Exhibit 10.18

Execution Version

 

SECOND LIEN TERM LOAN AGREEMENT

 

 

DATED AS OF

 

JANUARY 31, 2008

 

 

AMONG

 

 

LINN ENERGY, LLC,

 

AS BORROWER,

 

 

BNP PARIBAS,

 

AS ADMINISTRATIVE AGENT,

 

RBC CAPITAL MARKETS,

 

AS SYNDICATION AGENT,

 

SOCIETE GENERALE, CALYON CORPORATE AND INVESTMENT BANK

 

AND THE ROYAL BANK OF SCOTLAND PLC,

 

AS CO-DOCUMENTATION AGENTS

 

AND

 

THE LENDERS PARTY HERETO

 

 

JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS

 

 

BNP PARIBAS

 

RBC CAPITAL MARKETS

 

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TABLE OF CONTENTS

 

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01

Terms Defined Above

1

Section 1.02

Certain Defined Terms

1

Section 1.03

Types of Loans and Tranches

19

Section 1.04

Terms Generally

19

Section 1.05

Accounting Terms and Determinations; GAAP

20

 

 

 

ARTICLE II

 

THE CREDITS

 

 

 

Section 2.01

Term Loans

20

Section 2.02

Loans and Tranches

20

Section 2.03

Requests for the Loans

21

Section 2.04

Interest Elections

22

Section 2.05

Funding of Tranches

23

Section 2.06

Termination

24

Section 2.07

Total Reserve Value

24

Section 2.08

Intercreditor Agreement

24

 

 

 

ARTICLE III

 

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

 

 

Section 3.01

Repayment of Loans

24

Section 3.02

Interest

24

Section 3.03

Alternate Rate of Interest

25

Section 3.04

Optional Prepayments

26

Section 3.05

Mandatory Prepayments

26

Section 3.06

Fees

27

 

 

 

ARTICLE IV

 

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

 

 

 

Section 4.01

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

27

Section 4.02

Presumption of Payment by the Borrower

28

Section 4.03

Certain Deductions by the Administrative Agent

28

 

 

 

ARTICLE V

 

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES

 

 

 

Section 5.01

Increased Costs

28

Section 5.02

Break Funding Payments

29

Section 5.03

Taxes

30

Section 5.04

Designation of Different Lending Office; Replacement of Lenders

31

 

 

 

ARTICLE VI

 

CONDITIONS PRECEDENT

 

 

 

Section 6.01

Effective Date

32

 

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Section 6.02

Additional Conditions

35

 

 

 

ARTICLE VII

 

REPRESENTATIONS AND WARRANTIES

 

 

 

Section 7.01

Organization; Powers

35

Section 7.02

Authority; Enforceability

36

Section 7.03

Approvals; No Conflicts

36

Section 7.04

Financial Position; No Material Adverse Change

36

Section 7.05

Litigation

37

Section 7.06

Environmental Matters

37

Section 7.07

Compliance with the Laws and Agreements; No Defaults

38

Section 7.08

Investment Company Act

38

Section 7.09

Taxes

39

Section 7.10

ERISA

39

Section 7.11

Disclosure; No Material Misstatements

40

Section 7.12

Insurance

40

Section 7.13

Restriction on Liens

40

Section 7.14

Subsidiaries

40

Section 7.15

Location of Business and Offices

40

Section 7.16

Properties; Titles, Etc

41

Section 7.17

Maintenance of Properties

42

Section 7.18

Gas Imbalances, Prepayments

42

Section 7.19

Marketing of Production

42

Section 7.20

Swap Agreements

43

Section 7.21

Use of Loans

43

Section 7.22

Solvency

43

Section 7.23

Acquisition

43

 

 

 

ARTICLE VIII

 

AFFIRMATIVE COVENANTS

 

 

 

Section 8.01

Financial Statements; Other Information

44

Section 8.02

Notices of Material Events

47

Section 8.03

Existence; Conduct of Business

48

Section 8.04

Payment of Obligations

48

Section 8.05

Performance of Obligations under Loan Documents

48

Section 8.06

Operation and Maintenance of Properties

48

Section 8.07

Insurance

49

Section 8.08

Books and Records; Inspection Rights

49

Section 8.09

Compliance with Laws

49

Section 8.10

Environmental Matters

49

Section 8.11

Further Assurances

50

Section 8.12

Reserve Reports

51

Section 8.13

Title Information

52

Section 8.14

Additional Collateral; Additional Guarantors

53

Section 8.15

ERISA Compliance

54

Section 8.16

Marketing Activities

54

Section 8.17

Swap Agreements

54

 

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Section 8.18

Permanent Securities

54

 

 

 

ARTICLE IX

 

NEGATIVE COVENANTS

 

 

 

Section 9.01

Financial Covenants

55

Section 9.02

Debt

55

Section 9.03

Liens

57

Section 9.04

Dividends

57

Section 9.05

Investments, Loans and Advances

58

Section 9.06

Nature of Business

59

Section 9.07

Limitation on Leases

59

Section 9.08

Proceeds of Notes

59

Section 9.09

ERISA Compliance

60

Section 9.10

Sale or Discount of Receivables

60

Section 9.11

Mergers, Etc

60

Section 9.12

Sale of Properties

60

Section 9.13

Environmental Matters

61

Section 9.14

Transactions with Affiliates

61

Section 9.15

Subsidiaries

61

Section 9.16

Negative Pledge Agreements; Dividend Restrictions

61

Section 9.17

Gas Imbalances, Take-or-Pay or Other Prepayments

62

Section 9.18

Swap Agreements

62

Section 9.19

Tax Status as Partnership

63

Section 9.20

Acquisition Documents

63

Section 9.21

Anti-Layering

63

 

 

 

ARTICLE X

 

EVENTS OF DEFAULT; REMEDIES

 

 

 

Section 10.01

Events of Default

63

Section 10.02

Remedies

65

Section 10.03

Disposition of Proceeds

66

 

 

 

ARTICLE XI

 

THE ADMINISTRATIVE AGENT

 

 

 

Section 11.01

Appointment; Powers

66

Section 11.02

Duties and Obligations of Administrative Agent

66

Section 11.03

Action by Agent

67

Section 11.04

Reliance by Agent

68

Section 11.05

Subagents

68

Section 11.06

Resignation or Removal of Agents

68

Section 11.07

Agents and Lenders

69

Section 11.08

No Reliance

69

Section 11.09

Administrative Agent May File Proofs of Claim

70

Section 11.10

Authority of Administrative Agent to Release Collateral and Liens

70

Section 11.11

The Arrangers and the Agents

70

 

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ARTICLE XII

 

MISCELLANEOUS

 

 

 

Section 12.01

Notices

71

Section 12.02

Waivers; Amendments

72

Section 12.03

Expenses, Indemnity; Damage Waiver

73

Section 12.04

Successors and Assigns

75

Section 12.05

Survival; Revival; Reinstatement

78

Section 12.06

Counterparts; Integration; Effectiveness

79

Section 12.07

Severability

79

Section 12.08

Right of Setoff

79

Section 12.09

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

79

Section 12.10

Headings

81

Section 12.11

Confidentiality

81

Section 12.12

Interest Rate Limitation

82

Section 12.13

EXCULPATION PROVISIONS

83

Section 12.14

No Third Party Beneficiaries

83

Section 12.15

USA Patriot Act Notice

83

Section 12.16

Senior Revolving Credit Documents

84

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I

 

Commitments

 

 

 

Exhibit A

 

Form of Note

Exhibit B

 

Form of Compliance Certificate

Exhibit C

 

Security Instruments

Exhibit D

 

Form of Assignment and Assumption

Exhibit E

 

Form of Borrowing Request

Exhibit F

 

Form of Interest Election Request

 

 

 

Schedule 7.05

 

Litigation

Schedule 7.14

 

Subsidiaries and Partnerships

Schedule 7.18

 

Gas Imbalances

Schedule 7.19

 

Marketing Contracts

Schedule 7.20

 

Swap Agreements

 

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THIS SECOND LIEN TERM LOAN AGREEMENT dated as of January 31, 2008, is among Linn
Energy, LLC, a limited liability company duly formed and existing under the laws
of the State of Delaware (the “Borrower”); each of the Lenders from time to time
party hereto; BNP PARIBAS (in its individual capacity, “BNP Paribas”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); RBC Capital Markets
plc (in its individual capacity, “RBC”), as syndication agent for the Lenders
(in such capacity, together with its successor in such capacity, the
“Syndication Agent”), and Societe Generale, Calyon Corporate and Investment Bank
and The Royal Bank of Scotland plc, as co-documentation agents (in such
capacities, together with their successors in such capacity, the
“Co-Documentation Agents”) for the Lenders.

 

R E C I T A L S

 

A.            The Borrower has requested that the Lenders provide a $400,000,000
second lien term loan facility to the Borrower.

 

B.            Each Lender has severally agreed to make its ratable portion of
such loans subject to the terms and conditions of this Agreement.

 

C.            Now, therefore, in consideration of the mutual covenants and
agreements herein contained and of the loans and commitments hereinafter
referred to, the parties hereto agree as follows:

 

ARTICLE I
Definitions and Accounting Matters

 

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

 

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

 

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

 

“Acquisition” means the acquisition of certain oil, gas and mineral Properties
pursuant to the terms and conditions of the Acquisition Documents.

 

“Acquisition Documents” means (a) the Purchase and Sale Agreement dated as of
December 20, 2007, by and between Lamamco Drilling Company, as seller and Linn
Energy Holdings, LLC, as buyer, and (b) all bills of sale, assignments,
agreements, instruments and documents executed and delivered in connection
therewith, as amended.

 

“Acquisition Properties” means the Oil and Gas Properties and other properties
acquired by the Borrower or any Guarantor pursuant to the Acquisition Documents.

 

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

 

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

“Agent” means the Administrative Agent, the Syndication Agent, any
Co-Documentation Agent or any combination of them as the context requires.

 

“Agreement” means this Second Lien Term Loan Agreement, as the same may from
time to time be amended, modified, supplemented or restated.

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1%.  Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.

 

“Applicable Margin” means the rate per annum applicable to each Type of Tranche
or Loan for the period set forth below:

 

Period

 

Eurodollar

 

ABR

 

Effective Date to and including the one year anniversary of Effective Date

 

5.0

%

3.5

%

One day after anniversary of Effective Date to Maturity Date

 

7.5

%

6.0

%

 

“Approved Counterparty” means (a) any “Lender” as such term is defined under the
Senior Revolving Credit Agreement or any Affiliate of such lender and (b) any
other Person whose long term senior unsecured debt rating is A/A2 by S&P or
Moody’s (or their equivalent) or higher.

 

“Arrangers” means BNP Paribas and RBC Capital Markets, in their capacities as
joint lead arrangers and joint book runners hereunder.

 

“Asset Sale” means, solely for purposes of Section 3.05, the sale, transfer or
other disposition (by way of merger, casualty, condemnation or otherwise) by the
Borrower or any of the Subsidiaries to any Person other than the Borrower or any
Guarantor of (a) any Equity Interests in any of the Subsidiaries (including any
such sale by the issuer of such Equity Interests but excluding directors’
qualifying shares) or (b) any other assets of the Borrower or any of the
Subsidiaries (other than (x)(i) inventory (including Hydrocarbons),
(ii) damaged, obsolete or worn out assets, scrap and equipment no longer used in
the operations of the Borrower or any

 

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Subsidiary, and (iii) Investments permitted by Section 9.05, in each case
disposed of in the ordinary course of business and (y) any sale, transfer or
other disposition that, together with all related sales, transfers or other
dispositions, has a value not in excess of $25,000,000).

 

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

 

“Available Cash” means, with respect to any fiscal quarter ending prior to the
Maturity Date:

 

(a)           the sum of (i) all cash and cash equivalents of the Borrower and
each Subsidiary on hand at the end of such fiscal quarter; and (ii) all
additional cash and cash equivalents of the Borrower and each Subsidiary on hand
on the date of determination of Available Cash for such fiscal quarter resulting
from working capital borrowings made subsequent to the end of such fiscal
quarter, less

 

(b)           the amount of any cash reserves established by the board of
directors of the Borrower to (i) provide for the proper conduct of the business
of the Borrower and each Subsidiary (including reserves for future capital
expenditures including drilling and acquisitions and for anticipated future
credit needs of the Borrower and each Subsidiary), (ii) comply with applicable
law or any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Borrower or any Subsidiary is a party
or by which it is bound or its assets are subject or (iii) provide funds for
distributions with respect to any one or more of the next four fiscal quarters;

 

provided that disbursements made by the Borrower or any Subsidiary or cash
reserves established, increased or reduced after the end of such fiscal quarter
but on or before the date of determination of Available Cash with respect to
such fiscal quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such fiscal quarter
if the board of directors so determines.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

 

“Borrowing Request” means a request by the Borrower for the funding of the Loans
in accordance with Section 2.03 in substantially the form of Exhibit E.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Tranche or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Tranche or a
notice by the Borrower with respect to any such Tranche or continuation,
payment, prepayment, conversion or Interest Period, any day which is also a day
on which dealings in dollar deposits are carried out in the London interbank
market.

 

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

 

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $10,000,000 in the aggregate for any
calendar year.

 

“Change in Control” means the occurrence of any of the following events: 
(a) any Person or group of Persons acting in concert as a partnership or other
group (a “Group of Persons”), shall be the legal or beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
more than 35% of the combined voting power of the then total membership
interests (including all securities which are convertible into membership
interests) of the Borrower, provided, that a “Group of Persons” shall not
include the underwriter in any firm underwriting undertaken in connection with
any public offering of the Borrower, or (b) occupation of a majority of the
seats (other than vacant seats) on the board of directors (or board of managers)
of the Company by Persons who were neither (i) nominated by the board of
directors of the Borrower nor (ii) appointed by directors a majority of whom
were so nominated.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 5.01(b), by any lending office of such Lender or by such Lender’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.

 

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

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make its Loan hereunder on the Effective Date and “Commitments” means the
aggregate amount of the Commitments of all Lenders.  The amount of each Lender’s
Commitment is set forth on Annex I.

 

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or a Consolidated Subsidiary has an interest (which interest
does not cause the net income of such other Person to be consolidated with the
net income of the Borrower and the Consolidated Subsidiaries in accordance with
GAAP), except to the extent of the amount of dividends or distributions actually
paid in cash during such period by such other Person to the Borrower or to a
Consolidated Subsidiary, as the case may be; (b) the net income

 

4

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(but not loss) during such period of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) any extraordinary gains or losses during such period; (d) non-cash
gains, losses or adjustments under FASB Statement No. 133 as a result of changes
in the fair market value of derivatives; (e) any gains or losses attributable to
writeups or writedowns of assets, including ceiling test writedowns; and
(f) non-cash share-based payments under FASB Statement No. 123R; and provided
further that if the Borrower or any Consolidated Subsidiary shall acquire or
dispose of any Property during such period, then Consolidated Net Income shall
be calculated after giving pro forma effect to such acquisition or disposition,
as if such acquisition or disposition had occurred on the first day of such
period.

 

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person will be deemed to “control” such other Person. 
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable, accrued expenses, liabilities or other obligations of such
Person, in each such case to pay the deferred purchase price of Property or
services; (d) all obligations under Capital Leases; (e) all obligations under
Synthetic Leases; (f) all Debt (as defined in the other clauses of this
definition) of others secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) a Lien on any
Property of such Person, whether or not such Debt is assumed by such Person;
(g) all Debt (as defined in the other clauses of this definition) of others
guaranteed by such Person or with respect to which such Person otherwise assures
a creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(i) obligations to deliver commodities, goods or services, including, without
limitation, Hydrocarbons, in consideration of one or more advance payments,
other than gas balancing arrangements in the ordinary course of business;
(j) obligations to pay for goods or services whether or not such goods or
services are

 

5

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actually received or utilized by such Person (other than obligations under firm
transportation or drilling contracts); (k) any Debt of a partnership for which
such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability;
(l) Disqualified Capital Stock; and (m) the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment.  The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP.

 

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

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans or other
obligations hereunder outstanding.

