with respect
to any fiscal year (but no later than 120 days after the end of such fiscal
year) in an amount that does not exceed the sum of (i) the Available
Distribution Amount, plus (ii) the net proceeds of any equity offering or
contribution of equity, in each case received by a Loan Party during such fiscal
year, plus (iii) 100% of Free Cash Flow of the Loan Parties accrued during such
fiscal year, minus (iv) Free Cash Flow and capital contributions used to repay
Indebtedness pursuant to Section 8.9(z).
 
8.8. Limitation on Investments, Loans and Advances. Make any advance, loan,
extension of credit or capital contribution to, or incur any Guarantee
Obligation on behalf or for the benefit of, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other investment (including by the issuance of letters of credit) in
(collectively, “Investments”), any Person, except:
 
(a) extensions of trade credit in the ordinary course of business;
 
(b) investments in Cash Equivalents;
 
(c) loans and advances to officers and employees of the Borrowers and their
Subsidiaries for travel, entertainment and relocation expenses in the ordinary
course of business in an aggregate amount for the Borrowers and their
Subsidiaries not to exceed $1,000,000 at any one time outstanding;
 
(d) investments, loans or advances, the material details of which have been set
forth on Schedule 8.8;
 
(e) so long as no Default or Event of Default shall have occurred and be
continuing, Investments by any Loan Party, Subsidiary or Affiliate in which
EPPHC has a direct or indirect investment in any other Loan Party, Subsidiary or
Affiliate in which EPPHC has a direct or indirect investment;
 
(f) acquisitions and investments made or entered into in connection with the Oil
and Gas Business;
 
(g) transactions expressly permitted or contemplated under subsection 8.2
(provided, that no loans may be made by any Borrower pursuant to subsection
8.2(g) at any time when a Default, Event of Default, Borrowing Base Deficiency
or Collateral Value Deficiency shall have occurred and be continuing);
 
(h) provided no Default, Event of Default, Borrowing Base Deficiency, or
Collateral Value Deficiency shall have occurred and is continuing, additional
loans or advances made on a revolving basis to El Paso Corporation under the
Cash Management Program up to a maximum outstanding amount of $125,000,000; and
 
(i) Investments not otherwise permitted hereunder in an amount at any time not
in excess of $10,000,000.
 
8.9. Limitation on Payments and Modifications of Debt Instruments, Other
Documents. (a) Make any voluntary payment or prepayment on or redemption,
defeasance or purchase of (i) any Indebtedness (other than Indebtedness under
this Agreement) which has an aggregate principal amount in excess of $5,000,000
or (ii) any Subordinated Indebtedness other than, provided that no Event of
Default, Borrowing Base Deficiency, or Collateral Value Deficiency has occurred
and is continuing, principal with respect thereto and interest thereon, or (b)
amend, modify or change, or consent or agree to any material amendment,
modification or change to any of the payment, redemption, prepayment or similar
economic terms (including the subordination provisions) of any such Indebtedness
described in clauses (i) or (ii) immediately preceding (other than any such
amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon). Notwithstanding any contrary
provision in this Section 8.9, EPPHC may:
 
(w) prepay or purchase any outstanding Senior Notes provided that prior to the
date of such prepayment or purchase the Borrowing Base shall be redetermined in
accordance with the procedures set forth in subsection 4.9 which would have
applied had a Borrower Redetermination Notice or a Lender Redetermination
Notice;
 
(x) prepay or purchase any outstanding Senior Notes in connection with an
otherwise permitted refinancing of such Senior Notes;
 
(y) provided no Default, Event of Default, Borrowing Base Deficiency or
Collateral Value Deficiency shall have occurred and be continuing, pay principal
with respect to and interest on Indebtedness owed to El Paso Corporation;
provided, however, that such Indebtedness was incurred on a revolving basis and
the amount of such revolving Indebtedness outstanding at any time does not
exceed $125,000,000; and
 
(z) provided no Default, Event of Default, Borrowing Base Deficiency or
Collateral Value Deficiency shall have occurred and be continuing, pay principal
with respect to and interest on Indebtedness owed to El Paso Corporation (other
than Indebtedness described in clause (y) above) in an amount that does not
exceed the sum of (i) 100% of Free Cash Flow for the fiscal year in which such
payment is made, and (ii) capital contributions made to EPPHC for the fiscal
year in which such payment is made.
 
8.10. Limitation on Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of Property
or the rendering of any service, with any Affiliate (other than transactions
between or among the Borrower and its Guarantors) unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary course of the
Borrower’s or the Guarantor’s business and (c) upon fair and reasonable terms no
less favorable to the Borrower or the Guarantor, as the case may be, than it
would obtain in a comparable arm’s length transaction with a Person which is not
an Affiliate or, in the event no comparable transaction with an unaffiliated
Person is available, on terms that are fair from a financial point of view to
the Borrower or Guarantor provided, however, this subsection 8.10 shall not
apply to (i) the payment of reasonable and customary fees to directors of the
Borrower who are not employees of the Borrower; (ii) loans or advances made
pursuant to subsection 8.8(c); (iii) any other transaction with any employee,
officer or director of the Borrower pursuant to drilling arrangements,
exploration and production arrangements, Plans, compensation or other similar
arrangements entered into the ordinary course of business and approved by a
majority of the disinterested members of the Board of Directors of the Borrower;
or (iv) transactions in effect on the Closing Date including material
transactions involving the production, sale or transportation of Hydrocarbons
which have been disclosed to the Lenders and which do not have a Material
Adverse Effect.
 
8.11. Limitation on Changes in Fiscal Year. Permit the fiscal year of EPPHC to
end on a day other than December 31.
 
8.12. Limitation on Negative Pledge Clauses. Enter into with any Person any
agreement, other than this Agreement or the Indenture (including any new
indenture which results from an otherwise permitted refinancing of the Senior
Notes), which prohibits or limits the ability of any Loan Party to create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired.
 
8.13. Limitation on Lines of Business. Enter into any business, either directly
or through any Subsidiary, except for those businesses in which the Loan Parties
are engaged on the date of this Agreement or which are directly related thereto
or to the Oil and Gas Business.
 
8.14. Forward Sales. Except in accordance with ordinary practice in the Oil and
Gas Business, enter into or permit to exist any advance payment agreement or
other arrangement pursuant to which the Borrower or any of its Subsidiaries,
having received full or substantial payment of the purchase price for a
specified quantity of Hydrocarbons from any of the Borrowing Base Properties
upon entering such agreement or arrangement, is required to deliver, in one or
more installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons pursuant to and during the terms of such agreement or
arrangement.
 
8.15. Hedging Agreements. Enter into any Hedging Agreement after the Closing
Date, other than Hedging Agreements entered into in the ordinary course of
business to hedge or mitigate risks to which any Loan Party is exposed in the
conduct of its business or the management of its liabilities, and provided that
with respect to all Commodity Hedging Agreements (without duplication) (i) for
oil, the total volumes to be hedged shall not exceed 85% of expected oil
production of the Loan Parties for the twenty-four month period commencing at
the time of such hedging, and 60% for any subsequent twelve month period
(determined by reference to the most recent Reserve Report) and (ii) for gas,
the total volumes to be hedged for any twenty-four month period shall not exceed
85% of expected gas production of the Loan Parties for the twenty-four month
period commencing at the time of such hedging and 60% for any subsequent twelve
month period (determined by reference to the most recent Reserve Report).
 
SECTION 9
 
EVENTS OF DEFAULT
 
If any of the following events shall occur and be continuing:
 
(a) The Borrowers shall fail to pay any principal of any Loan when due in
accordance with the terms thereof or hereof; or the Borrowers shall fail to pay
any interest on any Loan, or any other fee, Reimbursement Obligation or other
amount payable hereunder, within three (3) Business Days after any such amount
becomes due in accordance with the terms thereof or hereof; or
 
(b) Any representation or warranty made or deemed made by any Loan Party herein
or in any other Loan Document or which is contained in any certificate, document
or financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
 
(c) Any Borrower shall default in the observance or performance of any agreement
applicable to it contained in subsections 4.10, 7.7(a) or 7.9 or Section 8 of
this Agreement; or
 
(d) Any Borrower shall default in the observance or performance of any other
agreement applicable to it contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this Section),
and such default shall continue unremedied for a period of 30 consecutive days;
or
 
(e) Any Borrower shall (i) default in any payment of principal of or interest on
any Indebtedness, including without limitation the Senior Notes (excluding the
Loans or any guarantee thereof), or in the payment of any Guarantee Obligation,
which default shall continue after the applicable grace period, if any, provided
in the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; provided that the aggregate principal amount of such
Indebtedness and Guarantee Obligations equals or exceeds $25,000,000; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness (including without limitation the Indenture)
or Guarantee Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, which default shall continue after the applicable
grace period, if any, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable, provided that the aggregate principal
amount of all such Indebtedness and Guarantee Obligations which would then
become due and payable would equal or exceed $25,000,000; or
 
(f) (i) Any Borrower shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or such Borrower shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against such
Borrower any case, proceeding or other action of a nature referred to in clause
(i) above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against such Borrower
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, restraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) such Borrower
shall take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) such Borrower shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
 
(g) (i) Any Person shall engage in any “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any
“accumulated funding deficiency” (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect; or
 