 

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

 

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

 

“Dominion Production Payment” means (i) the Production Payment Purchase and Sale
Agreement between Dominion Oklahoma Texas Exploration & Production, Inc. and
Dominion Natural Gas III, L.P., as sellers, and Dominion VPP Holdings, LLC, as
buyer, dated as of August 27, 2007, (ii) the Conveyance of Term Overriding
Royalty Including Assignment of Interests in Oil and Gas Wells and Leases from
Dominion Exploration & Production, Inc. and Dominion Natural Gas III, L.P. to
Dominion VPP Holdings, LLC, dated as of August 27, 2007, and (iii) the Natural
Gas Exchange Agreement between Dominion Oklahoma Texas Exploration &
Production, Inc. and Dominion VPP Holdings, LLC dated as of August 27, 2007; in
the case of each agreement referenced in clause (i), (ii) or (iii) above, as
such agreement is amended on or prior to the Effective Date.

 

“EBITDA” means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: Interest Expense, income taxes,
depreciation, depletion, amortization and other similar charges, minus all
noncash income added to Consolidated Net Income.

 

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

 

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“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health and safety (to the extent relating to exposure to Hazardous
Materials), the environment or the preservation or reclamation of natural
resources, in effect in any and all jurisdictions in which the Borrower or any
Subsidiary is conducting or at any time has conducted business, or where any
Property of the Borrower or any Subsidiary is located, including without
limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air
Act, as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, and Hazardous Materials Transportation Act, as amended.  The term “oil”
shall have the meaning specified in OPA, the terms “hazardous substance” and
“release” (or “threatened release”) have the meanings specified in CERCLA, the
terms “solid waste” and “disposal” (or “disposed”) have the meanings specified
in RCRA and the term “oil and gas waste” shall mean those waste that are
excluded from the definition of “hazardous waste” pursuant to 40 C.F.R.
Section 261.4(b)(5) (“Section 261.4(b)(5)”); provided, however, that (a) in the
event either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Subsidiary is located establish a meaning for “oil,” “hazardous
substance,” “release,” “solid waste,” “disposal” or “oil and gas waste” which is
broader than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5),
such broader meaning shall apply.

 

“Environmental Permit” means any permit, registration, license, approval,
consent, exemption, variance, or other authorization of a Governmental Authority
required under or issued pursuant to applicable Environmental Laws.

 

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

 

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

 

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or any of its Subsidiaries would be deemed to
be a “single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.

 

“ERISA Event” means (a) a reportable event described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower or any
of its Subsidiaries or any ERISA Affiliate from a Plan during a plan year in
which it was a “substantial employer” as defined in section 4001(a)(2) of ERISA,
(c) in each case solely with respect to a Plan subject to Title IV of ERISA, the
filing of a notice of intent to terminate a Plan or the treatment of a Plan

 

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amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt by the Borrower or any
of its Subsidiaries or any ERISA Affiliate of a notice of withdrawal liability
pursuant to Section 4202 of ERISA with respect to any Multiemployer Plan or
(f) any other event or condition which might constitute grounds under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan subject to Title IV of ERISA.

 

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

 

“Event of Default” has the meaning assigned such term in Section 10.01.

 

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any of its Subsidiaries or materially
impair the value of material Property subject thereto; (e) Liens arising solely
by virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash collateral account or
is subject to restrictions against access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by the Borrower or any of its Subsidiaries to provide collateral to the
depository institution; (f) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in

 

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any Property of the Borrower or any of its Subsidiaries for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines
for the removal of gas, oil, coal or other minerals or timber, and other like
purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment, that do not secure any monetary obligations and which
in the aggregate do not materially impair the use of such Property for the
purposes of which such Property is held by the Borrower or any of its
Subsidiaries or materially impair the value of any material Property subject
thereto; (g) Liens on cash or securities pledged to secure performance of
tenders, surety and appeal bonds, government contracts, performance and return
of money bonds, bids, trade contracts, leases, statutory obligations, regulatory
obligations and other obligations of a like nature incurred in the ordinary
course of business; (h) judgment and attachment Liens not giving rise to an
Event of Default, provided that any appropriate legal proceedings which may have
been duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall not
have expired and no action to enforce such Lien has been commenced; and
(i) Liens arising from precautionary Uniform Commercial Code financing statement
filings entered into by the Borrower and the Subsidiaries covering Property
under true leases entered into in the ordinary course of business; provided,
further that Liens described in clauses (a) through (e) shall remain “Excepted
Liens” only for so long as no action to enforce such Lien has been commenced and
no intention to subordinate the Lien granted in favor of the Administrative
Agent and the Lenders is to be hereby implied or expressed by the permitted
existence of such Excepted Liens.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower or any Guarantor hereunder or under any other Loan Document,
(a) income or franchise taxes imposed on (or measured by) its net income by the
United States of America or such other jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower or any Guarantor is
located and (c) in the case of a Foreign Lender any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender’s failure to comply with Section 5.03(e),
unless such Foreign Lender (or its assignor, if any) was entitled at the time of
designation of a new lending office (or assignment) to receive additional
amounts with respect to such withholding tax pursuant to Section 5.03(a) or
Section 5.03(c).

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received from three Federal funds brokers of recognized standing selected by the
Administrative Agent.

 

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

 

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

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

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

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over the
Borrower or any of its Subsidiaries, any of their Properties, any Agent or any
Lender.

 

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

 

“Guarantors” means the Subsidiaries of the Borrower listed on Part I of Schedule
7.14 and each other Material Domestic Subsidiary or other Domestic Subsidiary
that guarantees the Indebtedness pursuant to Section 8.14(b).

 

“Guaranty Agreement” means an agreement executed by the Guarantors in form and
substance reasonably satisfactory to the Administrative Agent unconditionally
guarantying on a joint and several basis, payment of the Indebtedness, as the
same may be amended, modified or supplemented from time to time.

 

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law and including, without
limitation:  (a) any chemical, compound, material, product, byproduct, substance
or waste defined as or included in the definition or meaning of “hazardous
substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,”
“pollutant,” or words of similar meaning or import found in any applicable
Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum
substances, natural gas, oil, oil and

 

10

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gas waste, crude oil, and any components, fractions, or derivatives thereof; and
(c) radioactive materials, asbestos containing materials, polychlorinated
biphenyls, or radon.

 

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.

 

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

 

“Indebtedness” means, without duplication, any and all amounts owing or to be
owing by the Borrower or any Guarantor (whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising): (a) to the Administrative Agent or any Lender
under any Loan Document and (b) all renewals, extensions and/or rearrangements
of any of the above.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of
the Effective Date entered into by and among BNP Paribas, as administrative
agent for the lenders pursuant to the Senior Revolving Credit Documents, the
Administrative Agent, and the Borrower, as the same may from time to time be
amended, modified, supplemented or restated.

 

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

 

“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including (a) to the extent included
in interest expense under GAAP:  (i) amortization of debt discount,
(ii) capitalized interest and (iii) the portion of any payments or accruals
under Capital Leases allocable to interest expense, plus the portion of any
payments or accruals under Synthetic Leases allocable to interest expense
whether or not the same constitutes interest expense under GAAP and (b) cash
dividend payments by the Borrower in respect of any Disqualified Capital Stock;
but excluding non-cash gains, losses or adjustments under FASB Statement No. 133
as a result of changes in the fair market value of derivatives.

 

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“Interest Period” means with respect to any Eurodollar Tranche, the period
commencing on the date of such Tranche and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Tranche that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes
hereof, the date of a Tranche initially shall be the date on which such Loans
comprising such Tranche are made and thereafter shall be the effective date of
the most recent conversion or continuation of such Tranche.

 

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any unfunded subscription agreement to make any such acquisition or
fund capital calls (including, without limitation, any “short sale” or any sale
of any securities at a time when such securities are not owned by the Person
entering into such short sale, but excluding any unconsummated purchase and sale
agreements to purchase all or substantially all the Equity Interests of Persons
owning Oil and Gas Properties); (b) the making of any deposit with, or advance,
loan or capital contribution to, assumption of Debt of, purchase or other
acquisition of any other Debt or equity participation or interest in, or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such Property to such Person, but excluding any such
advance, loan or extension of credit having a term not exceeding ninety (90)
days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); (c) the purchase or acquisition (in
one or a series of transactions) of Property of another Person that constitutes
a business unit or (d) the entering into of any guarantee of, or other
contingent obligation (including the deposit of any Equity Interests to be sold)
with respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.

 

“Investment Bank” means one or more investment banks engaged by the Borrower and
satisfactory to the Arrangers to assist in issuing the Permanent Securities.

 

“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate per annum determined on the basis of the rate for deposits in
dollars for a period equal to such Interest Period commencing on the first day
of such Interest Period appearing on the Reuters Screen LIBOR01 Page as of
11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period.  In the event that such rate does not appear on such page (or
otherwise on such screen), the “LIBO Rate” shall be determined by reference to
such other comparable publicly available service for displaying eurodollar rates
as may be selected by the

 

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Administrative Agent or, in the absence of such availability, by reference to
the rate at which the Administrative Agent is offered dollar deposits at or
about 11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where its eurodollar and
foreign currency and exchange operations are then being conducted for delivery
on the first day of such Interest Period for the number of days comprised
therein.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which they have acquired or hold subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

 

“Loan Documents” means this Agreement, the Notes, Security Instruments and the
Intercreditor Agreement.

 

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

 

“Majority Lenders” means, at any time while no Loans are outstanding, Lenders
having at least sixty-six and two-thirds percent (66-2/3%) of the Commitments;
and at any time while any Loans are outstanding, Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding principal amount
of the Loans (without regard to any sale by a Lender of a participation in any
Loan under Section 12.04(c)).

 

“Managers” means the members of the Board of Managers or Board of Directors
(however designated from time to time) of the Borrower as constituted from time
to time.

 

“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, condition (financial
or otherwise) or prospects of the Borrower and the Guarantors taken as a whole,
(b) the ability of the Borrower, any of its Subsidiaries or any Guarantor to
perform any of its obligations under any Loan Document to which it is a party,
(c) the validity or enforceability of any Loan Document or (d) the rights and
remedies of or benefits available to the Administrative Agent, any other Agent
or any Lender under any Loan Document.

 

“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary
that (a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries,
owns Property having a fair market value of $10,000,000 or more.

 

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“Material Indebtedness” means Debt (other than the Loans), or obligations in
respect of one or more Swap Agreements, of any one or more of the Borrower and
its Subsidiaries in an aggregate principal amount exceeding $10,000,000.  For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of the Borrower or any of its Subsidiaries in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Borrower or such Subsidiary would be required
to pay if such Swap Agreement were terminated at such time.

 

“Maturity Date” means July 31, 2009.

 

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

 

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

 

“Multiemployer Plan” means a multiemployer plan as defined in section 3(37) or
4001 (a)(3) of ERISA to which any Borrower or any Subsidiary or any ERISA
Affiliate is making or accruing an obligation to make contributions, or has
within the six calendar years preceding the date hereof, made or accrued an
obligation to make contributions.

 

“Net Cash Proceeds” means (a) in connection with any issuance or sale of Equity
Interests, Debt securities, Casualty Events or the incurrence of Debt, the cash
proceeds received from such issuance or incurrence, net of attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith; and (b) in connection with any Asset Sale, the cash
proceeds thereof (including cash proceeds subsequently received (as and when
received) in respect of noncash consideration initially received), net of
(i) selling and other expenses (including reasonable broker’s fees or
commissions, legal fees, transfer and similar taxes, and the Borrower’s good
faith estimate of income taxes actually paid or payable in connection with such
sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any
liabilities under any indemnification obligations or purchase price adjustment
associated with such Asset Sale (provided that, to the extent and at the time
any such amounts are released from such reserve, such amounts shall constitute
Net Cash Proceeds) and (iii) any amount payable in respect of any Debt for
borrowed money which is secured by the asset sold in such Asset Sale and which
is required to be repaid with such proceeds (excluding any such Debt assumed by
the purchaser of such asset).

 

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

 

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests;

 

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(d) all operating agreements, contracts and other agreements, including
production sharing contracts and agreements, which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

 

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or Property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.

 

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

 

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

 

“Permanent Securities” means senior subordinated unsecured notes, subordinated
unsecured notes or any Equity Interests of the Borrower which are issued after
the Effective Date for the purpose of refinancing all or a portion of the Loans
outstanding under this Agreement.

 

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

 

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored or maintained by the
Borrower, any of its Subsidiaries or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored or maintained
by the Borrower, any of its Subsidiaries or an ERISA Affiliate.

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by BNP Paribas as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.  Such
rate is set by BNP Paribas as a general reference rate of

 

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interest, taking into account such factors as BNP Paribas may deem appropriate;
it being understood that many of BNP Paribas’s commercial or other loans are
priced in relation to such rate, that it is not necessarily the lowest or best
rate actually charged to any customer and that BNP Paribas may make various
commercial or other loans at rates of interest having no relationship to such
rate.

 

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

 

“Proved Developed Producing Properties” means Oil and Gas Properties which are
categorized as “Proved Reserves” that are both “Developed” and “Producing”, as
such terms are defined in the Definitions for Oil and Gas Reserves as
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

 

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

 

“PV” means the net present value, discounted at 10% per annum, of the future net
revenues expected to accrue to the Borrower’s and its Subsidiaries’ collective
interests in Proved Reserves expected to be produced from their Oil and Gas
Properties during the remaining expected economic lives of such reserves.  Each
calculation of such expected future net revenues shall be made in accordance
with the then existing standards of the Society of Petroleum Engineers, provided
that in any event (a) appropriate deductions shall be made for severance and ad
valorem taxes, and for operating, gathering, transportation and marketing costs
required for the production and sale of such reserves, (b) appropriate
adjustments shall be made for hedging operations, provided that Swap Agreements
with non-investment grade counterparties shall not be taken into account to the
extent that such Swap Agreements improve the position of or otherwise benefit
the Borrower or any of its Subsidiaries, (c) the pricing assumptions used in
determining net present value for any particular reserves shall be based upon
the following price decks:  (i) for natural gas, the quotation for deliveries of
natural gas for each such year from the New York Mercantile Exchange for Henry
Hub, provided that with respect to quotations for calendar years after the fifth
calendar year, the quotation for the fifth calendar year shall be applied and
(ii) for crude oil, the quotation for deliveries of West Texas Intermediate
crude oil for each such calendar year from the New York Mercantile Exchange for
Cushing, Oklahoma, provided that with respect to quotations for calendar years
after the fifth calendar year, the quotation for the fifth calendar year shall
be applied, and (d) the cash-flows derived from the pricing assumptions set
forth in clauses (b) and (c) above shall be further adjusted to account for the
historical basis differentials for each month during the preceding 12-month
period calculated by comparing realized crude oil and natural gas prices to
Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period.

 

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

 

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“Register” has the meaning assigned such term in Section 12.04(b)(iv).

 

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

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing.

 

“Remedial Work” has the meaning assigned such term in Section 8.10(a).

 

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

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person.  Unless
otherwise specified, all references to a Responsible Officer herein means a
Responsible Officer of the Borrower.

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries.

 

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

 

“Security Instruments” means the Guaranty Agreement, if any, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit C, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by the Borrower or any
other Person (other than participation or similar agreements between any Lender
and any other lender or creditor with respect to any Indebtedness pursuant to
this Agreement) in connection with, or as security for the payment or
performance of the Indebtedness, the Notes or this Agreement, as such agreements
may be amended, modified, supplemented or restated from time to time.

 

“Senior Revolving Credit Agreement” means that certain Third Amended and
Restated Credit Agreement dated as of August 31, 2007 among the Borrower, as
borrower, BNP Paribas, as administrative agent and the other agents and lenders
from time to time parties thereto, as

 

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amended by that certain First Amendment to Third Amended and Restated Credit
Agreement dated as of November 2, 2007, and as hereafter amended, supplemented,
modified, restated, refinanced or replaced from time to time.

 

“Senior Revolving Credit Documents” means the Senior Revolving Credit Agreement,
the Senior Notes and any “Loan Documents” (as defined therein), in each case,
together with all amendments, modifications and supplements thereto and
replacements thereof.

 

“Senior Revolving Credit Notes” means the Notes from time to time issued under
the Senior Revolving Credit Agreement.

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

 

“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” means a Subsidiary of the Borrower.

 

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Borrower or any of its
Subsidiaries shall be a Swap Agreement.

 

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Total Debt” means, at any date, all Debt of the Borrower and its Consolidated
Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
FAS 133 or 143

 

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and (ii) accounts payable and other accrued liabilities (for the deferred
purchase price of Property or services) from time to time incurred in the
ordinary course of business which are not greater than sixty (60) days past the
date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP.

 

“Total Reserve Value” means at any time the PV attributable to Proved Reserves
as most recently determined and certified to the Lenders in accordance with
Section 2.07, as the same may be adjusted from time to time pursuant to
Section 8.13(c) or Section 9.12(d).

 

“Tranche” means a division or portion of the Loans.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, and each other Loan Document
and Acquisition Document to which it is a party, the Acquisition, the borrowing
of Loans, the use of the proceeds thereof, and the grant of Liens by the
Borrower on Mortgaged Properties and other Properties pursuant to the Security
Instruments and (b) any Guarantor, the execution, delivery and performance by
such Guarantor of each Loan Document and Acquisition Document to which it is a
party, the Acquisition, the guaranteeing of the Indebtedness and the other
obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s
grant of the security interests and provision of collateral under the Security
Instruments, and the grant of Liens by such Guarantor on Mortgaged Properties
and other Properties pursuant to the Security Instruments.

 

“Type”, when used in reference to any Loan or Tranche, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Tranche is
determined by reference to the Alternate Base Rate or the LIBO Rate.

 

“Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding
Equity Interests (other than any directors’ qualifying shares mandated by
applicable law), on a fully-diluted basis, are owned by the Borrower or one or
more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or
more of the Wholly-Owned Subsidiaries.

 

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

 

Section 1.04                                Terms Generally.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to

 

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include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement.  No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

 

Section 1.05                                Accounting Terms and Determinations;
GAAP.  Unless otherwise specified herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided that, if the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies the Borrower that the Majority Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until  such
notice shall have been withdrawn or such provision  amended in accordance
herewith.

 

ARTICLE II
The Credits

 

Section 2.01                                Term Loans.  Subject to the terms
and conditions set forth herein, each Lender agrees to make a Loan on the
Effective Date in dollars to the Borrower to fund the Acquisition in an
aggregate principal amount equal to such Lender’s Commitment.  The Commitments
are not revolving and amounts repaid or prepaid may not be re-borrowed under any
circumstance.

 

Section 2.02                                Loans and Tranches.

 

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

 

(b)                                 Types of Loans.  Subject to Section 3.03,
each Tranche shall be comprised entirely of ABR Tranches or Eurodollar Tranches
as the Borrower may request in accordance herewith.  Each Lender at its option
may fund any Eurodollar Tranches by causing any domestic or foreign branch or
Affiliate of such Lender to fund such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.

 

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(c)                                  Minimum Amounts.  At the commencement of
each Interest Period for any Eurodollar Tranche, such Tranche shall be in an
aggregate amount that is an integral multiple of $500,000 and not less than
$1,000,000.  At the time that each ABR Tranche is made, such Tranche shall be in
an aggregate amount that is an integral multiple of $250,000 and not less than
$1,000,000.  Tranches of more than one Type may be outstanding at the same time;
provided that there shall not at any time be more than a total of four
(4) Eurodollar Tranches outstanding.  Notwithstanding any other provision of
this Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Tranche if the Interest Period requested with respect
thereto would end after the Maturity Date.

 

(d)                                 Notes.  If a Lender shall make a written
request to the Administrative Agent and the Borrower to have its Loan evidenced
by a promissory note, then the Borrower shall executed and deliver a single
promissory note of the Borrower in substantially the form of Exhibit A payable
to the order of such Lender in a principal amount equal to such Lender’s
Commitment and otherwise duly completed.  The date, amount, Type, interest rate
and, if applicable, Interest Period of each Tranche consisting of a portion of
the Loan made by each Lender, and all payments made on account of the principal
thereof, may be recorded by such Lender on its books for its Note, and, prior to
any transfer, may be endorsed by such Lender on a schedule attached to such Note
or any continuation thereof or on any separate record maintained by such
Lender.  Failure to make any such notation or to attach a schedule shall not
affect any Lender’s or the Borrower’s rights or obligations in respect of its
Loan or affect the validity of such transfer by any Lender of its Note.

 

Section 2.03                                Requests for the Loans.  To request
a Loan, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Tranche, not later than 11:00 a.m.,
Houston time, three Business Days before the Effective Date or (b) in the case
of an ABR Tranche, not later than 12:00 noon, Houston time, on the Effective
Date.  Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Borrowing Request and signed by the Borrower.  Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:

 

(i)                                     the aggregate amount of the requested
Loans;

 

(ii)                                  the date of such Loan, which shall be the
Effective Date;

 

(iii)                               whether any portion of such Loans is to be
an ABR Tranche or a Eurodollar Tranche;

 

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

 

(v)                                 the location and number of the Borrower’s
account to which funds are to be disbursed, which shall comply with the
requirements of Section 2.05.

 

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If no election as to the Type is specified, then the entire portion of the Loans
shall be a Eurodollar Tranche having an Interest Period of one month.  If no
Interest Period is specified with respect to any requested Eurodollar Tranche,
then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration.

 

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

 

Section 2.04                                Interest Elections.

 

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

 

(b)                                 Interest Election Requests.  To make an
election pursuant to this Section 2.04, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election.  Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request and signed by the
Borrower.

 

(c)                                  Information in Interest Election Requests. 
Each telephonic and written Interest Election Request shall specify the
following information:

 

(i)                                     the Tranche to which such Interest
Election Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be allocated to
each resulting Tranche (in which case the information to be specified pursuant
to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Tranche);

 

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

 

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

 

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

 

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

 

(e)                                  Notice to Lenders by the Administrative
Agent.  Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Tranche.

 

(f)                                    Effect of Failure to Deliver Timely
Interest Election Request and Events of Default on Interest Election.  If the
Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Tranche prior to the end of the Interest Period applicable thereto,
then, unless such Tranche is repaid as provided herein, at the end of such
Interest Period such Tranche shall be continued as a Eurodollar Tranche having
an Interest Period of one month.  Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing:  (i) no outstanding
Tranche may be converted to or continued as a Eurodollar Tranche (and any
Interest Election Request that requests the conversion of any Tranche to, or
continuation of any Tranche as, a Eurodollar Tranche shall be ineffective) and
(ii) unless repaid, each Eurodollar Tranche shall be converted to an ABR Tranche
at the end of the Interest Period applicable thereto.

 

Section 2.05                                Funding of Tranches.

 

(a)                                  Funding by Lenders.  Each Lender shall make
its Loan on the Effective Date by wire transfer of immediately available funds
by 1:00 p.m., Houston time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders.  The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
and designated by the Borrower in such Borrowing Request.  Nothing herein shall
be deemed to obligate any Lender to obtain the funds for its Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for its Loan in any particular place or
manner.

 

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

 

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Section 2.06                                Termination.  The Commitments shall
terminate on the Effective Date.  Any portion of the Commitments not borrowed on
the Effective Date shall terminate.

 

Section 2.07                                Total Reserve Value.  Subject to
interim adjustment under Section 8.13(c) and Section 9.12(d), the initial Total
Reserve Value shall be $4,600,000,000.00.  The Borrower shall deliver to the
Administrative Agent a certificate, in form reasonably satisfactory to the
Administrative Agent, no later than March 15th and September 15th of each year,
commencing March 15, 2008, reflecting the Total Reserve Value as of the
immediately preceding December 31st or June 30th. In addition, the Borrower may,
by notifying the Administrative Agent thereof, and the Administrative Agent may,
at the direction of the Majority Lenders, by notifying the Borrower thereof,
each elect to require the Total Reserve Value be determined one additional time
on a specified “as of” date between such regular determinations (which shall be
the first day of a calendar month following the date of such notice), in which
event the Borrower shall deliver to the Administrative Agent a certificate, in
form reasonably satisfactory to the Administrative Agent, no later than three
months after such specified date reflecting the Total Reserve Value as of such
specified date.  The Borrower shall calculate the Total Reserve Value based upon
the applicable definitions of this Agreement, and provide with each such
certificate the Reserve Report and other information used by the Borrower in
calculating the Total Reserve Value.

 

Upon receipt of such certificate, the Administrative Agent shall promptly review
such certificate and, within five (5) Business Days, confirm to the Borrower and
the Lenders that (i) the calculations used to determine the Total Reserve Value
were based upon the pricing and other requirements set forth in the definition
of Total Reserve Value and (ii) no mathematical or other errors or omissions
have been made in such calculation.  If discrepancies or errors under (i) or
(ii) are ascertained to exist, the Administrative Agent and the Borrower shall
cooperate to promptly calculate the proper amount of the Total Reserve Value. 
Otherwise, upon confirmation of such amount as the Total Reserve Value, such
amount will be the Total Reserve Value until next adjusted or redetermined in
accordance with the terms of this Agreement.

 

Section 2.08                                Intercreditor Agreement.  The Loans,
the Notes, this Agreement and the other Loan Documents; the rights and remedies
of the Lenders and the Administrative Agent hereunder and thereunder and the
Liens created thereby are subject to the Intercreditor Agreement.

 

ARTICLE III
Payments of Principal and Interest; Prepayments; Fees

 

Section 3.01                                Repayment of Loans.  On the Maturity
Date, the Borrower shall repay the outstanding principal balance of the Loans in
full.

 

Section 3.02                                Interest.

 

(a)                                  ABR Tranches.  The portion of the Loans
comprising each ABR Tranche shall bear interest at the Alternate Base Rate plus
the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

 

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(b)                                 Eurodollar Tranches.  The portion of the
Loans comprising each Eurodollar Tranche shall bear interest at the LIBO Rate
for the Interest Period in effect for such Tranche plus the Applicable Margin,
but in no event to exceed the Highest Lawful Rate.

 

(c)                                  Post-Default Rate.  Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing, or if any
principal of or interest on any Loan or any fee or other amount payable by the
Borrower or any Guarantor hereunder or under any other Loan Document is not paid
when due, whether at stated maturity, upon acceleration or otherwise, then all
Loans outstanding, in the case of an Event of Default, and such overdue amount,
in the case of a failure to pay amounts when due, shall bear interest, after as
well as before judgment, at a rate per annum equal to two percent (2%) plus the
rate applicable to ABR Tranches as provided in Section 3.02(a), but in no event
to exceed the Highest Lawful Rate.

 

(d)                                 Interest Payment Dates.  Accrued interest on
each Loan shall be payable in arrears on: (i) with respect to any ABR Tranche,
the last day of each March, June, September and December; (ii) with respect to
any Eurodollar Tranche, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part but in all cases to be paid at least
every three months and (iii) in any case, on the Maturity Date; provided that
(i) interest accrued pursuant to Section 3.02(c) shall be payable on demand,
(ii) in the event of any prepayment of principal of any Loan, accrued interest
on the principal amount prepaid shall be payable on the date of such prepayment,
and (iii) in the event of any conversion of any Eurodollar Tranche prior to the
end of the current Interest Period therefor, accrued interest on such Loan shall
be payable on the effective date of such conversion.

 

(e)                                  Interest Rate Computations.  All interest
hereunder shall be computed on the basis of a year of 360 days, unless such
computation would exceed the Highest Lawful Rate, in which case interest shall
be computed on the basis of a year of 365 days (or 366 days in a leap year),
except that interest computed by reference to the Alternate Base Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).  The applicable Alternate Base Rate or
LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error, and be binding upon the
parties hereto.

 

Section 3.03                                Alternate Rate of Interest.  If
prior to the commencement of any Interest Period for a Eurodollar Tranche:

 

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

 

(b)                                 the Administrative Agent is advised by the
Majority Lenders that the LIBO Rate for such Interest Period will not adequately
and fairly reflect the cost to such Lenders of making or maintaining a portion
of their Loans included in such Tranche for such Interest Period;

 

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then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Tranche to, or continuation
of any Tranche as, a Eurodollar Tranche shall be ineffective, and (ii) if any
Borrowing Request requests a Eurodollar Tranche, such Tranche shall be made as
an ABR Tranche.

 

Section 3.04                                Optional Prepayments.

 

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

 

(b)                                 Notice and Terms of Optional Prepayment. 
The Borrower shall notify the Administrative Agent by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Tranche, not later than 12:00 noon, Houston time, three Business Days
before the date of prepayment, or (ii) in the case of prepayment of an ABR
Tranche, not later than 12:00 noon, Houston time, one Business Day before the
date of prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of the Loans or portion thereof to be
prepaid.  Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each prepayment of a
Tranche shall be applied ratably to the Loans of all Lenders in respect of such
Tranche.  Prepayments shall be accompanied by accrued interest to the extent
required by Section 3.02.

 

Section 3.05                                Mandatory Prepayments

 

(a)                                  The Borrower shall prepay the Notes in
amounts equal to:

 

(i)                                     100% of the Net Cash Proceeds of any
Debt incurrence of the Borrower or any of its Subsidiaries pursuant to
Section 9.02(i) or 9.02(j) (but only, in the case of 9.02(j), to the extent such
Debt exceeds $10,000,000 in the aggregate), or of the sale or issuance of any
Equity Interests of the Borrower.  Such prepayment shall be made no later than
the next Business Day after the receipt of such proceeds.

 

(ii)                                  100% of the Net Cash Proceeds of any
Casualty Event related to the Borrower or any of its Subsidiaries. Such
prepayment shall be made no later than the next Business Day after the receipt
of such proceeds.

 

(iii)                               100% of the Net Cash Proceeds of any Asset
Sale.  Such prepayment shall be made no later than the next Business Day after
the receipt of such proceeds.

 

(b)                                 Notwithstanding anything herein to the
contrary, (x) if the terms of the Senior Revolving Credit Agreement require that
any Net Cash Proceeds referred to in Section 3.05(a)(i) through (iii) be applied
to the obligations under the Senior Revolving Credit Agreement, then prepayment
under Sections 3.05(a)(i) through (iii) shall only be required to the

 

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extent any Net Cash Proceeds remain after any such application (taking into
consideration any waiver or reduction of such requirement) and (y) if not
required as a prepayment pursuant to clause (x), then any Net Cash Proceeds
received from the issuance of the Permanent Securities shall first be applied to
prepay the Loans.

 

Section 3.06                                Fees.  The Borrower agrees to pay to
the Administrative Agent, for its own account, fees payable in the amounts and
at the times separately agreed upon between the Borrower and the Administrative
Agent.

 

ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs

 

Section 4.01                                Payments Generally; Pro Rata
Treatment; Sharing of Set-offs.

 

(a)                                  Payments by the Borrower.  The Borrower
shall make each payment required to be made by it hereunder (whether of
principal, interest or fees, or of amounts payable under Section 5.01,
Section 5.02, Section 5.03 or otherwise) prior to 1:00 p.m., Houston time, on
the date when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim.  Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances, absent manifest error.  Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments
shall be made to the Administrative Agent at its offices specified in
Section 12.01, as expressly provided herein and except that payments pursuant to
Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made
directly to the Persons entitled thereto.  The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof.  If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension.  All payments hereunder shall be made in dollars.

 

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

 

(c)                                  Sharing of Payments by Lenders.  If any
Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on its Loan resulting
in such Lender receiving payment of a greater proportion of the aggregate amount
of its Loan and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate

 

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amount of principal of and accrued interest on their respective Loans; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this Section 4.01(c) shall not be construed
to apply to any payment made by the Borrower pursuant to and in accordance with
the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in its Loan to
any assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this Section 4.01(c) shall
apply).  The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

 

Section 4.02                                Presumption of Payment by the
Borrower.  Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due.  In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

 

Section 4.03                                Certain Deductions by the
Administrative Agent.  If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.05(a), Section 4.01(c) or Section 4.02 then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

 

ARTICLE V
Increased Costs; Break Funding Payments; Taxes

 

Section 5.01                                Increased Costs.