(h) One or more judgments or decrees shall be entered against any Borrower
involving in the aggregate a liability (to the extent not paid or covered by
insurance) of $25,000,000 or more, and all such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal (or otherwise
paid or satisfied in full) within 90 days after the entry thereof; or
 
(i) A material provision of any Loan Document or the guarantee of any of the
Guarantors under a Guarantee Agreement shall cease, for any reason, to be in
full force and effect, or any Loan Party, any of their Affiliates, or any
officer or employee of any of the foregoing, shall so assert; or
 
(j) The subordination provisions contained in any Subordinated Indebtedness
shall cease, for any reason, to be in full force and effect, or any Loan Party
that is a party thereto or holders of at least 25% of the aggregate principal
amount of such Subordinated Indebtedness shall so assert in writing; or
 
(k) Any Lien created by any Security Document shall cease to be enforceable and
of the same effect and priority purported to be created thereby other than
because of a release permitted hereunder signed by the Administrative Agent; or
 
(l) A Change of Control shall occur; or
 
(m) Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of, all or any material
portion (such materiality determined by reference to the Borrower and its
Subsidiaries taken as a whole) of the Property of the Borrower or any Guarantor;
 
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
and unpaid interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all Letter of Credit Outstandings, whether or
not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) and the other Loan Documents shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by written
notice to the Borrowers, declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the consent
of the Required Lenders, the Administrative Agent may, or upon the request of
the Required Lenders, the Administrative Agent shall, by written notice to the
Borrowers, declare the Loans hereunder (with accrued and unpaid interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all Letter of Credit Outstandings, whether or not the beneficiaries
of the then outstanding Letters of Credit shall have presented the documents
required thereunder) and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
 
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrowers shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then unexpired amount that is available to be drawn under such Letters
of Credit. The Borrowers hereby grant to the Administrative Agent, for the
benefit of the Issuing Lender and the L/C Participants, a security interest in
such cash collateral to secure all obligations of the Borrowers under this
Agreement and the other Loan Documents. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired, been cancelled or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrowers
hereunder and under the Notes. After all such Letters of Credit shall have
expired, been cancelled or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrowers hereunder
and under the other Loan Documents shall have been paid in full, the balance, if
any, in such cash collateral account shall be returned to the Borrowers. The
Borrowers shall execute and deliver to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, such further documents and
instruments as the Administrative Agent may reasonably request to evidence the
creation and perfection of the within security interest in such cash collateral
account. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
 
SECTION 10
 
THE ADMINISTRATIVE AGENT
 
10.1. Appointment. Each Lender hereby irrevocably designates and appoints Fortis
as Administrative Agent of such Lender under this Agreement and the other Loan
Documents, and each such Lender irrevocably authorizes the Administrative Agent,
in such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of this Agreement and the other Loan Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary contained elsewhere in this Agreement, the Administrative Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
 
10.2. Delegation of Duties
 
. The Administrative Agent may execute any of its duties under this Agreement
and the other Loan Documents by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
 
10.3. Exculpatory Provisions. None of the Technical Banks nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person’s own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by any Loan Party
or any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of any Loan Party to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
 
10.4. Reliance by Administrative Agent
 
. The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Loan Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, where unanimous consent of the Lenders is expressly
required hereunder, such Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, where
unanimous consent of the Lenders or the Required Lenders is expressly required
hereunder, such Lenders or Required Lenders, as applicable), and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
 
10.5. Notice of Default. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.” In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
 
10.6. Non-Reliance on Administrative Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Administrative
Agent hereafter taken, including any review of the affairs of any Loan Party,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent 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 appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each Loan Party and made its own decision to make its
Extensions of Credit hereunder and enter into this Agreement. Each Lender also
represents 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 deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of each Loan Party. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Loan Party which
may come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
 
10.7. Indemnification. The Lenders agree to indemnify the Administrative Agent
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation the Borrower to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
obligations under this Agreement) be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent’s gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of all obligations under this Agreement and
all other amounts payable hereunder.
 
10.8. Administrative Agent in Its Individual Capacity. The Administrative Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with any Loan Party as though the Administrative Agent
were not the Administrative Agent hereunder and under the other Loan Documents.
With respect to the Extensions of Credit made by it, the Administrative Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms “Lender” and “Lenders” shall include the
Administrative Agent in its individual capacity.
 
10.9. Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to the Lenders. If the Administrative
Agent shall resign as Administrative Agent under this Agreement and the other
Loan Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent, with the consent of the
Borrowers (such consent not to be unreasonably withheld or delayed), shall
succeed to the rights, powers and duties of the Administrative Agent hereunder.
Effective upon such appointment and approval, the term “Administrative Agent”
shall mean such successor agent, and the former Administrative Agent’s rights,
powers and duties as Administrative Agent shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent’s resignation as Administrative Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents. The Administrative Agent may be removed at any time with
or without cause by the Required Lenders (which for this purpose, shall not
include the Loans or Commitments of the Administrative Agent), provided that on
the effectiveness of such removal the Obligations owing to such Administrative
Agent as a Lender are repaid in full and as an Issuing Lender are cash
collateralized or otherwise secured. If the Administrative Agent is removed, the
procedures set forth in this Section 10.9 shall apply in appointing a successor
Administrative Agent.
 
10.10. Issuing Lender. The provisions of this Section 10 applicable to the
Administrative Agent shall apply to the Issuing Lender in the performance of its
duties under the Loan Documents, mutatis mutandis.
 
10.11. Others. None of the Joint Lead Arrangers, the Joint Bookrunners, the
Syndication Agent, nor the Documentation Agents, in such respective capacities,
shall have any duties or responsibilities, or incur any liabilities, under this
Agreement or the other Loan Documents.
 
10.12. Hedging Arrangements. To the extent any Affiliate of a Lender is a party
to a Hedging Agreement with the Borrowers and thereby becomes a beneficiary of
the Liens described in Section 4.16 hereof pursuant to the Security Documents,
such Affiliate of a Lender shall be deemed to appoint the Administrative Agent
its nominee and agent, to act for and on behalf of such Affiliate in connection
with the Security Documents and to be bound by the terms of this Section 10.
 
SECTION 11
 
MISCELLANEOUS
 
11.1. Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the applicable
Loan Parties written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the applicable Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the principal amount, or extend the
scheduled date of final maturity, of any Loan, or reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof or increase the principal amount or extend the expiration date of any
Lender’s Commitments, or change the limits on Letter of Credit Outstandings as
set forth in subsection 3.1(a)(i), in each case without the consent of each
Lender affected thereby, (ii) amend, modify or waive the definition of Technical
Lenders, any provision of Section 4.9, Section 4.10, Section 4.16, or Section
7.11 without the written consent of each Lender, (iii) amend, modify or waive
any provision of this subsection or reduce the percentage specified in the
definition of Required Lenders (or modify any provision of this Agreement or any
other Loan Document to provide that an action currently requiring the approval
of or consent by the Required Lenders may be taken with the consent or approval
by a lower percentage of Lenders), or consent to the assignment or transfer by
any Loan Party of any of its rights and obligations under this Agreement and the
other Loan Documents other than in accordance with the terms of the applicable
Loan Documents, in each case without the written consent of all the Lenders,
(iv) release, or subordinate the interest of the Administrative Agent in, any of
the collateral for the Obligations hereunder (except as specifically provided
herein) or release any of the Guarantors from their respective obligations under
the Guarantee Agreement without the written consent of each Lender, (v) change
subsection 4.8(a) or subsection 11.7(a) in a manner that would alter the pro
rata sharing of payments required thereby, without the written consent of each
Lender, (vi) amend, modify or waive any provision of Section 10 without the
written consent of the then Administrative Agent and Issuing Lender, or (vii)
amend, modify or waive any provision of this Agreement or any other Loan
Document prior to the initial Borrowing Date without the written consent of each
Lender. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Loan Parties,
the Lenders, the Administrative Agent and all future holders of the Loans. In
the case of any waiver, the Loan Parties, the Lenders and the Administrative
Agent shall be restored to their former positions and rights hereunder and under
the other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
 
11.2. Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission) and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made (a) in the case of delivery by hand or by
courier service, when delivered, (b) in the case of delivery by mail, three
Business Days after being deposited in the mails, postage prepaid, or (c) in the
case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Borrowers, the Administrative
Agent, and the other Technical Banks or to such other address as may be
hereafter notified by the respective parties hereto:
 
The Borrower: El Paso Production Holding Company
1001 Louisiana Street
Houston, TX 77002
Attention: John J. Hopper
Fax: (713) 420-2708
Email: john.hopper@elpaso.com

El Paso Production Company
1001 Louisiana Street
Houston, TX 77002
Attention: John J. Hopper
Fax: (713) 420-2708
Email: john.hopper@elpaso.com

--------------------------------------------------------------------------------

El Paso Energy Raton
Corporation1001 Louisiana Street
      Houston, TX 77002
Attention: John J. Hopper
Fax: (713) 420-2708
Email: john.hopper@elpaso.com

El Paso Production GOM Inc.
1001 Louisiana Street
Houston, TX 77002
Attention: John J. Hopper
Fax: (713) 420-2708
Email: john.hopper@elpaso.com

With a copy to:

Andrews Kurth LLP
600 Travis Street, Suite 4200
Houston, Texas 77002
Attention: Randy Bryant
Fax: (713) 220-4285
Email: randybryant@akllp.com

The Administrative Agent: Fortis Capital Corp.
Millennium I
15455 N. Dallas Parkway, Suite 1400
Addison, Texas 75001
Attention: Deirdre Sanborn
Fax: (214) 754-5982
Email: deirdre.sanborn@fortiscapitalusa.com

With a copy to:

Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attention: Robert S. Rendell
Fax: (214) 758-1550
Email: rrendell@pattonboggs.com

The Other Technical Banks: The Royal Bank of Scotland plc
101 Park Avenue, 12th Floor
New York, New York 10178
Attention: Caroline Cancel
Fax: (212) 401-1407
Email: caroline.cancel@rbos.com

With a copy to:
600 Travis Street, Suite 6500
Houston, Texas 77002
Attention: Scott Joyce
Fax: (713) 221-2430
Email: scott.joyce@rbos.com

The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, TX 77002
Attention: Joseph P. Lattanzi
Fax: (713) 752-2425
Email: joe_lattanzi@scotiacapital.com

provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 4.3, 4.5 or 4.8 shall not be
effective until received.
 