 

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

 

(i)                                     impose, modify or deem applicable any
reserve (including marginal, special, emergency or supplemental reserves),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender for Eurocurrency liabilities
under Regulation D of the Board (as the same may be amended, supplemented or
replaced from time to time) or otherwise; or

 

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(ii)                                  impose on any Lender or the London
interbank market any other condition affecting this Agreement or any Eurodollar
Tranche consisting of any portion of the Loan of such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Tranche (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

 

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

 

(c)                                  Certificates.  A certificate of a Lender
setting forth in reasonable detail the basis of its request and the amount or
amounts necessary to compensate such Lender or its holding company, as the case
may be, as specified in Section 5.01 (a) or (b) shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

 

(d)                                 Effect of Failure or Delay in Requesting
Compensation.  Failure or delay on the part of any Lender to demand compensation
pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s
right to demand such compensation; provided that the Borrower shall not be
required to compensate a Lender pursuant to this Section 5.01 for any increased
costs or reductions incurred more than 180 days prior to the date that such
Lender notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof. 
No Lender may make any demand pursuant to this Section 5.01 more than 180 days
after the Maturity Date.

 

Section 5.02                                Break Funding Payments.  In the
event of (a) the payment of any principal of any Eurodollar Tranche other than
on the last day of an Interest Period applicable thereto (including as a result
of an Event of Default), (b) the conversion of any Eurodollar Tranche into an
ABR Tranche other than on the last day of the Interest Period applicable thereto
or (c) the failure to borrow, convert, continue or prepay any Eurodollar Tranche
on the date specified in any notice delivered pursuant hereto, then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event.  In the case of a Eurodollar Tranche, such loss,
cost or expense to any Lender shall be deemed to include an amount determined by
such Lender to be the excess, if any, of (i) the amount of interest which would

 

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have accrued on the principal amount of its Loan had such event not occurred, at
the LIBO Rate that would have been applicable to such Loan, for the period from
the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.

 

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 and reasonably detailed
calculations therefore, upon written request of the Borrower, shall be delivered
to the Borrower and shall be conclusive absent manifest error.  The Borrower
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.

 

Section 5.03                                Taxes.

 

(a)                                  Payments Free of Taxes.  Any and all
payments by or on account of any obligation of the Borrower or any Guarantor
under any Loan Document shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any
Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 5.03(a)), the Administrative Agent or
Lender (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or such Guarantor
shall make such deductions and (iii) the Borrower or such Guarantor shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.

 

(b)                                 Payment of Other Taxes by the Borrower.  The
Borrower shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.

 

(c)                                  Indemnification by the Borrower.  The
Borrower shall indemnify the Administrative Agent and each Lender, within 10
days after written demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes paid by the Administrative Agent or such Lender on or with
respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 5.03) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate of
the Administrative Agent or a Lender as to the basis of such Indemnified Taxes
and Other Taxes and the amount of such payment or liability under this
Section 5.03 shall be delivered to the Borrower and shall be conclusive absent
manifest error.

 

(d)                                 Evidence of Payments.  As soon as
practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower or a Guarantor to a Governmental Authority, the Borrower shall deliver
to the Administrative Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return

 

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reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

 

(e)                                  Foreign Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which the Borrower is located, or any treaty to which
such jurisdiction is a party, with respect to payments under this Agreement or
any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.

 

Section 5.04                                Designation of Different Lending
Office; Replacement of Lenders.

 

(a)                                  Designation of Different Lending Office. If
any Lender requests compensation under Section 5.01, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loan hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender.  The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

(b)                                 Replacement of Lenders.  If (i) any Lender
requests compensation under Section 5.01, (ii) the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, (iii) any Lender defaults in its
obligation to fund Loans hereunder, (iv) any Lender has voted against an
amendment, modification or waiver of any provision of this Agreement proposed by
the Borrower, which proposed amendment, modification or waiver (x) was approved
by Lenders representing no less than 90% of the outstanding principal amount of
the Loans but (y) required the approval of all of the Lenders and did not get
such approval, or (v) any Lender has voted against an amendment, modification or
waiver of any provision of this Agreement proposed by the Borrower, which
proposed amendment, modification or waiver (x) was approved by Lenders
representing no less than 50% of the outstanding principal amount of the Loans
but (y) required the approval of the Majority Lenders and did not get such
approval, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 12.04(b)), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that
(1) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (2) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts) and (3) in the case of any such

 

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assignment resulting from a claim for compensation under Section 5.01 or
payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments.  A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.

 

ARTICLE VI
Conditions Precedent

 

Section 6.01                                Effective Date.  The obligations of
each Lender to make its Loan hereunder shall not become effective until the date
on which each of the following conditions is satisfied (or waived in accordance
with Section 12.02):

 

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

 

(b)                                 The Administrative Agent shall have received
a certificate of the Borrower and of each Guarantor setting forth
(i) resolutions of the Managers, board of directors or other managing body with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the individuals (y) who are
authorized to sign the Loan Documents to which the Borrower or such Guarantor is
a party and (z) who will, until replaced by another individual duly authorized
for that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with this
Agreement and the other Loan Documents to which it is a party, (iii) specimen
signatures of such authorized individuals, and (iv) the articles or certificate
of incorporation or formation and bylaws, operating agreement or partnership
agreement, as applicable, of the Borrower and each Guarantor, in each case,
certified as being true and complete.  The Administrative Agent and the Lenders
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from the Borrower to the contrary.

 

(c)                                  The Administrative Agent shall have
received certificates of the appropriate State agencies with respect to the
existence, qualification and good standing of the Borrower and each Guarantor.

 

(d)                                 The Administrative Agent shall have received
a closing certificate which shall be in form and substance reasonably
satisfactory to the Administrative Agent, duly and properly executed by a
Responsible Officer and dated as of the Effective Date.

 

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

 

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(f)                                    The Borrower shall have received a copy
of an amendment or waiver from the requisite lenders under the Senior Revolving
Credit Agreement authorizing this Agreement and the transactions contemplated
hereby.

 

(g)                                 The Administrative Agent shall have received
from each party thereto duly executed counterparts (in such number as may be
requested by the Administrative Agent) of the Security Instruments, including
the Guaranty Agreement and the other Security Instruments described on
Exhibit C.  In connection with the execution and delivery of the Security
Instruments, the Administrative Agent shall be reasonably satisfied that:

 

(i)                                     the Security Instruments create second
priority, perfected Liens (subject only to Liens existing under the Senior
Revolving Credit Documents and Excepted Liens identified in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisos at the end of
such definition) on so much of the total value of the Oil and Gas Properties
(x) evaluated in the most recently delivered Reserve Report and (y) included in
the Acquisition Properties as is necessary to satisfy Section 8.14(a).

 

(ii)                                  the administrative agent under the Senior
Revolving Credit Agreement has received certificates, together with undated,
blank stock powers for each such certificate, representing all of the issued and
outstanding Equity Interests of each of the Guarantors.

 

(iii)                               it has a Lien on all Property constituting
security for the Senior Revolving Credit Agreement.

 

(h)                                 The Administrative Agent shall have received
an opinion of (i) Akin Gump Strauss Hauer Feld LLP, special counsel to the
Borrower, in form and substance satisfactory to the Administrative Agent, as to
such matters incident to the Transactions as the Administrative Agent may
reasonably request, and (ii) local counsel in each of the following states: West
Virginia, Pennsylvania, Texas, Oklahoma and California and any other
jurisdictions requested by the Administrative Agent, in form and substance
satisfactory to the Administrative Agent.

 

(i)                                     The Administrative Agent shall have
received a certificate of insurance coverage of the Borrower evidencing that the
Borrower is carrying insurance in accordance with Section 7.12.

 

(j)                                     The Administrative Agent shall have
received a certificate of a Responsible Officer certifying that the Borrower has
received all consents and approvals required by Section 7.03.

 

(k)                                  The Administrative Agent shall have
received the financial statements referred to in Section 7.04(a).

 

(l)                                     The Administrative Agent shall have
received appropriate UCC search certificates reflecting no prior Liens, other
than Liens in favor of the administrative agent under the Senior Revolving
Credit Agreement, encumbering the Properties of the Borrower, and its

 

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Subsidiaries for each of the following jurisdictions:  Pennsylvania, West
Virginia, California, Oklahoma, Texas, Louisiana, Illinois, Delaware and any
other jurisdiction requested by the Administrative Agent; other than those being
assigned or released on or prior to the Effective Date or Liens permitted by
Section 9.03.

 

(m)                               The Administrative Agent or its counsel shall
have received (i) a certificate of a Responsible Officer of the Borrower
certifying:  (A) that the Borrower is concurrently consummating the Acquisition
in accordance with the terms of the Acquisition Documents (with all of the
material conditions precedent thereto having been satisfied in all material
respects by the parties thereto) and acquiring substantially all of the
Acquisition Properties contemplated by the Acquisition Documents; (B) as to the
final purchase price for the Acquisition Properties after giving effect to all
adjustments as of the closing date contemplated by the Acquisition Documents and
specifying, by category, the amount of such adjustment; (C) that attached
thereto is a true and complete list of the Acquisition Properties which have
been excluded from the Acquisition pursuant to the terms of the Acquisition
Documents, specifying with respect thereto the basis of exclusion as (1) title
defect, (2) preferential purchase right, (3) environmental or (4) casualty loss;
(D) that attached thereto is a true and complete list of all Acquisition
Properties for which any seller has elected to cure a title defect, (E) that
attached thereto is a true and complete list of all Acquisition Properties for
which any seller has elected to remediate an adverse environmental condition,
there was no known breach of the seller’s title or environmental representations
in the Acquisition Documents that would have a material adverse effect on the
Acquisition Properties, taken as a whole, and (F) that attached thereto is a
true and complete list of all Acquisition Properties which are currently pending
final decision by a third party regarding purchase of such property in
accordance with any preferential right; (ii) a true and complete executed copy
of each of the Acquisition Documents; (iii) original counterparts or copies,
certified as true and complete, of the assignments, deeds and leases for all of
the Acquisition Properties; and (iv) such other related documents and
information as the Administrative Agent shall have reasonably requested.

 

(n)                                 The Administrative Agent shall have received
evidence satisfactory to it that all Liens associated with the Acquisition
Properties have been released or terminated contemporaneously with the
Acquisition and that arrangements satisfactory to the Administrative Agent have
been made for recording and filing of such releases.

 

(o)                                 The Administrative Agent shall be reasonably
satisfied with the environmental condition of the Acquisition Properties of the
Borrower and its Subsidiaries.

 

(p)                                 The Administrative Agent shall have received
title information as the Administrative Agent may reasonably require
satisfactory to the Administrative Agent such that the requirements of
Section 8.13(a) are satisfied after giving effect to the inclusion of the
Acquisition Properties.

 

(q)                                 The Administrative Agent shall have received
duly executed Notes payable to the order of each Lender who has requested a Note
in a principal amount equal to its Commitment dated as of the date hereof.

 

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(r)                                    The Administrative Agent shall have
received such other documents as the Administrative Agent or special counsel to
the Administrative Agent may reasonably request.

 

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of each Lender to make its Loan
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 12.02) at or prior to 1:00 p.m.,
Houston time, on February 15, 2008 (and, in the event such conditions are not so
satisfied or waived, the Commitments shall terminate at such time).

 

Section 6.02                                Additional Conditions.  The
obligation of each Lender to fund its Loan is subject to the satisfaction of the
following additional conditions:

 

(a)                                  At the time of and immediately after giving
effect to the funding of the Loans, no Default shall have occurred and be
continuing.

 

(b)                                 At the time of and immediately after giving
effect to such Loans, no Material Adverse Effect shall have occurred.

 

(c)                                  The representations and warranties of the
Borrower and the Guarantors set forth in this Agreement and in the other Loan
Documents shall be true and correct on and as of the Effective Date, except to
the extent any such representations and warranties are expressly limited to an
earlier date, in which case, on and as of the Effective Date, such
representations and warranties shall continue to be true and correct as of such
specified earlier date.

 

(d)                                 The making of such Loan would not conflict
with, or cause any Lender to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the Senior Revolving Credit Agreement or the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

 

(e)                                  The receipt by the Administrative Agent of
a Borrowing Request in accordance with Section 2.03.

 

ARTICLE VII
Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01                                Organization; Powers.  Each of the
Borrower and its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority, and has all material governmental licenses,
authorizations, consents and approvals necessary, to own its assets and to carry
on its business as now conducted, and is qualified to do business in, and is in
good standing in, or has applied to qualify to do business in, every
jurisdiction where such qualification is required, except where

 

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failure to have such power, authority, licenses, authorizations, consents,
approvals and qualifications could not reasonably be expected to have a Material
Adverse Effect.

 

Section 7.02           Authority; Enforceability.  The Transactions are within
the Borrower’s and each Guarantor’s corporate powers and have been duly
authorized by all necessary corporate and, if required, member action
(including, without limitation, any action required to be taken by any class of
directors of the Borrower or any other Person, whether interested or
disinterested, in order to ensure the due authorization of the Transactions). 
When executed and delivered, each Loan Document and Acquisition Document to
which the Borrower and any Guarantor is a party will have been duly executed and
delivered by the Borrower and such Guarantor and will constitute a legal, valid
and binding obligation of the Borrower and such Guarantor, as applicable,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.

 

Section 7.03           Approvals; No Conflicts.  The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person (including the
members or any class of directors of the Borrower or any other Person, whether
interested or disinterested), nor is any such consent, approval, registration,
filing or other action necessary for the validity or enforceability of any Loan
Document or the consummation of the transactions contemplated thereby, except
(i) such as have been obtained or made and are in full force and effect, (ii) as
may not be filed or obtained until after the consummation of the Acquisition and
(iii) for the filing and recording of Security Instruments to perfect the Liens
created hereby and by the Security Instruments, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or their Properties, or give rise to a right thereunder to require
any payment to be made by the Borrower or such Subsidiary and (d) will not
result in the creation or imposition of any Lien on any Property of the Borrower
or any of its Subsidiaries (other than the Liens created by the Loan Documents).

 

Section 7.04           Financial Position; No Material Adverse Change.

 

(a)           The Borrower has heretofore furnished to the Lenders (i) the
audited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 2006, and related audited consolidated
statements of income, cash flows and changes in members’ equity for the fiscal
year ending December 31, 2006 and (ii) the unaudited consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of and for the fiscal
quarter and the portion of the fiscal year ended September 30, 2007 certified by
its chief financial officer.  Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its consolidated subsidiaries as of such date and for
such period in accordance with GAAP.

 

(b)           Since December 31, 2006, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and

 

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(ii) the business of the Borrower and its Subsidiaries has been conducted only
in the ordinary course consistent with past business practices.

 

(c)           Neither the Borrower nor any of its Subsidiaries has on the date
hereof any material Debt (including Disqualified Capital Stock), or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except for the
(i) Indebtedness or (ii) as referred to or reflected or provided for in the
Financial Statements.

 

Section 7.05           Litigation.  Except as set forth on Schedule 7.05, there
are no actions, suits, investigations or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries or
involving the Acquisition (a) as to which there is a reasonable possibility of
an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (b) that involve any Loan Document or (c) that could impair the
consummation of the Acquisition on the time and in the manner contemplated by
the Acquisition Documents.

 

Section 7.06           Environmental Matters.  Except for such matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Borrower:

 

(a)           the Borrower and its Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws;

 

(b)           the Borrower and its Subsidiaries have obtained all Environmental
Permits required for their respective operations and each of their Properties,
with all such Environmental Permits being currently in full force and effect,
and none of Borrower or its Subsidiaries has received any written notice or
otherwise has knowledge that any such existing Environmental Permit will be
revoked or that any application for any new Environmental Permit or renewal of
any existing Environmental Permit will be protested or denied;

 

(c)           there are no claims, demands, suits, orders, inquiries, or
proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under, any applicable Environmental Laws that is
pending or threatened against the Borrower or its Subsidiaries or any of their
respective Properties or as a result of any operations at the Properties;

 

(d)           none of the Properties contain or have contained any: 
(i) underground storage tanks; (ii) asbestos containing materials in a friable
condition or otherwise requiring abatement under Environmental Laws; or
(iii) landfills or dumps; (iv) hazardous waste management units as defined
pursuant to RCRA or any comparable state law; or (v) sites on or nominated for
the National Priority List promulgated pursuant to CERCLA or any similar state
remedial priority list promulgated or published pursuant to any comparable state
law;

 

(e)           there is no Release or threatened Release, of Hazardous Materials
at, on, under or from any of Borrower’s or its Subsidiaries’ Properties, there
are no investigations,

 

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remediations, abatements, removals, or monitorings of Hazardous Materials
required under applicable Environmental Laws at such Properties and none of such
Properties are adversely affected by any Release or threatened Release of a
Hazardous Material originating or emanating from any other real property,

 

(f)            neither the Borrower nor its Subsidiaries has received any
written notice asserting an alleged liability or obligation under any applicable
Environmental Laws with respect to the investigation, remediation, abatement,
removal, or monitoring of any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite the Borrower’s or its
Subsidiaries’ Properties and there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written notice.

 

(g)           there has been no exposure of any Person or property to any
Hazardous Materials as a result of or in connection with the operations and
businesses of any of the Borrower’s or its Subsidiaries’ Properties that would
reasonably be expected to form the basis for a material claim for damages or
compensation and there are no conditions or circumstances that would reasonably
be expected to result in the receipt of notice regarding such exposure; and

 

(h)           the Borrower and its Subsidiaries have made available to Lenders
copies of all material environmental site assessment reports and other material
documents relating to any alleged non-compliance with or liability under
Environmental Laws that are in any of the Borrower’s or its Subsidiaries’
possession or control and relating to their respective Properties or operations
thereon.

 

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

 

(a)           Each of the Borrower and its Subsidiaries is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other
authorizations granted by Governmental Authorities necessary for the ownership
of its Property and the present conduct of its business, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

(b)           Neither the Borrower nor any of its Subsidiaries is in default nor
has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or any of its Subsidiaries to Redeem or
make any offer to Redeem all or any portion of any Debt outstanding under any
indenture, note, credit agreement or instrument pursuant to which any Material
Indebtedness is outstanding or by which the Borrower or any of its Subsidiaries
or any of their Properties is bound.

 

(c)           No Default has occurred and is continuing.

 

Section 7.08           Investment Company Act.  Neither the Borrower nor any of
its Subsidiaries is an “investment company” or a company “controlled” by an
“investment

 

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company,” within the meaning of, or subject to regulation under, the Investment
Company Act of 1940, as amended.

 

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

 

Section 7.10           ERISA.  Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:

 

(a)           the Borrower, its Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan, if any.

 

(b)           each Plan, if any, is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.

 

(c)           no act, omission or transaction has occurred that could result in
imposition on the Borrower, any of its Subsidiaries or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.

 

(d)           no liability to the PBGC (other than for the payment of current
premiums which are not past due) by the Borrower, any of its Subsidiaries or any
ERISA Affiliate has been or is expected by the Borrower, any of its Subsidiaries
or any ERISA Affiliate to be incurred with respect to any Plan.  No ERISA Event
with respect to any Plan has occurred.

 

(e)           no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan.

 

(f)            neither the Borrower, its Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.

 

(g)           neither the Borrower, its Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.

 

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Section 7.11           Disclosure; No Material Misstatements.  None of the
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrower or any of its Subsidiaries to the Administrative
Agent, any other Agent or any Lender or any of their Affiliates in connection
with the negotiation of this Agreement or any other Loan Document or delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.  There is no fact peculiar to the Borrower or any
of its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect or in the future is reasonably likely to have a Material Adverse Effect
and which has not been set forth in this Agreement or the Loan Documents or the
other documents, certificates and statements furnished to the Administrative
Agent, any other Agent or the Lenders by or on behalf of the Borrower or any of
its Subsidiaries prior to, or on, the date hereof in connection with the
transactions contemplated hereby.  There are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail to
take into account material information regarding the matters reported therein,
it being understood that projections concerning volumes attributable to the Oil
and Gas Properties and production and cost estimates contained in each Reserve
Report are necessarily based upon professional opinions, estimates and
projections and that the Borrower and the Subsidiaries do not warrant that such
opinions, estimates and projections will ultimately prove to have been accurate.

 

Section 7.12           Insurance.  The Borrower has, and has caused all of its
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Subsidiaries. 
The Administrative Agent and the Lenders have been named as additional insureds
in respect of such liability insurance policies and the Administrative Agent has
been named as loss payee with respect to property loss insurance.

 

Section 7.13           Restriction on Liens.  Neither the Borrower nor any of
its Subsidiaries is a party to any material agreement or arrangement (other than
(i) the Senior Revolving Credit Documents and (ii) Capital Leases creating Liens
to the extent permitted by Section 9.03(d), but then only on the Property
subject to such Capital Leases), or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its ability to grant
Liens to the Administrative Agent and the Lenders on or in respect of their
Properties to secure the Indebtedness and the Loan Documents.

 

Section 7.14           Subsidiaries.  Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders) and which shall be a supplement to Schedule 7.14, the
Borrower has no Subsidiaries.

 

Section 7.15           Location of Business and Offices.  The Borrower’s
jurisdiction of organization is Delaware; the name of the Borrower as listed in
the public records of its

 

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jurisdiction of organization is Linn Energy, LLC, and the organizational
identification number of the Borrower in its jurisdiction of organization is
3951040 (or, in each case, as set forth in a notice delivered to the
Administrative Agent pursuant to Section 8.01(l) in accordance with
Section 12.01).  The Borrower’s principal place of business and chief executive
offices are located at the address specified in Section 12.01 (or as set forth
in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c)).  Each
Subsidiary’s jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(l)).

 

Section 7.16          Properties; Titles, Etc.

 

(a)           Each of the Borrower and its Subsidiaries has good and defensible
title to its Oil and Gas Properties evaluated in the most recently delivered
Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 9.03.  After giving
full effect to the Excepted Liens, the Borrower or any of its Subsidiaries
specified as the owner owns the net interests in production attributable to the
Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate the Borrower or any of its Subsidiaries to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth in the
most recently delivered Reserve Report that is not offset by a corresponding
proportionate increase in the Borrower’s or any of its Subsidiaries’ net revenue
interest in such Property.

 

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

 

(c)           The rights and Properties presently owned, leased or licensed by
the Borrower and its Subsidiaries including, without limitation, all easements
and rights of way, include all rights and Properties necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material respects
as conducted on the date hereof.

 

(d)           All of the material Properties of the Borrower and each of its
Subsidiaries that are reasonably necessary for the operation of their businesses
are in good working condition and are maintained in accordance with prudent
business standards.

 

(e)           The Borrower and each of its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.  The Borrower and its
Subsidiaries either own or have valid licenses or other rights to use all

 

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databases, geological data, geophysical data, engineering data, seismic data,
maps, interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with
such exceptions as could not reasonably be expected to have a Material Adverse
Effect.

 

(f)            For purposes of determining any Default or Event of Default, each
of the representations and warranties in this Section 7.16 shall be deemed to
have been made without qualification by this Section 7.16(f).  Subject to the
preceding sentence, each of the representations and warranties in this
Section 7.16 as to the Acquisition Properties is to the knowledge of the
Borrower and its Subsidiaries.

 

Section 7.17           Maintenance of Properties.  Except for such acts or
failures to act as could not be reasonably expected to have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all Government Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties.  Specifically in connection with the foregoing, except
as could not reasonably be expected to have a Material Adverse Effect, (a) no
Oil and Gas Property is subject to having allowable production reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time) and
(b) none of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) is deviated from the vertical more than the
maximum permitted by Government Requirements, and such wells are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of wells located on Properties unitized
therewith, such unitized Properties).  All pipelines, wells, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrower or any of its Subsidiaries that are
necessary to conduct normal operations are being maintained in a state adequate
to conduct normal operations, and with respect to such of the foregoing which
are operated by the Borrower or any of its Subsidiaries, in a manner consistent
with the Borrower’s or its Subsidiaries’ past practices (other than those the
failure of which to maintain in accordance with this Section 7.17 could not
reasonably be expect to have a Material Adverse Effect).

 

Section 7.18           Gas Imbalances, Prepayments.  As of the date hereof,
except as set forth on Schedule 7.18 or on the most recent certificate delivered
pursuant to Section 8.12(b), on a net basis there are no gas imbalances, take or
pay or other prepayments which would require the Borrower or any of its
Subsidiaries to deliver, in the aggregate, two percent (2%) or more of the
monthly production from Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor.

 

Section 7.19           Marketing of Production.  Except for contracts listed and
in effect on the date hereof on Schedule 7.19, and thereafter either disclosed
in writing to the Administrative Agent or included in the most recently
delivered Reserve Report (with respect to all of which contracts the Borrower
represents that it or its Subsidiaries are receiving a price for all

 

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production sold thereunder which is computed substantially in accordance with
the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property’s delivery capacity), no material
agreements exist which are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower’s or its
Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other
rights to purchase, production, whether or not the same are currently being
exercised) that (a) pertain to the sale of production at a fixed price and
(b) have a maturity or expiry date of more than six (6) months from the date
hereof.

 

Section 7.20           Swap Agreements.  Schedule 7.20, as of December 31, 2007,
and after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(d) (as of the relevant period end), sets forth, a true
and complete list of all Swap Agreements of the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net
marked-to-market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.

 

Section 7.21           Use of Loans.  The proceeds of the Loans shall be used to
finance the Acquisition and to pay related fees and expenses.  The Borrower and
its Subsidiaries are not engaged principally, or as one of its or their
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board).  No part of the
proceeds of any Loan will be used for any purpose which violates the provisions
of Regulations T, U or X of the Board.

 

Section 7.22           Solvency.  After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement), at a fair valuation, of the Borrower and the
Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and
the Guarantors on a consolidated basis, as the Debt becomes absolute and
matures, (b) each of the Borrower and the Guarantors will not have incurred or
intended to incur, and will not believe that it will incur, Debt beyond its
ability to pay such Debt (after taking into account the timing and amounts of
cash to be received by each of the Borrower and the Guarantors and the amounts
to be payable on or in respect of its liabilities, and giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement) as such Debt becomes absolute and matures and (c) each
of the Borrower and the Guarantors will not have (and will have no reason to
believe that it will have thereafter) unreasonably small capital for the conduct
of its business.

 

Section 7.23           Acquisition.  The copies of the Acquisition Documents
previously delivered by the Borrower to the Administrative Agent are true,
accurate and complete and have not been amended or modified in any manner, other
than pursuant to amendments or modifications previously delivered to the
Administrative Agent.  No party to any Acquisition Document is in default in
respect of any material term or obligation thereunder.

 

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ARTICLE VIII
Affirmative Covenants

 

Until the principal of and interest on each Loan and all fees payable hereunder
and all other amounts payable under the Loan Documents shall have been paid in
full, the Borrower covenants and agrees with the Lenders that:

 

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

 

(a)           Annual Financial Statements.  As soon as available, but in any
event not later than 90 days after the end of each fiscal year, Borrower’s
audited consolidated balance sheet and related statements of operations,
members’ equity and cash flows as of the end of and for such year, setting forth
in each case in comparative form the figures for the previous fiscal year, all
reported on by KPMG, LLP or independent public accountants of recognized
national standing and reasonably acceptable to the Administrative Agent (without
a “going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied.

 

(b)           Quarterly Financial Statements.  As soon as available, but in any
event not later than 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance sheet and
related statements of operations, members’ equity and cash flows as of the end
of and for such quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by a Financial Officer as presenting fairly
in all material respects the financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes.

 

(c)           Certificate of Financial Officer — Compliance.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit B hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 9.01 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the Effective Date and,
if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.

 

(d)           Swap Agreements.  Concurrently with any delivery of financial
statements under Section 8.01(a) and Section 8.01(b), a true and complete list
of all Swap Agreements, as of the last Business Day of such fiscal quarter or
fiscal year, of the Borrower and each of its Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net mark-to-market value therefor, any new credit
support

 

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agreements relating thereto not listed on Schedule 7.20, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement.  To the extent the Borrower or a Subsidiary changes the material
terms of a Swap Agreement listed in the foregoing schedule, terminates any such
Swap Agreement or enters into a new Swap Agreement which has the effect of
creating an off-setting position, the Borrower will give the Lenders prompt
written notice of such event if, with respect to any commodity-price Swap
Agreement, the product of (i) the notional volumes of such commodity-price Swap
Agreement times (ii) the excess of (A) the strike or fixed rate payor price over
(B) the “price deck” used in calculating the Total Reserve Value for the
relevant commodities, exceeds in the aggregate during such period $50,000,000.

 

(e)           Certificate of Insurer – Insurance Coverage.  Concurrently with
any delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

 

(f)            Other Accounting Reports.  Promptly upon receipt thereof, a copy
of each other report or letter submitted to the Borrower or any of its
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of the Borrower or any such
Subsidiary, and a copy of any response by the Borrower or any such Subsidiary to
such letter or report.

 

(g)           SEC and Other Filings; Reports to shareholders.  Promptly after
the same become publicly available, copies of all periodic and other reports,
proxy statements and other materials filed by the Borrower or any Subsidiary
with the SEC, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; provided, however,
that the Borrower shall be deemed to have furnished the information required by
this Section 8.01(g) if it shall have timely made the same available on “EDGAR”
and/or on its home page on the worldwide web (at the date of this Agreement
located at http://www.linnenergy.com); provided further, however, that if any
Lender is unable to access EDGAR or the Borrower’s home page on the worldwide
web, the Borrower agrees to provide such Lender with paper copies of the
information required to be furnished pursuant to this Section 8.01(g) promptly
following notice from the Administrative Agent that such Lender has requested
same.  Information required to be delivered pursuant to this
Section 8.01(g) shall be deemed to have been delivered on the date on which the
Borrower provides notice to the Administrative Agent that such information has
been posted on “EDGAR” or the Borrower’s website or another website identified
in such notice and accessible by the Administrative Agent without charge (and
the Borrower hereby agrees to provide such notice).

 

(h)           Notices Under Material Instruments.  Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation, indenture,
loan or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.

 

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(i)            Lists of Purchasers.  Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of
Persons purchasing Hydrocarbons from the Borrower and its Subsidiaries
reasonably expected to account for at least 80% of the revenues resulting from
the sale of Hydrocarbons produced from the Mortgaged Properties in the quarter
following the “as of” date of such Reserve Report.

 

(j)            Notice of Sales of Oil and Gas Properties.  In the event the
Borrower or any of its Subsidiaries intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties included in the most recently
delivered Reserve Report (or any Equity Interests in any Subsidiary owning
interests in such Oil and Gas Properties) during any period between two
successive dates on which the Total Reserve Value is determined in accordance
with Section 2.07 having a fair market value, individually or in the aggregate,
in excess of $10,000,000, prior written notice of such disposition, the price
thereof, the anticipated date of closing, and any other details thereof
reasonably requested by the Administrative Agent or any Lender.

 

(k)           Notice of Casualty Events.  Prompt written notice, and in any
event within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.

 

(l)            Information Regarding Borrower and Guarantors.  Prompt written
notice of (and in any event within ten (10) days after) any change (i) in the
Borrower or any Guarantor’s corporate name or in any trade name used to identify
such Person in the conduct of its business or in the ownership of its
Properties, (ii) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor’s identity or corporate structure, (iv) in the Borrower or any
Guarantor’s jurisdiction of organization or such Person’s organizational
identification number in such jurisdiction of organization, and (v) in the
Borrower or any Guarantor’s federal taxpayer identification number, if any.

 

(m)          Production Report and Lease Operating Statements.  Within 45 days
after the end of each fiscal quarter, a report setting forth, for each calendar
month during the then-current fiscal year to date, the volume of production and
sales attributable to production (and the prices at which such sales were made
and the revenues derived from such sales) for each such calendar month from the
Oil and Gas Properties, and setting forth the related ad valorem, severance and
production taxes and lease operating expenses attributable thereto and incurred
for each such calendar month.