11.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent, the Issuing Lender or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
 
11.4. Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Extensions of Credit hereunder.
 
11.5. Payment of Expenses and Taxes. The Borrowers agree (a) to pay or reimburse
the Administrative Agent and the other Technical Banks and their Affiliates for
all their reasonable and documented out-of-pocket costs and expenses incurred in
connection with the development, syndication, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of (i) counsel to the Administrative Agent and (ii) the
Administrative Agent customarily charged by it in connection with syndicated
credits, (b) to pay or reimburse each Lender and the Administrative Agent for
all its reasonable and documented costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent and to
the several Lenders, (c) to pay, indemnify, and hold each Lender, the
Administrative Agent, the Joint Lead Arrangers, the Joint Bookrunners and the
Documentation Agents (and their respective Affiliates and their respective
directors, officers, employees and agents) harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender, the Administrative
Agent, the Joint Lead Arrangers, the Joint Bookrunners and the Documentation
Agents (and their respective directors, officers, employees, agents and
affiliates) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents or the use or the proposed use of proceeds
contemplated by this Agreement, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or liability under,
any Environmental Law applicable to any Loan Party or any of the Properties (all
the foregoing in this clause (d), collectively, the “Indemnified Liabilities”),
provided that the Borrowers shall have no obligation under this clause (d) to
any Administrative Agent, the Joint Lead Arrangers, the Joint Bookrunners and
the Documentation Agents or any Lender (or any of their respective directors,
officers, employers, agents or affiliates), with respect to indemnified
liabilities to the extent such liabilities 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 Person. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrowers agree
not to assert, and hereby waives, and agrees to cause each of its Subsidiaries
not to assert and to so waive, all rights for contribution or any other rights
of recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Person entitled to indemnification under this subsection
11.5. The agreements in this subsection shall survive repayment of the Loans and
all other amounts payable hereunder and the termination of this Agreement.
 
11.6. Successors and Assigns; Participations and Assignments. (a) This Agreement
shall be binding upon and inure to the benefit of the Borrowers, the Lenders,
the Administrative Agent, all future holders of the Loans and any Notes
hereunder and their respective successors and assigns, except that the Borrowers
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
 
(a) Any Lender may, in the ordinary course of its commercial banking or lending
business and in accordance with applicable law and at no cost or expense to the
Borrowers, at any time sell to one or more banks or other entities
(“Participants”) participating interests in any Loan owing to such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, (i) such Lender’s obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible for the performance thereof,
(iii) such Lender shall remain the holder of any such Loan (and any Note
evidencing such Loan) for all purposes under this Agreement and the other Loan
Documents, (iv) the Borrowers and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement and the other Loan Documents, and
(v) in any proceeding under the Bankruptcy Code the Lender shall be, to the
extent permitted by law, the sole representative with respect to the obligations
held in the name of such Lender, whether for its own account or for the account
of any Participant. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such Participant’s
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those specified in clauses (i) and (ii) of the proviso to
subsection 11.1. The Borrowers agree that each Participant shall be entitled to
the benefits of subsections 4.13 and 4.14 with respect to its participation in
the Commitments and the Loans and Letters of Credit outstanding from time to
time as if it was a Lender; provided that, in the case of subsection 4.13, such
Participant shall have complied with the requirements of said subsection and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
 
(b) Any Lender may, in the ordinary course of its commercial banking or lending
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any Affiliate thereof or, with the prior written
consent of the Administrative Agent and the Borrowers (which in each case shall
not be unreasonably withheld), to an additional bank or financial institution or
other entity (an “Assignee”) all or any part of its rights and obligations under
this Agreement and the other Loan Documents including, without limitation, its
Commitments, L/C Commitments, Loans and L/C Participating Interests, pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit G, executed
by such Assignee, such assigning Lender (and, in the case of an Assignee that is
not then a Lender, by the Borrowers, the Administrative Agent and each Issuing
Lender) and delivered to the Administrative Agent for its acceptance and
recording in the Register, provided that (i) (unless the Borrower and the
Administrative Agent otherwise consent in writing) no such transfer to an
Assignee (other, than a Lender or any Affiliate thereof) shall be in an
aggregate principal amount less than $1,000,000 in the aggregate (or, if less,
the full amount of such assigning Lender’s Loans, L/C Participating Interests
and Commitments), and (ii) if any Lender assigns all or any part of its rights
and obligations under this Agreement to one of its Affiliates in connection with
or in contemplation of the sale or other disposition of its interest in such
Affiliate, the Borrowers’ prior written consent shall be required for such
assignment (which shall not be unreasonably withheld). Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and L/C
Commitment as set forth therein, and (y) the assigning Lender thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this paragraph (c) and paragraph
(e) of this subsection, the consent of the Borrowers shall not be required, and,
unless requested by the Assignee and/or the assigning Lender, new Notes shall
not be required to be executed and delivered by the Borrowers, for any
assignment which occurs at any time when any of the events described in Section
9 shall have occurred and be continuing.
 
(c) The Administrative Agent, on behalf of the Borrowers, shall maintain at the
address of the Administrative Agent referred to in subsection 11.2 a copy of
each Assignment and Acceptance delivered to it and a register (the “Register”)
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Administrative Agent and the Lenders may
(and, in the case of any Loan or other obligation hereunder not evidenced by a
Note, shall) treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. Any assignment of any Loan or other obligation hereunder
not evidenced by a Note shall be effective only upon appropriate entries with
respect thereto being made in the Register. The Register shall be available for
inspection by the Borrowers or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
 
(d) Notwithstanding anything in this Agreement to the contrary, no assignment
under subsection 11.6(c) of any rights or obligations under or in respect of the
Loans, the Notes or the Letters of Credit shall be effective unless and until
the Administrative Agent shall have recorded the assignment pursuant to
subsection 11.6(d). Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrowers and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500 (other than in the case of an assignment by a Lender to
an affiliate of such Lender), the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrowers.
On or prior to such effective date, the assigning Lender shall surrender any
outstanding Notes held by it all or a portion of which are being assigned, and
the Borrowers, at their own expense, shall, upon the request to the
Administrative Agent by the assigning Lender or the Assignee, as applicable,
execute and deliver to the Administrative Agent (in exchange for the outstanding
Notes of the assigning Lender) a new Note to the order of such Assignee in an
amount equal to the lesser of (A) the amount of such Assignee’s Commitment and
(B) the aggregate principal amount of all Loans made by such Assignee, after
giving effect to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment hereunder, a new Note to the order of the assigning Lender
in an amount equal to the lesser of (A) the amount of such Lender’s Commitment
and (B) the aggregate principal amount of all Loans made by such Lender, after
giving effect to such Assignment and Acceptance. Any such new Notes shall be
dated the Closing Date and shall otherwise be in the form of the Note replaced
thereby. Any Notes surrendered by the assigning Lender shall be returned by the
Administrative Agent to the Borrowers marked “canceled.”
 
(e) The Borrowers authorize each Lender to disclose to any Participant or
Assignee (each, a “Transferee”) and any prospective Transferee, any and all
financial information in such Lender’s possession concerning the Loan Parties
and their Affiliates which has been delivered to such Lender by or on behalf of
the Borrowers pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Borrowers in connection with such Lender’s credit
evaluation of the Loan Parties and their Affiliates prior to becoming a party to
this Agreement.
 
(f) For avoidance of doubt, the parties to this Agreement acknowledge that the
provisions of this subsection concerning assignments of Loans and Notes relate
only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
 
11.7. Adjustments; Set-off. (a) If any Lender (a “Benefitted Lender”) shall at
any time receive any payment of all or part of its Loans or Reimbursement
Obligations, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in subsection 9(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender’s Loans or Reimbursement
Obligations, or interest thereon, such Benefitted Lender shall purchase for cash
from the other Lenders a participating interest in such portion of each such
other Lender’s Loans or Reimbursement Obligations, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
 
(a) In addition to any rights and remedies of the Lenders provided by law, each
Lender shall have the right, without prior notice to the Borrowers, any such
notice being expressly waived by the Borrowers to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrowers
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrowers, as the case may be. Each Lender agrees
promptly to notify the Borrowers and the Administrative Agent after any such
set-off and application made by such Lender, provided that, to the extent
permitted by applicable law, the failure to give such notice shall not affect
the validity of such set-off and application.
 