 

(n)           Notices of Certain Changes.  Promptly, but in any event within
five (5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
by-laws, any preferred stock designation or any other organic document of the
Borrower or any of its Subsidiaries.

 

(o)           Annual Budget.  Promptly, but in any event within 90 days after
the end of each fiscal year, a budget for the then current fiscal year,
including a pro forma balance sheet and income and cash flow projections.

 

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(p)           Acquisition Notices.  In the event that after the Effective Date: 
(i) the Borrower is required or elects to purchase any of the Acquisition
Properties which had been excluded from, or return any of the Acquisition
Properties which had been included in, the Acquisition Properties in accordance
with the terms of the Acquisition Documents, (ii) the Borrower is required to
honor any preferential purchase right in respect of any Acquisition Property
which has not been waived, (iii) any matter being disputed in accordance with
the terms of the Acquisition Documents is resolved and (iv) the Borrower
receives the draft and final statements setting forth the final calculation of
the Adjusted Purchase Price (as defined therein) and showing the calculation of
each adjustment, delivered to the Borrower pursuant to Section 14.1 of the
Acquisition Documents, then, in each such case, the Borrower shall promptly give
the Administrative Agent notice in reasonable detail of such circumstances and
such copies of such documents, as applicable.

 

(q)           Certificate of Responsible Officer—Total Debt.  At the times
specified in Section 2.07 and promptly following any change to Total Reserve
Value pursuant to Section 8.13(c) or Section 9.12(d), the Borrower will deliver
a certificate of a Responsible Officer of the Borrower setting forth the Total
Reserve Value both immediately prior to and after giving effect to such event.

 

(r)            Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries (including,
without limitation, any Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.

 

Section 8.02           Notices of Material Events.  The Borrower will furnish to
the Administrative Agent and each Lender, promptly after the Borrower obtains
knowledge thereof, written notice of the following:

 

(a)           the occurrence of any Default;

 

(b)           the filing or commencement of, or the threat in writing of, any
action, suit, investigation, arbitration or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Subsidiary thereof, or any material adverse development in any action, suit,
proceeding, investigation or arbitration (whether or not previously disclosed to
the Lenders), that, in either case, if adversely determined, could reasonably be
expected to result in liability in excess of $10,000,000;

 

(c)           the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$3,000,000; and

 

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

 

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Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

 

Section 8.03           Existence; Conduct of Business.  The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business and maintain, if necessary, its qualification to
do business in each other jurisdiction in which any of its Oil and Gas
Properties is located or the ownership of its Properties requires such
qualification, except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect; provided that the foregoing shall
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 9.12.

 

Section 8.04           Payment of Obligations.  The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities of the Borrower and all of its Subsidiaries before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any material Property of the Borrower or any
of its Subsidiaries.

 

Section 8.05           Performance of Obligations under Loan Documents.  The
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and the Borrower will cause each of its Subsidiaries to
do and perform every act and discharge all of the obligations to be performed
and discharged by them under the Loan Documents, including, without limitation,
this Agreement, at the time or times and in the manner specified.

 

Section 8.06           Operation and Maintenance of Properties.  The Borrower
will, and will cause each of its Subsidiaries to:

 

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

 

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

 

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

 

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

 

(e)           to the extent the Borrower or one of its Subsidiaries is not the
operator of any Property, the Borrower shall use reasonable efforts to cause the
operator to comply with this Section 8.06.

 

Section 8.07           Insurance.  The Borrower will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will give at
least 30 days prior notice of any cancellation to the Administrative Agent.

 

Section 8.08           Books and Records; Inspection Rights.  The Borrower will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities.  The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its Properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.

 

Section 8.09           Compliance with Laws.  The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to them or their Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

Section 8.10           Environmental Matters.

 

(a)           The Borrower shall at its sole expense (including such
contribution from third parties as may be available): (i) comply, and shall
cause its Properties and operations and each Subsidiary and each Subsidiary’s
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not dispose of or otherwise release, and shall cause each Subsidiary not to
dispose of or otherwise release, any oil, oil and gas waste, hazardous
substance, or solid waste

 

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on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties
or any other Property to the extent caused by the Borrower’s or any of its
Subsidiaries’ operations except in compliance with applicable Environmental
Laws, the disposal or release of which could reasonably be expected to have a
Material Adverse Effect; (iii) timely obtain or file, and shall cause each
Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions,
approvals, registrations or other authorizations, if any, required under
applicable Environmental Laws to be obtained or filed in connection with the
operation or use of the Borrower’s or its Subsidiaries’ Properties, which
failure to obtain or file could reasonably be expected to have a Material
Adverse Effect; (iv) promptly commence and diligently prosecute to completion,
and shall cause each Subsidiary to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring, containment,
cleanup, removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in the event any Remedial Work is required
or reasonably necessary under applicable Environmental Laws because of or in
connection with the actual or suspected past, present or future disposal or
other release of any oil, oil and gas waste, hazardous substance or solid waste
on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties,
which failure to commence and diligently prosecute to completion could
reasonably be expected to have a Material Adverse Effect; and (v) establish and
implement, and shall cause each Subsidiary to establish and implement, such
reasonable policies of environmental audit and compliance as may be reasonably
necessary to continuously determine and assure that the Borrower’s and its
Subsidiaries’ obligations under this Section 8.10(a) are timely and fully
satisfied, which failure to establish and implement could reasonably be expected
to have a Material Adverse Effect.

 

(b)           The Borrower will promptly, but in any event within five (5) days
thereof, notify the Administrative Agent and the Lenders in writing of any
threatened action, investigation or inquiry by any Governmental Authority or any
threatened demand or lawsuit by any landowner or other third party against the
Borrower or its Subsidiaries or their Properties of which the Borrower has
knowledge in connection with any Environmental Laws (excluding routine testing
and corrective action) if the Borrower reasonably anticipates that such action
will result in liability (whether individually or in the aggregate) in excess of
$10,000,000, not fully covered by insurance, subject to normal deductibles.

 

(c)           The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders and
no more than once per year in the absence of any Event of Default (or as
otherwise reasonably required to be obtained by the Administrative Agent or the
Lenders by any Governmental Authority), in connection with any future
acquisitions of material Oil and Gas Properties or other material Properties.

 

Section 8.11           Further Assurances.

 

(a)           The Borrower at its sole expense will, and will cause each of its
Subsidiaries to, promptly execute and deliver to the Administrative Agent all
such other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any of its
Subsidiaries, as the case may be, in the Loan Documents, including the Notes, or
to further evidence and more fully describe the collateral intended as security
for

 

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the Indebtedness, or to correct any omissions in this Agreement or the Security
Instruments, or to state more fully the obligations secured therein, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the sole discretion of the Administrative Agent, in connection
therewith.

 

(b)           The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property without the signature of
the Borrower or any other Guarantor where permitted by law.  A carbon,
photographic or other reproduction of the Security Instruments or any financing
statement covering the Mortgaged Property or any part thereof shall be
sufficient as a financing statement where permitted by law.  The Administrative
Agent will promptly send the Borrower any financing or continuation statements
it files without the signature of the Borrower or any other Guarantor and the
Administrative Agent will promptly send the Borrower the filing or recordation
information with respect thereto.

 

Section 8.12          Reserve Reports.

 

(a)           On or before March 1st and September 1st of each year, commencing
March 1st, 2008, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report as of the immediately preceding December 31st or
June 30th, as applicable.  The Reserve Report as of December 31st of each year
shall be prepared by one or more petroleum engineers reasonably acceptable to
the Administrative Agent and the June 30th Reserve Report of each year shall be
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
December 31st Reserve Report.

 

(b)           With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information provided by the Borrower in connection with the preparation of such
Reserve Report and any other information delivered in connection therewith by
the Borrower is true and correct, and any projections based upon such
information have been prepared in good faith based upon assumptions believed by
the Borrower to be reasonable, subject to uncertainties inherent in all
projections, (ii) the Borrower or its Subsidiaries owns good and defensible
title to the Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section 9.03,
(iii) except as set forth on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments in excess of the volume
specified in Section 7.18 with respect to their Oil and Gas Properties evaluated
in such Reserve Report that would require the Borrower or any of its
Subsidiaries to deliver Hydrocarbons either generally or produced from such Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor, (iv) none of their Oil and Gas Properties have been sold since
the date of the last Reserve Report except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties sold
and in such detail as reasonably required by the Administrative Agent,
(v) attached to the certificate is a list of all marketing agreements entered
into subsequent to the later

 

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of the date hereof or the most recently delivered Reserve Report that the
Borrower could reasonably be expected to have been obligated to list on Schedule
7.19 had such agreement been in effect on the date hereof and (vi) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
present value that such Mortgaged Properties represent.

 

Section 8.13           Title Information.

 

(a)           On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), to the extent
requested by the Administrative Agent, the Borrower will deliver title
information in form and substance reasonably acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, reasonably
satisfactory title information on such portion of the Oil and Gas Properties
evaluated by such Reserve Report, not to exceed 80% of the total value thereof,
as may be reasonably requested by the Administrative Agent.

 

(b)           If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within 60 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance reasonably acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, reasonably satisfactory title
information on such portion of the Oil and Gas Properties evaluated by such
Reserve Report, not to exceed 80% of the total value thereof, as may be
reasonably requested by the Administrative Agent.

 

(c)           If the Borrower is unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 60-day period or
the Borrower does not comply with the requirements to provide acceptable title
information as required by Section 8.13(a) and Section 8.13(b), such default
shall not be a Default, but instead the Administrative Agent and/or the Majority
Lenders shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by the
Administrative Agent or the Lenders.  To the extent that the Administrative
Agent or the Majority Lenders are not reasonably satisfied with title to any
Mortgaged Property after the 60-day period has elapsed, such unacceptable
Mortgaged Property shall not count towards the requirements of
Section 8.13(a) and Section 8.13(b), and the Administrative Agent may send a
notice to the Borrower and the Lenders that the then outstanding Total Reserve
Value shall be reduced by an amount as determined by the Majority Lenders to
cause the Borrower to be in compliance with the requirement to provide
acceptable title information pursuant to Section 8.13(a) and Section 8.13(b). 
This new Total Reserve Value shall become effective immediately after receipt of
such notice.

 

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Section 8.14           Additional Collateral; Additional Guarantors.

 

(a)           In connection with the delivery of each Reserve Report, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(b)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% of the total value of the Oil and
Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Subsidiaries to, grant, within sixty (60) days of the delivery of the
certificate contemplated by Section 8.12(b), to the Administrative Agent or its
designee as security for the Indebtedness a Lien interest (subject to a Lien
under the Senior Revolving Credit Documents and provided the Excepted Liens of
the type described in clauses (a) to (d) and (f) of the definition thereof may
exist, but subject to the provisos at the end of such definition) on additional
Oil and Gas Properties not already subject to a Lien of the Security Instruments
such that after giving effect thereto, the Mortgaged Properties will represent
at least 80% of such total value.  All such Liens will be created and perfected
by and in accordance with the provisions of deeds of trust, security agreements
and financing statements or other Security Instruments, all in form and
substance reasonably satisfactory to the Administrative Agent or its designee
and in sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.  In order to comply with the foregoing, if
any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary
is not a Guarantor, then it shall become a Guarantor and comply with
Section 8.14(b).

 

(b)           If (i) the Borrower determines that any Subsidiary is a Material
Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees any
Debt other than the Indebtedness, and in either case, such Subsidiary is not
already a Guarantor, then the Borrower shall promptly cause such Subsidiary to
guarantee the Indebtedness pursuant to the Guaranty Agreement.  In connection
with any such guaranty, the Borrower shall, or shall cause such Subsidiary to,
(A) execute and deliver a supplement to the Guaranty Agreement executed by such
Subsidiary, (B) pledge all of the Equity Interests of such Subsidiary
(including, without limitation, delivery of original stock certificates
evidencing the Equity Interests of such Subsidiary, together with an appropriate
undated stock powers for each certificate duly executed in blank by the
registered owner thereof to the Administrative Agent or if the Senior Revolving
Credit Agreement is then in effect, to the administrative agent thereunder) and
(C) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative Agent
or its designee.

 

(c)           Prior to or contemporaneously with the granting of any Lien on any
Property to or for the benefit of any agent or lender under the Senior Revolving
Credit Agreement pursuant to any Senior Revolving Credit Document or otherwise,
the Borrower or applicable Subsidiary shall grant to the Administrative Agent a
Lien interest (subject only to Liens under the Senior Revolving Credit Documents
and Excepted Liens of the type described in clauses (a) to (d) and (f) in the
definition thereof, but subject to the provisos at the end of such definition)
on such Property for the benefit of the Lenders to secure the Indebtedness.  All
such Liens in favor of the Administrative Agent will be created and perfected by
and in accordance with the provisions of deeds of trust, security agreements and
financing statements or other

 

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Security Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in a sufficient number of executed (and acknowledged
where necessary or appropriate) counterparts for recording purposes.  In order
to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas
Properties and such Subsidiary is not a Guarantor, then it shall become a
Guarantor and comply with Section 8.14(b).

 

Section 8.15           ERISA Compliance.  The Borrower will promptly furnish,
and will cause its Subsidiaries and any ERISA Affiliate to promptly furnish, to
the Administrative Agent (a) immediately upon becoming aware of the occurrence
of any ERISA Event, a written notice signed by the President or the principal
Financial Officer of the Borrower, its Subsidiaries or the ERISA Affiliate, as
the case may be, specifying the nature thereof, what action the Borrower, its
Subsidiaries or the ERISA Affiliate is taking or proposes to take with respect
thereto, and, if then known, any action taken or proposed by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto, and
(b) immediately upon receipt thereof, copies of any notice of the PBGC’s
intention to terminate or to have a trustee appointed to administer any Plan.

 

Section 8.16           Marketing Activities.  The Borrower will not, and will
not permit any of its Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than
(a) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to
be produced from their proved Oil and Gas Properties during the period of such
contract, (b) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries
has the right to market pursuant to joint operating agreements, unitization
agreements or other similar contracts that are usual and customary in the oil
and gas business and (c) other contracts for the purchase and/or sale of
Hydrocarbons of third parties (i) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (ii) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.

 

Section 8.17           Swap Agreements.  Within 30 days of the Effective Date,
the Borrower shall enter into Swap Agreements with respect to the Acquisition
Properties for volumes and prices satisfactory to the Administrative Agent and
the Borrower shall neither assign, terminate or unwind any such Swap Agreements
nor sell any Swap Agreements if the effect of such action (when taken together
with any other Swap Agreements executed contemporaneously with the taking of
such action) would have the effect of canceling its positions under such Swap
Agreements required hereby.

 

Section 8.18           Permanent Securities.  The Borrower shall use
commercially reasonable efforts to prepare a registration statement or a
Rule 144A offering memorandum relating to the Permanent Securities, and provide
to the Arrangers a complete initial draft of such document (including the
financial statements to be included therein) in each case, no later than 13
months after the Effective Date, provided that the Borrower shall not be
required to issue or sell Permanent Securities pursuant to such registration
statement or offering memorandum.  The Borrower shall engage and provide
evidence of such engagement to the Administrative Agent, and at all times retain
an Investment Bank (or promptly engage another Investment Bank if either

 

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party disengages from such relationship) for the purpose of assisting the
Borrower using commercially reasonable efforts to issue, sell or place the
Permanent Securities, the Net Cash Proceeds of which shall equal or exceed the
outstanding principal balance of the Loans, interest thereon and all fees and
expenses required to be paid under this Agreement and be available to repay this
Agreement on or before the Maturity Date.

 

ARTICLE IX
Negative Covenants

 

Until the principal of and interest on each Loan and all fees payable hereunder
and all other amounts payable under the Loan Documents have been paid in full,
the Borrower covenants and agrees with the Lenders that:

 

Section 9.01           Financial Covenants.

 

(a)           Ratio of EBITDA to Interest Expense.  The Borrower will not, as of
the last day of any fiscal quarter, commencing with the fiscal quarter ending
March 31, 2008, permit its ratio of EBITDA for the period of four fiscal
quarters then ended to Interest Expense for such period to be less than 2.5 to
1.0.  For purposes of this Section 9.01(a), the calculation of EBITDA and
Interest Expense shall be as follows: (x) for the fiscal quarter ending
March 31, 2008, EBITDA and Interest Expense for the two quarter period ending on
such date, each multiplied by two, (y) for the fiscal quarter ending June 30,
2008, EBITDA and Interest Expense for the three quarter period ending on such
date, each multiplied by 4/3 and (z) for each fiscal quarter ending on or after
September 30, 2008, EBITDA and Interest Expense for the period of four fiscal
quarters then ending.

 

(b)           Current Ratio.  The Borrower will not permit, as of the last day
of any fiscal quarter, its ratio of (i) consolidated current assets (including
the unused amount of the total Commitments, but excluding non-cash assets under
FAS 133) to (ii) consolidated current liabilities (excluding non-cash
obligations under FAS 133 and current maturities under this Agreement) to be
less than 1.0 to 1.0.

 

(c)           Total Reserve Value to Total Debt Ratio.  The Borrower will not as
of any date of determination permit its ratio of (i) Total Reserve Value as in
effect on such date of determination to (ii) Total Debt as of such date of
determination to be less than 1.5 to 1.0.

 

Section 9.02           Debt.  Neither the Borrower nor any of its Subsidiaries
will incur, create, assume or suffer to exist any Debt, except:

 

(a)           the Notes or other Indebtedness or any guaranty of or suretyship
arrangement for the Notes or other Indebtedness.

 

(b)           accounts payable and other accrued expenses, liabilities or other
obligations to pay (for the deferred purchase price of Property or services)
from time to time incurred in the ordinary course of business which are not
greater than ninety (90) days past the date of invoice or delinquent or which
are being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP.

 

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(c)           intercompany Debt between the Borrower and any of its Subsidiaries
or between Subsidiaries to the extent permitted by Section 9.05(g); provided
that such Debt is not held, assigned, transferred, negotiated or pledged to any
Person other than the Borrower or one of their Wholly-Owned Subsidiaries, and,
provided further, that any such Debt owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Guaranty
Agreement.

 

(d)           endorsements of negotiable instruments for collection in the
ordinary course of business.

 

(e)           Debt now or hereafter outstanding under the Senior Revolving
Credit Agreement (and any guarantees thereof by the Guarantors), provided that
(i) the aggregate principal amount of the Senior Revolving Credit Agreement
shall not exceed $2,250,000,000, (ii) no part of the Debt for principal owing
under the Senior Revolving Credit Agreement is subordinated in right of payment
to any other Debt for principal owing under the Senior Revolving Credit
Agreement and (iii) such Debt is comprised of a single facility with no
differentiation among lenders in the revolving character, pricing or maturity
thereof.

 

(f)            Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of Oil and Gas
Properties in the ordinary course of business.

 

(g)           Debt consisting of the Dominion Production Payment or any
unsecured guarantee by the Borrower or any Guarantor in respect thereto.

 

(h)           Capital Leases not to exceed $25,000,000 in the aggregate at any
one time.

 

(i)            Debt and any guarantees thereof, provided that (i) at the time
such Debt is incurred, no Default has occurred and is then continuing, (ii) no
Default would result from the incurrence of such Debt after giving effect to the
incurrence of such Debt (and any concurrent repayment of Debt with the proceeds
of such incurrence), and (iii) the Net Cash Proceeds of such Debt are applied as
contemplated by Section 3.05.

 

(j)            other Debt not to exceed $40,000,000 in the aggregate at any one
time outstanding.

 

(k)           Extensions, renewals or replacements of any Debt (for purposes of
this paragraph (k), “refinancing debt”) permitted in clauses (a) through (j) so
long as (i) the principal amount (or accreted value, if applicable) of such
refinancing debt does not exceed the principal amount (or accreted value, if
applicable) of the Debt extended, renewed or replaced (plus all accrued interest
on the Debt and the amount of all expenses and premiums incurred in connection
therewith), (ii) such refinancing debt has a final maturity date later than the
final maturity date of the Debt being extended, renewed or replaced, (iii) if
the Debt being extended, renewed or replaced is subordinated in right of payment
to the obligations under this Agreement, such refinancing debt has a final
maturity date equal to or later than the final maturity date of, and is
subordinated in right of payment to, the obligations under this Agreement on
terms at least as favorable to the Lenders as those contained in the
documentation governing the Debt being

 

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extended, renewed or replaced, (iv) such refinancing debt is incurred either by
the Borrower or by a Subsidiary who is the obligor on the Debt being extended,
renewed or replaced, and (v) if incurred by the Borrower, such refinancing debt
may be guaranteed by the Guarantors.

 

Section 9.03           Liens.  Neither the Borrower nor any of its Subsidiaries
will create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except:

 

(a)           Liens securing the payment of any Indebtedness.

 

(b)           Excepted Liens.

 

(c)           Liens securing the obligations of the Borrower and the Guarantors
under the Senior Revolving Credit Agreement and the other Senior Revolving
Credit Documents; provided that, such Liens shall not encumber any Property that
is not subject to a second priority Lien in favor of, or for the benefit of, the
Administrative Agent for the benefit of the Lenders to secure the Indebtedness.

 

(d)           The Dominion Production Payment.

 

(e)           Liens in connection with Capital Leases permitted under
Section 9.02(h).

 

(f)            Liens on cash, marketable securities or letters of credit in an
aggregate amount not to exceed $50,000,000 at any one time to secure Swap
Agreements with Persons (or their Affiliates) who have ceased to be lenders
under the Senior Revolving Credit Agreement.

 

(g)           Liens on Property not constituting collateral for the Indebtedness
and not otherwise permitted by the foregoing clauses of this Section 9.03;
provided that the aggregate principal or face amount of all Debt secured under
this Section 9.03(g) shall not exceed $10,000,000 at any time.

 

(h)           Extensions, renewals or replacements of any of the Liens permitted
in clauses (a) through (g) so long as (i) the principal amount of the Debt or
obligation secured thereby is no greater than the principal amount of such Debt
or obligation at the time such Lien was permitted hereunder except for increases
in an amount equal to a reasonable premium or other reasonable amount paid, and
fees and expenses reasonably incurred, in connection with such extension,
renewal, refinancing, or replacement and in an amount equal to any existing
commitments unutilized thereunder, (ii) any such extension, renewal or
replacement Lien is limited to the property originally encumbered thereby, and
(iii) any renewal or extension of the Debt or obligations secured or benefited
thereby is permitted by Section 9.02.

 

Section 9.04           Dividends.  The Borrower will not, and will not permit
any of its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of their Property to their respective Equity Interest
holders, except (i)  the Borrower may declare and pay dividends or distributions
with respect to its Equity Interests payable solely in additional shares of its
Equity Interests (other than Disqualified Capital Stock), (ii) Subsidiaries may
declare and pay dividends

 

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or distributions ratably with respect to their Equity Interests and (iii) so
long as no Default or Event of Default has occurred and is continuing or would
result therefrom, the Borrower may declare and pay quarterly cash dividends to
its members out of Available Cash for the preceding quarter (including amounts
borrowed as contemplated under clause (a)(ii) of the definition of Available
Cash subsequent to the end of such quarter).

 

Section 9.05           Investments, Loans and Advances.  Neither the Borrower
nor any of its Subsidiaries will make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:

 

(a)           Investments reflected in the Financial Statements.

 

(b)           accounts receivable arising in the ordinary course of business.

 

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

 

(d)           commercial paper maturing within one year from the date of
creation thereof rated A2 or P2 by S&P or Moody’s.

 

(e)           deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $250,000,000 (as of the date
of such bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody’s, respectively.

 

(f)            deposits in money market funds investing primarily in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).

 

(g)           Investments (i) made by the Borrower in or to the Guarantors,
(ii) made by any Subsidiary in or to the Borrower or any Guarantor, (iii) made
by the Borrower or any Guarantor in any Person that owns Oil and Gas Properties
which are overriding royalty, royalty interests or other similar non-cost
bearing interests and which does not own other material Properties, provided,
that after the consummation of such Investment (A) the Borrower and its
Subsidiaries are in compliance with all covenants under this Agreement and
(B) such Person promptly becomes a Guarantor or is promptly dissolved into a
Guarantor or the Borrower and (iv) made by the Borrower or any Guarantor in
Subsidiaries that are not Guarantors, provided that the aggregate of all
Investments made by the Borrower and the Guarantors in or to all Subsidiaries
that are not Guarantors shall not exceed $10,000,000 at any time.

 

(h)           Investments (including, without limitation, capital contributions)
in general or limited partnerships or other types of entities (each a “venture”)
entered into by the Borrower or any of its Subsidiaries with others in the
ordinary course of business; provided that (i) any such venture is engaged
exclusively in oil and gas exploration, development, production,

 

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processing and related activities, including transportation, treatment and
storage, (ii) the interest in such venture is acquired in the ordinary course of
business and on fair and reasonable terms and (iii) such venture interests
acquired and capital contributions made (valued as of the date such interest was
acquired or the contribution made) do not exceed, in the aggregate at any time
outstanding an amount equal to $10,000,000.

 

(i)            subject to the limits in Section 9.06, Investments, including the
Acquisition, in direct ownership interests in additional Oil and Gas Properties
and gas gathering systems related thereto or related to farm-out, farm-in, joint
operating, joint venture or area of mutual interest agreements, gathering
systems, pipelines or other similar arrangements which are usual and customary
in the oil and gas exploration and production business located within the
geographic boundaries of the United States of America.

 

(j)            loans or advances to employees, officers or directors in the
ordinary course of business of the Borrower or any of its Subsidiaries, in each
case only as permitted by applicable law, including Section 402 of the Sarbanes
Oxley Act of 2002, but in any event not to exceed $1,000,000 in the aggregate at
any time.

 

(k)           Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any of its Subsidiaries as a result of a bankruptcy or
other insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of its Subsidiaries;
provided that the Borrower shall give the Administrative Agent prompt written
notice in the event that the aggregate amount of all Investments held at any one
time under this Section 9.05(k) exceeds $1,000,000.

 

(l)            Any guarantee permitted under Section 9.02.

 

Section 9.06           Nature of Business.  Neither the Borrower nor any of its
Subsidiaries will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.  The
Borrower will not, and will not permit any of its Subsidiaries to, operate its
business outside the geographical boundaries of the United States.

 

Section 9.07           Limitation on Leases.  Neither the Borrower nor any of
its Subsidiaries will create, incur, assume or suffer to exist any obligation
for the payment of rent or hire of Property of any kind whatsoever (real or
personal but excluding Capital Leases permitted by Section 9.02(h), leases of
Hydrocarbon Interests and drilling and other similar contracts), under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Borrower and its Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $10,000,000 in any period of twelve consecutive calendar
months during the life of such leases.

 

Section 9.08           Proceeds of Notes.  The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.21.  Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulations T, U or X or any other regulation of the Board
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule 

 

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or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

 

Section 9.09           ERISA Compliance.  Except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
the Borrower and its Subsidiaries will not at any time:

 

(a)           terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Borrower, any of its Subsidiaries or any ERISA Affiliate
to the PBGC.

 

(b)           contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any Multiemployer Plan.

 

(c)           acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Borrower or any of its Subsidiaries or with respect to any ERISA Affiliate
of the Borrower or any of its Subsidiaries if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such acquisition
has sponsored, maintained, or contributed to, (i) any Multiemployer Plan, or
(ii) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities.

 

Section 9.10           Sale or Discount of Receivables.  Except for receivables
obtained by the Borrower or any of its Subsidiaries out of the ordinary course
of business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, neither the Borrower nor any of its
Subsidiaries will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.

 

Section 9.11           Mergers, Etc.  Neither the Borrower nor any of its
Subsidiaries will merge into or with or consolidate with any other Person, or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property to any other Person,
except that any Wholly-Owned Subsidiary may merge with any other Wholly-Owned
Subsidiary so long as in the case of any merger involving a Guarantor, a
Guarantor is the surviving entity, and that the Borrower may merge with any
Wholly-Owned Subsidiary so long as the Borrower is the survivor.

 

Section 9.12           Sale of Properties.  The Borrower will not, and will not
permit any of its Subsidiaries to, sell, assign, farm-out, convey or otherwise
transfer any Property except for: (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage

 

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and assignments in connection with such farmouts; (c) the sale or transfer of
equipment that is no longer necessary for the business of the Borrower or such
Subsidiary or is replaced by equipment of at least comparable value and use;
(d) other sales or dispositions (including Casualty Events) of Oil and Gas
Properties or any interest therein or Subsidiaries owning Oil and Gas
Properties; provided that (i) 100% of the consideration received in respect of
such other sale or disposition shall be cash, (ii) the consideration received in
respect of such other sale or disposition shall be equal to or greater than the
fair market value of the Oil and Gas Property, interest therein or Subsidiary
subject of such other sale or disposition (as reasonably determined by the board
of directors of the Borrower and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect), (iii) if such other sale or disposition of Oil and
Gas Property or Subsidiary owning Oil and Gas Properties included in the most
recently delivered Reserve Report during any period between two successive dates
on which the Total Reserve Value is determined in accordance with Section 2.07
has a fair market value (as determined by the Administrative Agent),
individually or in the aggregate, in excess of $25,000,000, the Total Reserve
Value shall be reduced, effective immediately upon such sale or disposition, by
an amount equal to the Total Reserve Value of such Property as calculated
pursuant to the most recently delivered Reserve Report and (iv) if any such
other sale or disposition is of a Subsidiary owning Oil and Gas Properties, such
other sale or disposition shall include all the Equity Interests of such
Subsidiary; and (e) sales and other dispositions of Properties not regulated by
Section 9.12(a) to (d) having a fair market value not to exceed $10,000,000
during any 12-month period.

 

Section 9.13           Environmental Matters.  The Borrower will not, and will
not permit any Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.

 

Section 9.14           Transactions with Affiliates.  The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

 

Section 9.15           Subsidiaries.  The Borrower shall have no Subsidiaries
other than Wholly-Owned Subsidiaries.  The Borrower shall not, and shall not
permit its Subsidiaries to, create or acquire any additional Subsidiary unless
the Borrower gives written notice to the Administrative Agent of such creation
or acquisition and complies with Section 8.14(b).  The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign or otherwise dispose
of any Equity Interests in any of its Subsidiaries.  The Borrower shall have no
Foreign Subsidiaries.

 

Section 9.16           Negative Pledge Agreements; Dividend Restrictions. 
Neither the Borrower nor any of its Subsidiaries will create, incur, assume or
suffer to exist any contract,

 

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agreement or understanding (other than this Agreement, the Security Instruments
and the Senior Revolving Credit Documents) that in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property in favor of the Administrative Agent and the Lenders or restricts
any Subsidiary from paying dividends or making distributions to the Borrower or
any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith; provided, however, that the preceding  restrictions will
not apply to encumbrances or restrictions arising under or by reason of (1) the
Dominion Production Payment but only on the Oil and Gas Property subject
thereto, (2) any leases (other than leases of Oil and Gas Properties) or
licenses or similar contracts as they affect any Property or Lien subject to
such lease or license, (3) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the direct or indirect sale or
disposition of all or substantially all the equity or Property of such
Subsidiary (or the Property that is subject to such restriction) pending the
closing of such sale or disposition, (4) customary provisions with respect to
the distribution of Property in joint venture agreements or (5) Capital Leases
permitted under Section 9.02(g), but then only on the Property subject of such
Capital Leases.

 

Section 9.17           Gas Imbalances, Take-or-Pay or Other Prepayments.  The
Borrower will not, and will not permit any of its Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrower or any of its Subsidiaries that would require the
Borrower or such Subsidiary to deliver, in the aggregate, two percent (2%) or
more of the monthly production of Hydrocarbons at some future time without then
or thereafter receiving full payment therefor.