11.8. Counterparts. This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrowers and the
Administrative Agent.
 
11.9. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
 
11.10. Integration. This Agreement and the other Loan Documents represent the
agreement of the Borrowers, the other Loan Parties, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
 
11.11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
 
11.12. Submission To Jurisdiction; Waivers. Each Borrower hereby irrevocably and
unconditionally:
 
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and appellate courts from any thereof;
 
(b) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;
 
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrowers at their
address set forth in subsection 11.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
 
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
 
(e) waives, to the maximum extent not prohibited by law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
subsection any special, exemplary, punitive or consequential damages.
 
11.13. Acknowledgments. The Borrowers hereby acknowledge that:
 
(a) they have been advised by counsel in the negotiation, execution and delivery
of this Agreement and the other Loan Documents;
 
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrowers arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
Administrative Agent and Lenders, on one hand, and the Borrower, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor;
and
 
(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
 
11.14. WAIVERS OF JURY TRIAL. THE BORROWERS, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
 
11.15. Release of Borrowing Base Properties. The Administrative Agent is hereby
authorized by the Lenders to execute, at the cost and expense of the Borrowers
and pursuant to documentation reasonably acceptable to the Administrative Agent,
partial releases of the Borrowing Base Properties to the extent such Borrowing
Base Properties are substituted in accordance with Section 4.16(f) or sold in
accordance with the terms of the Mortgage and subsection 8.6.
 
11.16. Limitation on Interest. The Borrowers, the Loan Parties, the
Administrative Agent and the Lenders intend to contract in strict compliance
with applicable usury law from time to time in effect. In furtherance thereof
such persons stipulate and agree that none of the terms and provisions contained
in the Loan Documents shall ever be construed to provide for interest in excess
of the maximum amount of interest permitted to be charged by applicable law from
time to time in effect. Neither any Loan Party nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. The
Administrative Agent and the Lenders expressly disavow any intention to charge
or collect excessive unearned interest or finance charges in the event the
maturity of any Obligation is accelerated. If (a) the maturity of any Obligation
is accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) any Lender or may other holder of any or all of the Obligations
shall otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at such Lender’s or holder’s option,
promptly returned to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
law, Lenders, the Administrative Agent and the Loan Parties (and any other
payers thereof) shall to the greatest extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments evidencing the
Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law. To the extent that the interest rate laws of the
State of Texas are applicable to this Agreement, any Note or any other Loan
Document, the applicable interest rate ceiling is the indicated (weekly) ceiling
determined in accordance with Chapter 303 of the Texas Finance Code, as amended,
and, to the extent that any Obligation under this Agreement, any Note or any
other Loan Document is deemed an open end account as such term is defined in
Chapter 302 of the Texas Finance Code, as amended, Administrative Agent retains
the right to modify the interest rate in accordance with applicable law.
 
11.17. Joint and Several Obligations of Borrowers.
 
(a) The Borrowers state and acknowledge that: (a) pursuant to this Agreement,
the Borrowers desire to utilize their borrowing potential on a consolidated
basis to the same extent possible if they were merged into a single entity and
that this Agreement reflects the establishment of credit facilities which would
not otherwise be available to such entity if each Borrower were not jointly and
severally liable for payment of the Indebtedness; (b) each Borrower has
determined that it will benefit specifically and materially from the advances of
credit contemplated by this Agreement; (c) it is both a condition precedent to
the obligations of the Lenders hereunder and a desire of the Borrowers that each
Borrower execute and deliver this Agreement; and (d) each Borrower has requested
and bargained for the structure and terms of and security for the advances
contemplated by this Agreement.
 
(b) Each Borrower hereby irrevocably and unconditionally: (a) agrees that it is
jointly and severally liable to Lenders for the full and prompt payment of the
Indebtedness and the performance by each Borrower of its obligations hereunder
in accordance with the terms hereof; (b) agrees to fully and promptly perform
all of its Obligations hereunder with respect to each advance of credit
hereunder as if such advance had been made directly to it; and (c) agrees as a
primary obligation to indemnify Lenders on demand for and against any loss
incurred by a Lender as result of any of the obligations of any one or more of
the Borrowers being or becoming void, voidable, unenforceable or ineffective for
any reason whatsoever, whether or not known to a Lender or any Person, the
amount of such loss being the amount which each Lender would otherwise have been
entitled to recover from any one or more of the Borrowers whose obligation
becomes void, voidable, unenforceable or ineffective.
 
It is the intent of each Borrower that the Indebtedness, obligations and
liability hereunder of no one of them be subject to challenge on any basis,
including, without limitation, pursuant to any applicable fraudulent conveyance
or fraudulent transfer laws. Accordingly, as of the date hereof, the liability
of each Borrower under this Section 11.17, together with all of its other
liabilities to all Persons as of the date hereof and as of any other date on
which a transfer or conveyance is deemed to occur by virtue of this Agreement,
calculated in amount sufficient to pay its probable net liabilities on its
existing Indebtedness as the same become absolute and matured (“Dated
Liabilities”) is, and is to be, less than the amount of the aggregate of a fair
valuation of its property as of such corresponding date (“Dated Assets”). To
this end, each Borrower under this Section 11.17, (a) grants to and recognizes
in each other Borrower, ratably, rights of subrogation and contribution in the
amount, if any, by which the Dated Assets of such Borrower, but for the
aggregate of subrogation and contribution in its favor recognized herein, would
exceed the Dated Liabilities of such Borrower or, as the case may be, and (b)
acknowledges receipt of and recognizes its right to subrogation and contribution
ratably from each of the other Borrowers in the amount, if any, by which the
Dated Liabilities of such Borrower, but for the aggregate of subrogation and
contribution in its favor recognized herein, would exceed the Dated Assets of
such Borrower under this Section 11.17. In recognizing the value of the Dated
Assets and the Dated Liabilities, it is understood that Borrowers will
recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this Section 11.17 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by reason of an arbitrary interpretation of its joint
and several obligations hereunder. In addition to and not in limitation of the
foregoing provisions of this Section 11.17, the Borrowers and Lenders hereby
agree and acknowledge that it is the intent of each Borrower and of each Lender
that the obligations of each Borrower hereunder be in all respects in compliance
with, and not be voidable pursuant to, applicable fraudulent conveyance and
fraudulent transfer laws.
 
11.18. Amendment and Restatement. The Borrowers, the Administrative Agent and
the Lenders agree that this Agreement is an amendment and restatement of the
Existing Credit Agreement in its entirety, and the terms and provisions hereof
supersede the terms and provisions thereof. The parties further agree that this
Agreement is not a new or substitute credit agreement or a novation of the
Existing Credit Agreement, and that (a) the Indebtedness of the Borrowers under
the Existing Credit Agreement shall be deemed to be Indebtedness of the
Borrowers outstanding under and governed by this Agreement, and (b) all Liens
securing the Obligations of the Borrowers under the Existing Credit Agreement
and Loan Documents shall continue in full force and effect to secure the
Obligations under this Agreement and the Loan Documents.
 
11.19. USA Patriot Act Notice. Each Lender and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies the Borrowers that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”), it is required to obtain,
verify and record information that identifies the Borrowers, which information
includes the name and address of the Borrowers and other information that will
allow such Lender or the Administrative Agent, as applicable, to identify the
Lender in accordance with the Act.
 
[Remainder of Page Intentionally Left Blank]
 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
 
EL PASO PRODUCTION HOLDING COMPANY

By: /s/ GENE T. WAGUESPACK
Name: Gene T. Waguespack
Title:  Senior Vice President, Treasurer
and Controller

EL PASO PRODUCTION COMPANY

By: /s/ GENE T. WAGUESPACK
Name: Gene T. Waguespack
Title:  Senior Vice President, Treasurer
and Controller

EL PASO ENERGY RATON CORPORATION

By: /s/ GENE T. WAGUESPACK
Name: Gene T. Waguespack
Title:  Senior Vice President, Treasurer
and Controller

EL PASO PRODUCTION GOM INC.

By: /s/ GENE T. WAGUESPACK
Name: Gene T. Waguespack
Title:  Senior Vice President, Treasurer
and Controller

--------------------------------------------------------------------------------

FORTIS CAPITAL CORP.,
as Administrative Agent, Joint Lead Arranger, Joint Bookrunner, Issuing Lender
and as a Lender

By: /s/ TROND ROKHOLT
Name: Trond Rokholt
Title: Managing Director

By: /s/ DOUGLAS RIAHI
Name: Douglas Riahi
Title: Managing Director

--------------------------------------------------------------------------------

THE ROYAL BANK OF SCOTLAND plc,
as Joint Lead Arranger, Joint Bookrunner, Syndication Agent and as a Lender

By: /s/ PATRICIA J. DUNDEE
Name: Patricia J. Dundee
Title: Managing Director

--------------------------------------------------------------------------------

THE BANK OF NOVA SCOTIA,
as Joint Lead Arranger, Co-Documentation Agent and as a Lender

By: /s/ N. BELL
Name: N. Bell
Title: Senior Manager

--------------------------------------------------------------------------------

SOCIETE GENERALE,
as Co-Documentation Agent and as a Lender

By: /s/ STEPHEN W. WARFEL
Name: Stephen W. Warfel
Title: Vice President

--------------------------------------------------------------------------------

WESTLB AG, NEW YORK BRANCH,
as Co-Documentation Agent and as a Lender

By: /s/ EVA STEINHAUS
Name: Eva Steinhaus
Title: Manager

By: /s/ VINOD JENVEJA
Name: Vinod Jenveja
Title: Director

ABN AMRO BANK N.V.,

--------------------------------------------------------------------------------

as a Lender

By: /s/ JOSHUA WOLF
Name: Joshua Wolf
Title: Vice President

By: /s/ TODD D. VAUBEL
Name: Todd Vaubel
Title: Assistant Vice President

--------------------------------------------------------------------------------

ALLIED IRISH BANKS, plc,
as a Lender

By: /s/ MARK K. CONNELLY
Name: Mark K. Connelly
Title: Vice President

By: /s/ VAUGHN BUCK
Name: Vaughn Buck
Title: Senior Vice President

--------------------------------------------------------------------------------

BANK OF SCOTLAND
as a Lender

By: /s/ KAREN WEICH
Name: Karen Weich
Title: Assistant Vice President

--------------------------------------------------------------------------------

BAYERISCHE LANDESBANK,
as a Lender

By: /s/ JAMES KING
Name: James King
Title: First Vice President

By: /s/ NORMAN MCCLAVE
Name: Norman McClave
Title: First Vice President

--------------------------------------------------------------------------------

GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender

By: /s/ SIMON DUNCAN
Name: Simon Duncan
Title: Authorized Signatory

--------------------------------------------------------------------------------

HSH NORDBANK AG, NEW YORK BRANCH,
as a Lender

By: /s/ THOMAS K. EMMONS
Name: Thomas K. Emmons
Title: Senior Vice President

By: /s/ ROHAN SINGH
Name: Rohan Singh
Title: Assistant Vice President

--------------------------------------------------------------------------------

BAYERISCHE HYPO-UND VEREINSBANK AG - NEW YORK BRANCH,
as a Lender

By: /s/ ROGER G. EUSTANCE
Name: Roger G. Eustance
Title: Director Project Finance

By: /s/ MICHAEL E. TERRY
Name: Michael E. Terry
Title: Director Global Project Finance

--------------------------------------------------------------------------------

MORGAN STANLEY SENIOR FUNDING, INC.,
as a Lender

By: /s/ EUGENE F. MARTIN
Name: Eugene F. Martin
Title: Vice President

--------------------------------------------------------------------------------

NATEXIS BANQUES POPULAIRES,
as a Lender

By: /s/ DONOVAN C. BROUSSARD
Name: Donovan C. Broussard
Title: Vice President and Manager

By: /s/ TIMOTHY L. POLVADO
Name: Timothy L. Polvado
Title: Vice President and Group Manager

--------------------------------------------------------------------------------

RZB FINANCE LLC,
as a Lender

By: /s/ JOHN A. VALISKA
Name: John A. Valiska
Title: First Vice President

By: /s/ ASTRID WILKE
Name: Astrid Wilke
Title: Vice President

--------------------------------------------------------------------------------

U.S. BANK NATIONAL ASSOCIATION,
as a Lender

By: /s/ MARK E. THOMPSON
Name: Mark E. Thompson
Title: Vice President

--------------------------------------------------------------------------------

AMEGY BANK NATIONAL ASSOCIATION,
as a Lender

By: /s/ W. BRYAN CHAPMAN
Name: W. Bryan Chapman
Title: Senior Vice President

--------------------------------------------------------------------------------

BANK OF AMERICA, N.A.,
as a Lender

By: /s/ WILLIAM E. LIVINGSTONE, IV
Name: William E. Livingstone, IV
Title: Senior Vice President

--------------------------------------------------------------------------------

COMERICA BANK,
as a Lender

By: /s/ JULI BIESER
Name: Juli Bieser
Title: Vice President

--------------------------------------------------------------------------------

COMPASS BANK,
as a Lender

By: /s/ MURRAY BRASSEUX
Name: Murray Brasseux
Title: Executive Vice President

--------------------------------------------------------------------------------

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as a Lender

By: /s/ LANA GIFAS
Name: Lana Gifas
Title: Vice President

By: /s/ PAUL O’LEARY
Name: Paul Oleary
Title: Vice President

--------------------------------------------------------------------------------

MERRILL LYNCH CAPITAL CORPORATION,
as a Lender

By: /s/ CAROL J.E. FEELEY
Name: Carol J.E. Feeley
Title: Vice President

--------------------------------------------------------------------------------

STERLING BANK,
as a Lender

By: /s/ DAVID W. PHILLIPS
Name: David W. Phillips
Title: Senior Vice President

--------------------------------------------------------------------------------

UNION BANK OF CALIFORNIA, N.A.,
as a Lender

By: /s/ DUSTIN GASPARI
Name: Dustin Gaspari
Title: Vice President

--------------------------------------------------------------------------------

GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender

By: /s/ WILLIAM W. ARCHER
Name: William W. Archer
Title: Managing Director

--------------------------------------------------------------------------------

EXHIBIT A
 
NOTE
 
$_______________October ___, 2005
 
FOR VALUE RECEIVED, the undersigned, EL PASO PRODUCTION HOLDING COMPANY, a
Delaware corporation, EL PASO PRODUCTION COMPANY, a Delaware corporation, EL
PASO ENERGY RATON CORPORATION, a Delaware corporation, and EL PASO PRODUCTION
GOM INC., a Delaware corporation (the “Borrowers”), hereby unconditionally
promise to pay, on a joint and several basis, to the order of
_______________________ (the “Lender”) at the offices of Fortis Capital Corp.,
located at Millennium I, 15455 North Dallas Parkway, Suite 1400, Addison, Texas
75001, in lawful money of the United States of America and in immediately
available funds, on the Termination Date, the principal amount of (a)
___________________________________ ($__________), or, if less, (b) the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrowers pursuant to subsection 2.1 of the Credit Agreement, as hereinafter
defined. The Borrowers further agree to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in subsections 4.1 through 4.3 of such
Credit Agreement.
 
The holder of this Note is authorized to endorse on the schedules annexed hereto
and made a part hereof or on a continuation thereof which shall be attached
hereto and made a part hereof the date, type and amount of each Loan made
pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal and, in the case of Eurodollar Loans, the length of each
Interest Period with respect thereto. Each such endorsement shall constitute
prima facie evidence of the accuracy of the information endorsed. The failure to
make any such endorsement shall not affect the obligations of the Borrower in
respect of such Loan.
 
This Note (a) is one of the Notes referred to in the Amended and Restated Credit
Agreement, dated as of October 19, 2005 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among the Borrowers, Fortis
Capital Corp. as Administrative Agent, the Lender and the other banks and
financial institutions from time to time parties thereto, (b) is subject to the
provisions of the Credit Agreement, and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement. This Note is
secured and guaranteed as provided in the Loan Documents. Reference is hereby
made to the Loan Documents for a description of the security and the guarantees,
the terms of and conditions upon which the security interests and each guarantee
were granted and the rights of the holder of this Note in respect thereof.
 
Upon the occurrence of any one or more of the Events of Default, all amounts
then remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
 
All parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest and all other notices of any kind.
 
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
 
EL PASO PRODUCTION HOLDING COMPANY

By: 
Name: 
Title:  

EL PASO PRODUCTION COMPANY

By: 
Name: 
Title:  

EL PASO ENERGY RATON CORPORATION

By: 
Name: 
Title:  

EL PASO PRODUCTION GOM INC.

By: 
Name: 
Title:  

Exhibit A-

--------------------------------------------------------------------------------

EXHIBIT B
 
FORM OF
 
GUARANTEE AGREEMENT
 
THIS GUARANTEE AGREEMENT (this “Guaranty”) is made as of __________, 2005, by
____________________________, a __________ corporation (“Guarantor”), in favor
of FORTIS CAPITAL CORP., a Connecticut corporation (“Agent”), as agent for the
Creditors (as hereinafter defined).
 
RECITALS:
 
WHEREAS, Guarantor is a direct or indirect wholly owned subsidiary of EL PASO
PRODUCTION HOLDING COMPANY, a Borrower under the Credit Agreement (as
hereinafter defined), an Affiliate of EL PASO PRODUCTION COMPANY, a Delaware
corporation, EL PASO ENERGY RATON CORPORATION, a Delaware corporation, and EL
PASO PRODUCTION GOM INC., a Delaware corporation, each a Borrower under the
Credit Agreement (collectively, the “Borrowers”);
 
WHEREAS, Borrowers, the Agent and the Lenders party thereto have entered into an
Amended and Restated Credit Agreement dated as of October 19, 2005 (as amended,
supplemented or restated, the “Credit Agreement”);
 
WHEREAS, certain Lenders and their Affiliates are prepared to enter into Hedging
Agreements with the Borrowers;
 
WHEREAS, it is a requirement of the Credit Agreement and the creation or
acquisition of any Subsidiary that Guarantor execute this Guaranty to secure the
obligations of the Borrowers under the Credit Agreement, Hedging Agreements and
the other Loan Documents;
 
WHEREAS, Guarantor has agreed to execute this Guaranty in favor of the Agent for
the benefit of the Agent and the Creditors; and
 
WHEREAS, the board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, are in the best interests of
Guarantor, and are necessary for the promotion, conduct and attainment of the
Guarantor’s business.
 
NOW, THEREFORE, in consideration of the premises, of the benefits which will
inure to Guarantor from Lenders’ advances of funds to the Borrowers under the
Credit Agreement, and the Lenders and their Affiliates entering into Hedging
Agreements with the Borrowers, and other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, and in order to
induce Lenders to enter into the Credit Agreement and Lenders and their
Affiliates to enter into Hedging Agreements with the Borrowers, Guarantor hereby
agrees for the benefit of the Agent and the Creditors as follows:
 
AGREEMENTS
 
Section 1. Definitions. Reference is hereby made to the Credit Agreement for all
purposes. All terms used in this Guaranty which are defined in the Credit
Agreement and not otherwise defined herein shall have the same meanings when
used herein. All references herein to any Obligation Document, Loan Document, or
other document or instrument refer to the same as from time to time amended,
supplemented or restated. As used herein the following terms shall have the
following meanings:
 
“Agent” means Fortis Capital Corp., and any other Person who, at the time in
question, is the “Administrative Agent” under the Credit Agreement.
 
“Creditors” means the Lenders under the Credit Agreement and a Lender or any
Affiliate of a Lender party to a Hedging Agreement with any Borrower. The term
Creditors shall also include a former Lender or an Affiliate of a former Lender
that is party to a Hedging Agreement with any Borrower, provided that such
former Lender or Affiliate was a Lender hereunder or an Affiliate of a Lender
hereunder at the time it entered into such Hedging Agreement.
 
“Lenders” means all Persons who at any time are "Lenders" under the Credit
Agreement.
 
“Obligations” means collectively all of the indebtedness, obligations, and
undertakings which are guaranteed by Guarantor and described in Section 2.
 
“Obligation Documents” means this Guaranty, the Notes, the Credit Agreement, the
Hedging Agreements, the Loan Documents, all other documents and instruments
under, by reason of which, or pursuant to which any or all of the Obligations
are evidenced, governed, secured, or otherwise dealt with, and all other
documents, instruments, agreements, certificates, legal opinions and other
writings heretofore or hereafter delivered in connection herewith or therewith.
 
“Obligors” means the Borrowers, Guarantor and any other endorsers, guarantors or
obligors, primary or secondary, of any or all of the Obligations.
 
“Security” means any rights, properties, or interests of Agent or Creditors,
under the Obligation Documents or otherwise, which provide recourse or other
benefits to Agent or Creditors in connection with the Obligations or the
nonpayment or nonperformance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or any Creditor has rights
under or pursuant to any Obligation Documents, guaranties of the payment or
performance of any Obligation, bonds, surety agreements, keep well agreements,
letters of credit, rights of subrogation, rights of offset, and rights pursuant
to which other claims are subordinated to the Obligations.
 
Section 2. Guaranty.
 
(a) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to
Agent for itself and the ratable benefit of the Creditors the prompt, complete,
and full payment when due, and no matter how the same shall become due, of:
 
(i) the Notes, including all principal, all interest thereon and all other sums
payable thereunder; and
 
(ii) the Loans made by the Lenders under the Credit Agreement, including the
Loans, together with interest thereon; and
 
(iii) the Hedging Agreements concluded by the Lenders and their Affiliates with
the Borrowers; and
 
(iv) All other sums payable to Agent or Creditors under any other Obligation
Document, whether for principal, interest, fees or otherwise.
 
Without limiting the generality of the foregoing, Guarantor's liability
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of the Borrowers described above in this subsection
(a), or below in the following subsection (b), which would be owed by the
Borrowers but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization, or similar proceeding involving
the Borrowers.
 
(b) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to
Agent and each Creditor the prompt, complete and full performance, when due, and
no matter how the same shall become due, of all obligations and undertakings of
the Borrowers to Agent or such Creditor under, by reason of, or pursuant to any
of the Obligation Documents.
 
(c) If the Borrowers shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
Guarantor will, forthwith upon demand by Agent, pay such Obligation in full to
Agent for the benefit of Agent and the Creditor to whom such Obligation is owed.
If the Borrowers shall for any reason fail to perform promptly any Obligation,
Guarantor will, forthwith upon demand by Agent, cause such Obligation to be
performed or, if specified by Agent, provide sufficient funds, in such amount
and manner as Agent shall in good faith determine, for the prompt, full and
faithful performance of such Obligation by Agent or such other Person as Agent
shall designate.
 
(d) If the Borrowers or Guarantor fail to pay or perform any Obligation as
described in the immediately preceding subsections (a), (b), or (c) Guarantor
will incur the additional obligation to pay to Agent, and Guarantor will
forthwith upon demand by Agent pay to Agent, the amount of any and all expenses,
including fees and disbursements of Agent's counsel and of any experts or agents
retained by such Agent, which such Agent may incur as a result of such failure.
 
(e) It is the intention of the Guarantor and Creditors that this Guaranty not
constitute a fraudulent transfer or fraudulent conveyance under any state or
federal law that may be applied hereto. Guarantor and, by its acceptance hereof,
each Creditor, hereby acknowledge and agree that, notwithstanding any other
provision of this Guaranty, the indebtedness guaranteed hereby shall be limited
to the maximum amount of indebtedness that can be incurred or guaranteed by
Guarantor without rendering this Guaranty subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provisions of any
applicable state or federal law.
 
Section 3. Unconditional Guaranty.
 
(a) No action which Agent or any Creditor may take or omit to take in connection
with any of the Obligation Documents, any of the Obligations (or any other
indebtedness owing by the Borrowers to Agent or any Creditor), or any Security,
and no course of dealing of Agent or any Creditor with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Creditor, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or any
Creditor or any Obligor or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, Guarantor hereby expressly agrees that
Agent and Creditors may, from time to time, without notice to or the consent of
Guarantor, do any or all of the following:
 
(i) Amend, change or modify, in whole or in part, any one or more of the
Obligation Documents and give or refuse to give any waivers or other indulgences
with respect thereto.
 
(ii) Neglect, delay, fail, or refuse to take or prosecute any action for the
collection or enforcement of any of the Obligations, to foreclose or take or
prosecute any action in connection with any Security or Obligation Document, to
bring suit against any Obligor or any other Person, or to take any other action
concerning the Obligations or the Obligation Documents.
 
(iii) Accelerate, change, rearrange, extend, or renew the time, rate, terms, or
manner for payment or performance of any one or more of the Obligations (whether
for principal, interest, fees, expenses, indemnifications, affirmative or
negative covenants, or otherwise).
 
(iv) Compromise or settle any unpaid or unperformed Obligation or any other
obligation or amount due or owing, or claimed to be due or owing, under any one
or more of the Obligation Documents.
 
(v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or
all Security for any or all of the Obligations, accept additional or substituted
Security therefor, and perfect or fail to perfect Agent's or Creditors’ rights
in any or all Security.
 
(vi) Discharge, release, substitute or add Obligors.
 
(vii) Apply all monies received from Obligors or others, or from any Security
for any of the Obligations, as Agent or Creditors may determine to be in their
best interest, without in any way being required to marshal Security or assets
or to apply all or any part of such monies upon any particular Obligations.
 
(b) No action or inaction of any Obligor or any other Person, and no change of
law or circumstances, shall release or diminish Guarantor's obligations,
liabilities, agreements, or duties hereunder, affect this Guaranty in any way,
or afford Guarantor any recourse against Agent or any Creditor. Without limiting
the foregoing, the obligations, liabilities, agreements, and duties of Guarantor
under this Guaranty shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any or all of the following from time to time,
even if occurring without notice to or without the consent of Guarantor:
 
(i) Any voluntary or involuntary liquidation, dissolution, sale of all or
substantially all assets, marshalling of assets or liabilities, receivership,
conservatorship, assignment for the benefit of creditors, insolvency,
bankruptcy, reorganization, arrangement, or composition of any Obligor or any
other proceedings involving any Obligor or any of the assets of any Obligor
under laws for the protection of debtors, or any discharge, impairment,
modification, release, or limitation of the liability of, or stay of actions or
lien enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.
 
(ii) The failure by Agent or any Creditor to file or enforce a claim in any
proceeding described in the immediately preceding subsection (i) or to take any
other action in any proceeding to which any Obligor is a party.
 
(iii) The release by operation of law of any Obligor from any of the Obligations
or any other obligations to Agent or any Creditor.
 
(iv) The invalidity, deficiency, illegality, or unenforceability of any of the
Obligations or the Obligation Documents, in whole or in part, any bar by any
statute of limitations or other law of recovery on any of the Obligations, or
any defense or excuse for failure to perform on account of force majeure, act of
God, casualty, impossibility, impracticability, or other defense or excuse
whatsoever.
 
(v) The failure of any Obligor or any other Person to sign any guaranty or other
instrument or agreement within the contemplation of any Obligor, Agent or any
Creditor.
 
(vi) The fact that Guarantor may have incurred directly part of the Obligations
or is otherwise primarily liable therefor.
 
(vii) Without limiting any of the foregoing, any fact or event (whether or not
similar to any of the foregoing) which in the absence of this provision would or
might constitute or afford a legal or equitable discharge or release of or
defense to a guarantor or surety other than the actual payment and performance
by Guarantor under this Guaranty.
 
(c) Agent and Creditors may invoke the benefits of this Guaranty before pursuing
any remedies against any Obligor or any other Person and before proceeding
against any Security now or hereafter existing for the payment or performance of
any of the Obligations. Agent and Creditors may maintain an action against
Guarantor on this Guaranty without joining any other Obligor therein and without
bringing a separate action against any other Obligor.
 
(d) If any payment to Agent or any Creditor by any Obligor is held to constitute
a preference or a voidable transfer under applicable state or federal laws, or
if for any other reason Agent or any Creditor is required to refund such payment
to the payor thereof or to pay the amount thereof to any other Person, such
payment to Agent or such Creditor shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Creditor on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Agent and Creditors.
 
(e) This is a continuing guaranty and shall apply to and cover all Obligations
and renewals and extensions thereof and substitutions therefor from time to
time.
 
Section 4. Waiver. Guarantor hereby waives, with respect to the Obligations,
this Guaranty, and the other Obligation Documents:
 
(a) notice of the incurrence of any Obligation by the Borrowers, and notice of
any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of the Borrowers (it
being understood and agreed that: (i) Guarantor shall take full responsibility
for informing itself of such matters, (ii) neither Agent nor any Creditor shall
have any responsibility of any kind to inform Guarantor of such matters, and
(iii) Agent and Creditors are hereby authorized to assume that Guarantor, by
virtue of its relationships with the Borrowers which are independent of this
Guaranty, has full and complete knowledge of such matters at each time when
Creditors extend credit to the Borrowers or take any other action which may
change or increase Guarantor's liabilities or losses hereunder).
 
(b) notice that Agent, any Creditor, any Obligor, or any other Person has taken
or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
 
(c) demand, presentment for payment, and notice of demand, dishonor, nonpayment,
or nonperformance.
 
(d) notice of intention to accelerate, notice of acceleration, protest, notice
of protest, notice of any exercise of remedies (as described in the following
Section 5 or otherwise), and all other notices of any kind whatsoever.
 
Section 5. Exercise of Remedies. Agent and each Creditor shall have the right to
enforce, from time to time, in any order and at Agent's or such Creditor’s sole
discretion, any rights, powers and remedies which Agent or such Creditor may
have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent and each Creditor hereunder for any
deficiency resulting from the exercise by Agent or any Creditor of any such
right or remedy even though any rights which Guarantor may have against the
Borrowers or others may be destroyed or diminished by exercise of any such right
or remedy. No failure on the part of Agent or any Creditor to exercise, and no
delay in exercising, any right hereunder or under any other Obligation Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right preclude any other or further exercise thereof or the exercise of any
other right. The rights, powers and remedies of Agent and each Creditor provided
herein and in the other Obligation Documents are cumulative and are in addition
to, and not exclusive of, any other rights, powers or remedies provided in any
Loan Document or by law or in equity. The rights of Agent and each Creditor
hereunder are not conditional or contingent on any attempt by Agent or any
Creditor to exercise any of its rights under any other Obligation Document
against any Obligor or any other Person.
 
Section 6. Limited Subrogation. Until all of the Obligations have been paid and
performed in full Guarantor shall have no right to exercise any right of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty, and Guarantor hereby waives any
rights to enforce any remedy which Guarantor may have against the Borrowers and
any right to participate in any Security until such time. If any amount shall be
paid to Guarantor on account of any such subrogation or other rights, any such
other remedy, or any Security at any time when all of the Obligations and all
other expenses guaranteed pursuant hereto shall not have been paid in full, such
amount shall be held in trust for the benefit of Agent, shall be segregated from
the other funds of Guarantor and shall forthwith be paid over to Agent to be
held by Agent as collateral for, or then or at any time thereafter applied in
whole or in part by Agent against, all or any portion of the Obligations,
whether matured or unmatured, in such order as Agent shall elect. If Guarantor
shall make payment to Agent of all or any portion of the Obligations and if all
of the Obligations shall be finally paid in full, Agent will, at Guarantor's
request and expense, execute and deliver to Guarantor (without recourse,
representation or warranty) appropriate documents necessary to evidence the
transfer by subrogation to Guarantor of an interest in the Obligations resulting
from such payment by Guarantor; provided that such transfer shall be subject to
Section 3(d) above and that without the consent of Agent (which Agent may
withhold in its discretion) Guarantor shall not have the right to be subrogated
to any claim or right against any Obligor which has become owned by Agent or any
Creditor, whose ownership has otherwise changed in the course of enforcement of
the Obligation Documents, or which Agent otherwise has released or wishes to
release from its Obligations.
 
Section 7. Successors and Assigns. Guarantor's rights or obligations hereunder
may not be assigned or delegated, but this Guaranty and such obligations shall
pass to and be fully binding upon the successors of Guarantor, as well as
Guarantor. This Guaranty shall apply to and inure to the benefit of Agent,
Creditors and their respective successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent and each Creditor may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Creditor may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent or such Creditor hereunder
unless otherwise expressly provided by Agent or such Creditor in connection with
such assignment or transfer.
 
Section 8. Subordination and Offset. Guarantor hereby subordinates and makes
inferior to the Obligations any and all indebtedness now or at any time
hereafter owed by the Borrowers to Guarantor. Guarantor agrees that after the
occurrence of any Default or Event of Default it will neither permit the
Borrowers to repay such indebtedness or any part thereof nor accept payment from
the Borrowers of such indebtedness or any part thereof without the prior written
consent of Agent and Creditors. If Guarantor receives any such payment without
the prior written consent of Agent and Creditors, the amount so paid shall be
held in trust for the benefit of Creditors, shall be segregated from the other
funds of Guarantor, and shall forthwith be paid over to Agent to be held by
Agent as collateral for, or then or at any time thereafter applied in whole or
in part by Agent against, all or any portions of the Obligations, whether
matured or unmatured, in such order as Agent shall elect. Guarantor hereby
grants to Agent and Creditors a right of offset to secure the payment of the
Obligations and Guarantor's obligations and liabilities hereunder, which right
of offset shall be upon any and all monies, securities and other property (and
the proceeds therefrom) of Guarantor now or hereafter held or received by or in
transit to Agent or any Creditor from or for the account of Guarantor, whether
for safekeeping, custody, pledge, transmission, collection or otherwise, and
also upon any and all deposits (general or special), credits and claims of
Guarantor at any time existing against Agent or such Creditor. Upon the
occurrence of any Default or Event of Default Agent and each Creditor is hereby
authorized at any time and from time to time, without notice to Guarantor, to
offset, appropriate and apply any and all items hereinabove referred to against
the Obligations and Guarantor's obligations and liabilities hereunder
irrespective of whether or not Agent or any Creditor shall have made any demand
under this Guaranty and although such obligations and liabilities may be
contingent or unmatured. Agent and each Creditor agrees promptly to notify
Guarantor after any such offset and application made by Agent or such Creditor,
provided that the failure to give such notice shall not affect the validity of
such offset and application. The rights of Agent and Creditors under this
section are in addition to, and shall not be limited by, any other rights and
remedies (including other rights of offset) which Agent and Creditors may have.
 
Section 9. Representations and Warranties. Guarantor hereby represents and
warrants to Agent and each Creditor as follows:
 
(a) The Recitals at the beginning of this Guaranty are true and correct in all
respects.
 
(b) The direct or indirect value of the consideration received and to be
received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the incurrence
of such liability and obligations in return for such consideration may
reasonably be expected to benefit Guarantor, directly or indirectly.
 
(c) Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation as set forth in the
Recitals to this Guaranty; and Guarantor has all requisite power and authority
to execute, deliver and perform this Guaranty.
 
(d) Guarantor is not "insolvent" on the date hereof (that is, the sum of
Guarantor's absolute and contingent liabilities, including the Obligations, does
not exceed the fair market value of Guarantor's assets). Guarantor's capital is
adequate for the businesses in which Guarantor is engaged and intends to be
engaged. Guarantor has not incurred (whether hereby or otherwise), nor does
Guarantor intend to incur or believe that it will incur, debts which will be
beyond its ability to pay as such debts mature.
 
(e) The execution, delivery and performance by Guarantor of this Guaranty have
been duly authorized by all necessary corporate action and do not and will not
contravene its certificate or articles of incorporation or bylaws.
 
(f) The execution, delivery and performance by Guarantor of this Guaranty do not
and will not contravene any law or governmental regulation or any contractual
restriction binding on or affecting Guarantor or any of its Affiliates or
properties, and do not and will not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of its properties.
 
(g) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or other regulatory body or third party is
required for the due execution, delivery and performance by Guarantor of this
Guaranty.
 
(h) This Guaranty is a legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms except as limited by
bankruptcy, insolvency or similar laws of general application relating to the
enforcement of creditors' rights.
 
(i) The representations and warranties made in Article V of the Credit
Agreement, to the extent that they relate to Guarantor, Guarantor's business,
assets, liabilities, properties or operations are true, complete and correct.
 
Section 10. No Oral Change. No amendment of any provision of this Guaranty shall
be effective unless it is in writing and signed by Guarantor and Agent, and no
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall be effective unless it is in writing and signed by
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Creditors as required in the Credit Agreement.
 
Section 11. Invalidity of Particular Provisions. If any term or provision of
this Guaranty shall be determined to be illegal or unenforceable all other terms
and provisions hereof shall nevertheless remain effective and shall be enforced
to the fullest extent permitted by applicable law.
 
Section 12. Headings and References. The headings used herein are for purposes
of convenience only and shall not be used in construing the provisions hereof.
The words “this Guaranty”' “this instrument,”“herein”“hereof”“hereby” and words
of similar import refer to this Guaranty as a whole and not to any particular
subdivision unless expressly so limited. The phrases “this section” and “this
subsection” and similar phrases refer only to the subdivisions hereof in which
such phrases occur. The word “or” is not exclusive, and the word “including” (in
its various forms) means “including without limitation”. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender, and
words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
 
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, Lenders have no
obligation to make any loans or other advances to the Borrowers, and all
obligations and undertakings of the Borrowers under, by reason of, or pursuant
to the Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
Creditors to the Borrowers shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
 
Section 14. Delivery of Corporate Documents. Upon execution of this Guaranty,
Guarantor shall deliver the following to the Agent:
 
(a) An “Omnibus Certificate” of the Secretary or of any Vice President of the
Guarantor, which shall contain the names and signatures of the officers of the
Guarantor, authorized to execute the Guaranty and which shall certify to the
truth, correctness and completeness of the following exhibits attached thereto:
(1) a copy of resolutions duly adopted by the Board of Directors of the
Guarantor and in full force and effect at the time this Guaranty is entered
into, authorizing the execution of this Guaranty delivered or to be delivered in
connection herewith and the consummation of the transactions contemplated herein
and therein, (2) a copy of the charter documents of the Guarantor and all
amendments thereto, certified by the appropriate official of the Guarantor's
state of organization, and (3) a copy of any bylaws of the Guarantor; and
 
(b) A certificate (or certificates) of the due formation, valid existence and
good standing of the Guarantor in its state of organization, issued by the
appropriate authorities of such jurisdiction, and certificates of the
Guarantor's good standing and due qualification to do business, issued by
appropriate officials in any states in which the Guarantor conducts a material
portion of its business.
 
Section 15. Notices. Any notice or communication required or permitted hereunder
shall be given in writing, sent by personal delivery, by telecopy, by delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, addressed to the appropriate party as follows:
 
To Guarantor: __________________________
1001 Louisiana Street
Houston, TX 77002
Attention: John J. Hopper
Tel. _____________
Fax: (713) 420-2708

To Agent: Fortis Capital Corp.
15455 N. Dallas Parkway, Suite 1400
Addison, Texas 75001
Attention: Deirdre Sanborn
Tel. (214) 953-9304
Fax (214) 754-5982

or to such other address or to the attention of such other individual as
hereafter shall be designated in writing by the applicable party sent in
accordance herewith. Any such notice or communication shall be deemed to have
been given (i) in the case of personal delivery or delivery service, as of the
date of first attempted delivery at the address or in the manner provided
herein, (ii) in the case of telecopy, upon receipt, or (iii) in the case of
registered or certified United States mail, three days after deposit in the
mail.
 
Section 16. Limitation on Interest. Agent, Creditors, and Guarantor intend to
contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein.
 
Section 17. Loan Document. This Guaranty is a Loan Document and is subject to
the provisions of the Credit Agreement governing Loan Documents. For the
avoidance of doubt, Guarantor is considered a “Domestic Restricted Person” for
purposes of the Credit Agreement and other Loan Documents.
 
Section 18. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which when so executed shall be deemed to constitute one
and the same Guaranty.
 
Section 19. GOVERNING LAW. THIS GUARANTY IS TO BE PERFORMED IN THE STATE OF NEW
YORK AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF SUCH STATE.
 
Section 20. FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES HERETO.
 
IN WITNESS WHEREOF, the Guarantor has executed and delivered this Guaranty as of
the date first written above.
 
_____________________________________

By: 
Name: 
Title: 

Exhibit B-

--------------------------------------------------------------------------------

EXHIBIT F
 
FORM OF CLOSING CERTIFICATE
 
Pursuant to subsection 6.1(d) of the Amended and Restated Credit Agreement,
dated as of October 19, 2005 (the “Agreement;” terms defined therein being used
herein as therein defined), among EL PASO PRODUCTION HOLDING COMPANY, a Delaware
corporation, EL PASO PRODUCTION COMPANY, a Delaware corporation, and EL PASO
ENERGY RATON CORPORATION, a Delaware corporation, and EL PASO PRODUCTION GOM
INC., a Delaware corporation (the “Borrowers”), the several banks and financial
institutions and other entities from time to time parties to the Agreement
(collectively, the “Lenders”) and Fortis Capital Corp., as Administrative Agent
for the Lenders, the undersigned Responsible Officer of each of the Borrowers
hereby certifies, in its capacities as such, as follows:
 
1. Each of the representations and warranties made by each Loan Party in or
pursuant to the Loan Documents is true and correct on and as of the date hereof
as if made on and as of such date (unless such representation or warranty is
stated to relate to a specific earlier date, in which case such representation
or warranty is true and correct as of such earlier date);
 
2. No Default or Event of Default has occurred and is continuing as of the date
hereof or after giving effect to any Extensions of Credit requested to be made
on the date hereof;
 
3. No events or events which, individually or in the aggregate, have had or is
reasonably likely to have a Material Adverse Effect has occurred;
 

Exhibit F-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has hereunto executed this certificate on
behalf of each Borrower and not individually.
 
EL PASO PRODUCTION HOLDING COMPANY

By: 
Name: 
Title:  

EL PASO PRODUCTION COMPANY

By: 
Name: 
Title:  

EL PASO ENERGY RATON CORPORATION

By: 
Name: 
Title:  

EL PASO PRODUCTION GOM INC.

By: 
Name: 
Title:  

Date: _________________________
 

Exhibit F-

--------------------------------------------------------------------------------

EXHIBIT G
 
FORM OF ASSIGNMENT AND ACCEPTANCE
 
Reference is made to the Amended and Restated Credit Agreement, dated as of
October 19, 2005 (as amended and in effect on the date hereof, the “Credit
Agreement”), among EL PASO PRODUCTION HOLDING COMPANY, a Delaware corporation,
EL PASO PRODUCTION COMPANY, a Delaware corporation, EL PASO ENERGY RATON
CORPORATION, a Delaware corporation, and EL PASO PRODUCTION GOM INC., a Delaware
corporation (the “Borrowers”), the several banks, financial institutions, and
other entities from time to time parties to the Credit Agreement (collectively,
the “Lenders”) named therein, Fortis Capital Corp. as Administrative Agent for
the Lenders. Terms defined in the Credit Agreement are used herein with the same
meanings.
 
The Assignor named below hereby sells and assigns, without recourse, to the
Assignee named below, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Assignment Date set forth
below, the interests set forth below (the “Assigned Interest”) in the Assignor’s
rights and obligations under the Credit Agreement including, without limitation,
the interests set forth below in the Commitment of the Assignor of the
Assignment Date and Loans owing to the Assignor which are outstanding on the
Assignment Date, but excluding accrued interest and fees to and excluding the
Assignment Date. The Assignee hereby acknowledges receipt of a copy of the
Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of a Lender
thereunder, and (ii) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
 
This Assignment and Acceptance is being delivered to the Administrative Agent
together with (i) if the Assignee is a Non-U.S. Lender, any documentation
required to be delivered by the Assignee pursuant to subsection 4.13(b) of the
Credit Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Administrative Agent, duly completed
by the Assignee. The [Assignee/Assignor] shall pay any fee payable to the
Administrative Agent pursuant to subsection 11.6(e) of the Credit Agreement.
 
This Assignment and Acceptance shall be governed by and construed in accordance
with the laws of the State of New York.
 
Date of Assignment:
Legal Name of Assignor:

Legal Name of Assignee:

Assignee’s Address for Notices:

Effective Date of Assignment
(“Assignment Date”)

Exhibit G-

--------------------------------------------------------------------------------

Percentage of
Principal Amount Assigned Commitment Assigned

Commitment Assigned: $_______________ $_______________*

The terms set forth above are hereby agreed to:
 
[Name of Assignor], as Assignor

By: _________________________________
Name: _________________________________
Title: _________________________________

[Name of Assignee], as Assignee

By: _________________________________
Name: _________________________________
Title: _________________________________

The undersigned hereby consent to the within assignment:
 
El Paso Production Holding Company Fortis Capital Corp., as Administrative Agent

By: ____________________________ By: ____________________________
Name: ____________________________ Name: ____________________________
Title: ____________________________ Title: ____________________________

El Paso Production Company

By: ____________________________
Name: ____________________________
Title: ____________________________

El Paso Energy Raton Corporation

By: ____________________________
Name: ____________________________
Title: ____________________________

El Paso Production GOM Inc.

By: ____________________________
Name: ____________________________
Title: ____________________________