 

Section 9.18           Swap Agreements.  Neither the Borrower nor any of its
Subsidiaries will enter into any Swap Agreements with any Person other than
(a) Swap Agreements in respect of commodities (i) with an Approved Counterparty,
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 85% of the reasonably anticipated projected
production from Proved Reserves for each month during the period during which
such Swap Agreement is in effect for each of crude oil and natural gas,
calculated separately, for the remainder of the calendar year plus the next two
full calendar years succeeding the execution of such Swap Agreement and 70% of
the reasonably anticipated projected production from Proved Reserves for each
month during the period during which such Swap Agreement is in effect for each
of crude oil and natural gas, calculated separately, for each month thereafter,
and (iii) the notional volumes for which do not exceed the current net monthly
production (regardless of projected production levels) at the time such Swap
Agreement is executed, calculated separately for each of crude oil and natural
gas, provided, that the foregoing shall not prevent the Borrower from entering
into forward agreements in respect of commodity Swap Agreements in respect of
future projected volumes from Oil and Gas Properties subject to the Dominion
Production Payment, so long as the notional volumes under such forward
agreements do not exceed the reasonably anticipated net monthly production for
all calculation periods under such forward agreements, calculated separately for
each of crude oil and natural gas, and (b) Swap Agreements in respect of
interest rates with an Approved Counterparty, which effectively convert interest
rates from floating to fixed, the notional amounts of which (when aggregated
with all other Swap Agreements of the Borrower and its Subsidiaries then in
effect effectively converting interest

 

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rates from floating to fixed) do not exceed 90% of the then outstanding
principal amount of the Borrower’s Debt for borrowed money which bears interest
at a floating rate.  Notwithstanding anything to the contrary in this
Section 9.18, there shall be no prohibition against the Borrower entering into
any “put” contracts or commodity price floors so long as such agreements are
entered into for non-speculative purposes and in the ordinary course of business
for the purpose of hedging against fluctuations of commodity prices.

 

Section 9.19           Tax Status as Partnership.  The Borrower shall not alter
its status as a partnership for purposes of United States Federal Income taxes.

 

Section 9.20           Acquisition Documents.  The Borrower will not, and will
not permit any of its Subsidiaries to, amend, modify or supplement any of the
Acquisition Documents if the effect thereof could reasonably be expected to have
a Material Adverse Effect (and provided that the Borrower promptly furnishes to
the Administrative Agent a copy of such amendment, modification or supplement).

 

Section 9.21           Anti-Layering.  The Borrower will not, and will not
permit any Subsidiary to, incur, create, assume or suffer to exist any Debt if
such Debt is subordinate or junior in ranking in right of payment to the Senior
Revolving Credit Agreement, unless such Debt is pari passu or expressly
subordinated in right of payment to the obligations under this Agreement.

 

ARTICLE X
Events of Default; Remedies

 

Section 10.01         Events of Default.  One or more of the following events
shall constitute an “Event of Default”:

 

(a)           the Borrower shall fail to pay any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment thereof or otherwise.

 

(b)           the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days.

 

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

 

(d)           the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in, Section 8.01(l),
Section 8.01(m), Section 8.02, Section 8.03 or in ARTICLE IX.

 

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(e)           the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the earlier to occur of (i) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (ii) a Responsible Officer of the Borrower or any of its
Subsidiaries otherwise becoming aware of such default.

 

(f)            the Borrower or any of its Subsidiaries shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
(after giving effect to any applicable notice and cure period).

 

(g)           any event or condition occurs (after giving effect to any notice
or cure period) that results in any Material Indebtedness (other than the Senior
Revolving Credit Agreement) becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or agent
on its or their behalf to cause any Material Indebtedness to become due, or to
require the Redemption thereof or any offer to Redeem to be made in respect
thereof, prior to its scheduled maturity or require the Borrower or any of its
Subsidiaries to make an offer in respect thereof.

 

(h)           any event or condition occurs (after giving effect to any notice
or cure period) that results in the Senior Revolving Credit Notes becoming due
prior to their scheduled maturity or requires the Borrower or any of its
Subsidiaries to make an offer in respect thereof.

 

(i)            an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any of its Subsidiaries or its debts, or of a
substantial part of its assets, under any  federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered.

 

(j)            the Borrower or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(i), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing; or any member of the Borrower shall
make any request or take any action for the purpose of calling a meeting of the
members of the Borrower to consider a resolution to dissolve and wind-up the
Borrower’s affairs.

 

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(k)           the Borrower or any of its Subsidiaries shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due.

 

(l)            (i) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 (to the extent not covered by
independent third party insurance provided by insurers of the highest claims
paying rating or financial strength as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more
non monetary judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, shall be rendered
against the Borrower, any of its Subsidiaries or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower or any
of its Subsidiaries to enforce any such judgment.

 

(m)          the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by
them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any of its
Subsidiaries shall so state in writing.

 

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

 

(o)           a Change in Control shall occur.

 

Section 10.02         Remedies.

 

(a)           In the case of an Event of Default other than one described in
Section 10.01(i), Section 10.01(j) or Section 10.01(k), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent, at
the request of the Majority Lenders, shall, by notice to the Borrower, declare
the Notes and the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower and the Guarantors
accrued hereunder and under the Notes and the other Loan Documents, shall become
due and payable immediately, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other notice of any kind, all of
which are hereby waived by the Borrower and each Guarantor; and in case of an
Event of Default described in Section 10.01(i), Section 10.01(j) or 
Section 10.01(k), the Notes and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and the other obligations of
the Borrower and the Guarantors accrued hereunder and under the Notes and the
other Loan Documents, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.

 

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(b)           In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.

 

(c)           All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:  first, to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Notes; third, to fees; fourth,
pro rata to principal outstanding on the Notes; fifth, to any other
Indebtedness; and any excess shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

 

Section 10.03         Disposition of Proceeds.  The Security Instruments contain
an assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property.  The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, except after the occurrence and during the continuance of
an Event of Default, (a) the Administrative Agent and the Lenders agree that
they will neither notify the purchaser or purchasers of such production nor take
any other action to cause such proceeds to be remitted to the Administrative
Agent or the Lenders, but the Lenders will instead permit such proceeds to be
paid to the Borrower and its Subsidiaries and (b) the Lenders hereby authorize
the Administrative Agent to take such actions as may be necessary to cause such
proceeds to be paid to the Borrower and/or its Subsidiaries.

 

ARTICLE XI
The Administrative Agent

 

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

 

Section 11.02         Duties and Obligations of Administrative Agent.  The
Administrative Agent shall have no duties or obligations except those expressly
set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term “agent” herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall have no duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is

 

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communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity.  The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or under any other Loan Document or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or in any
other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in
ARTICLE VI or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent, (vi) the existence, value,
perfection or priority of any collateral security or the financial or other
condition of the Borrower and its Subsidiaries or any other obligor or
guarantor, or (vii) any failure by the Borrower or any other Person (other than
itself) to perform any of its obligations hereunder or under any other Loan
Document or the performance or observance of any covenants, agreements or other
terms or conditions set forth herein or therein.  For purposes of determining
compliance with the conditions specified in ARTICLE VI, each Lender shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Administrative Agent shall
have received written notice from such Lender prior to the proposed closing date
specifying its objection thereto.

 

Section 11.03         Action by Agent.  The Administrative Agent shall have no
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) and in all cases the Administrative Agent shall be fully
justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. 
The instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders.  If
a Default has occurred and is continuing, then the Administrative Agent shall
take such action with respect to such Default as shall be directed by the
requisite Lenders in the written instructions (with indemnities) described in
this Section 11.03, provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interests of the
Lenders.  In no event, however, shall the Administrative Agent be required to
take any action which exposes the Administrative Agent to personal liability or
which is contrary to this Agreement, the Loan Documents or applicable law.  If a
Default has occurred and is continuing, the Syndication Agent and the Co-

 

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Documentation Agents shall have no obligation to perform any act in respect
thereof.  No Agent shall be liable for any action taken or not taken by it with
the consent or at the request of the Majority Lenders or the Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or
under any other Loan Document or under any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith
INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.

 

Section 11.04         Reliance by Agent.  Each Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person.  Each
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon and each of the Borrower and the Lenders hereby
waives the right to dispute such Agent’s record of such statement, except in the
case of gross negligence or willful misconduct by such Agent.  Each Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.  The Agents may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall have been
filed with the Administrative Agent.

 

Section 11.05         Subagents.  The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Agent.

 

Section 11.06         Resignation or Removal of Agents.  Subject to the
appointment and acceptance of a successor Agent as provided in this
Section 11.06, any Agent may resign at any time by notifying the Lenders and the
Borrower, and any Agent may be removed at any time with or without cause by the
Majority Lenders.  Upon any such resignation or removal, the Majority Lenders
shall have the right, in consultation with the Borrower, to appoint a
successor.  If no successor shall have been so appointed by the Majority Lenders
and shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation or removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent.  Upon
the acceptance of its appointment as Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor. 
After the Agent’s resignation hereunder, the provisions of this ARTICLE XI and

 

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Section 12.03 shall continue in effect for the benefit of such retiring Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as Agent.

 

Section 11.07         Agents and Lenders.  Each bank serving as an Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not an Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent hereunder.

 

Section 11.08         No Reliance.

 

(a)           Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, any other Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and each other
Loan Document to which it is a party.  Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent, any
other Agent or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document, any related agreement or any document furnished hereunder or
thereunder.  The Agents shall not be required to keep themselves informed as to
the performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries.  Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent and no Arranger shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower (or any of its Affiliates) which
may come into the possession of such Agent or any of its Affiliates.  In this
regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this
transaction as special counsel to the administrative agent and arranger of the
Senior Revolving Credit Agreement only in respect of the Senior Revolving Credit
Agreement, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document.  Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

 

(b)           The Lenders acknowledge that the Administrative Agent and the
Arrangers are acting solely in administrative capacities with respect to the
structuring and syndication of this facility and have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than their administrative duties, responsibilities and
liabilities specifically as set forth in the Loan Documents and in their
capacity as Lenders hereunder.  In structuring, arranging or syndicating this
facility, each Lender acknowledges that the Administrative Agent and/or
Arrangers may be agents or lenders under these Notes, the Senior Revolving
Credit Notes, other loans or other securities and waives any existing or future
conflicts of interest associated with the their role in such other debt
instruments.  If in its administration of this facility or any other debt
instrument, the Administrative Agent determines (or is given written notice by
any Lender) that a conflict exists, then it shall eliminate such

 

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conflict within 90 days or resign pursuant to Section 11.06 and shall have no
liability for action taken or not taken, other than actions taken or not taken
which represent Administrative Agent’s gross negligence or willful misconduct,
while such conflict existed.

 

Section 11.09         Administrative Agent May File Proofs of Claim.  In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(a)           to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and

 

(b)           to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.

 

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

 

Section 11.10         Authority of Administrative Agent to Release Collateral
and Liens.  Each Lender hereby authorizes the Administrative Agent to release
any collateral that is permitted to be sold or released pursuant to the terms of
the Loan Documents.  Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower’s sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents.

 

Section 11.11         The Arrangers and the Agents.  The Arrangers, the
Syndication Agent and the Co-Documentation Agents shall have no duties,
responsibilities or liabilities under this

 

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Agreement and the other Loan Documents other than their duties, responsibilities
and liabilities in their individual capacity as Lenders hereunder to the extent
they are a party to this Agreement as a Lender.

 

ARTICLE XII
Miscellaneous

 

Section 12.01                          Notices.

 

(a)                                  Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
Section 12.01(b)), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

 

(i)                                     if to the Borrower, to it at

 

Linn Energy, LLC

600 Travis Street, Suite 5100

Houston, TX 77002

 

Attention: Kolja Rockov

Telephone: 281-840-4169

Fax: 281-840-4189

E-Mail: kr@linnenergy.com

 

with a copy to:

 

Linn Energy, LLC

600 Travis Street, Suite 5100

Houston, TX 77002

 

Attention:  Charlene A. Ripley

Telephone: 281-840-4119

Fax:  281-840-4180

E-mail: cripley@linnenergy.com

 

(ii)                                  if to the Administrative Agent, to it at

 

525 Washington Blvd., 8th floor

Jersey City, New Jersey 07310

Attention: Dina Wilson, Loan Assistant

Telecopy:  201-850-4020

 

with a copy to the Administrative Agent at:

 

1200 Smith Street, Suite 3100

Houston, Texas  77002

Attention:  Betsy Jocher

 

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Telecopy: 713-659-6915

 

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

 

(b)           Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V
unless otherwise agreed by the Administrative Agent and the applicable Lender. 
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.

 

(c)           Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto.  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

 

Section 12.02         Waivers; Amendments.

 

(a)           No failure on the part of the Administrative Agent, any other
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege, or any abandonment or
discontinuance of steps to enforce such right, power or privilege, under any of
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  The rights and remedies of the Administrative
Agent, any other Agent and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of any provision of this Agreement or any
other Loan Document or consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any other
Agent or any Lender may have had notice or knowledge of such Default at the
time.

 

(b)           Neither this Agreement nor any provision hereof nor any Security
Instrument nor any other Loan Document nor any provision thereof may be waived,
amended or modified, except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Majority Lenders or by the Borrower and the
Administrative Agent with the written consent of the Majority Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) modify Section 2.07 or the definition
of Total Reserve Value, (iii) reduce the principal amount of any Loan or reduce
the rate of interest thereon, or reduce any fees payable hereunder, or reduce
any other Indebtedness hereunder or under any other Loan Document, without the
written consent of each Lender affected thereby, (iv) postpone the scheduled
date of payment or prepayment of the

 

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principal amount of any Loan, or any interest thereon, or any fees payable
hereunder, or any other Indebtedness hereunder or under any other Loan Document,
or reduce the amount of, waive or excuse any such payment, or postpone or extend
the Maturity Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 6.01, Section 8.14 or
Section 10.02(c) change the definition of the terms “Domestic Subsidiary”,
“Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without
the written consent of each Lender, (vii) release any Guarantor (except as set
forth in the Guaranty Agreement), release all or substantially all of the
collateral (other than as provided in Section 11.09), or reduce the percentage
set forth in Section 8.14(a) to less than 80%, without the written consent of
each Lender, or (viii) change any of the provisions of this Section 12.02(b) or
the definition of “Majority Lenders” or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or under any other Loan Documents or make any determination or
grant any consent hereunder or any other Loan Documents, without the written
consent of each Lender; provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent or
any other Agent hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent or such other Agent, as the case may
be.  Notwithstanding the foregoing, any supplement to Schedule 7.14
(Subsidiaries) shall be effective simply by delivering to the Administrative
Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.

 

Section 12.03         Expenses, Indemnity; Damage Waiver.

 

(a)           The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and other
outside consultants for the Administrative Agent, the reasonable travel,
photocopy, mailing, courier, telephone and other similar expenses, and, in
connection with the syndication of the credit facilities provided for herein,
the preparation, negotiation, execution, delivery and administration (both
before and after the execution hereof and including advice of counsel to the
Administrative Agent as to the rights and duties of the Administrative Agent and
the Lenders with respect thereto) of this Agreement and the other Loan Documents
and any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket costs, expenses,
Taxes, assessments and other charges incurred by any Agent or any Lender in
connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or
any other document referred to therein, (iii) all out-of-pocket expenses
incurred by any Agent or any Lender, including the fees, charges and
disbursements of any counsel for any Agent or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement or any
other Loan Document, including its rights under this Section 12.03, or in
connection with the Loans made, including, without limitation, all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans.

 

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(b)           THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS AND EACH
LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM,
ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING
THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED
BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS
A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT (OTHER THAN EXPENSES IN CONNECTION WITH THE EXECUTION AND DELIVERY OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DATED OF EVEN DATE HEREWITH, WHICH
EXPENSES SHALL ONLY BE PAID BY THE BORROWER TO THE EXTENT PROVIDED IN
SECTION 12.03(A)) OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY,
THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT
OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE
FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS OF
ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES,
(vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY OF ITS SUBSIDIARIES, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT
IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT,
DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT
OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE
OF HAZARDOUS MATERIALS ON OR FROM

 

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ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii)
ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

 

(c)           To the extent that the Borrower fails to pay any amount required
to be paid by it to any Agent or the Arrangers under Section 12.03(a) or (b),
each Lender severally agrees to pay to such Agent or the Arrangers, as the case
may be, such Lender’s ratable share (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against such Agent or the Arrangers in its capacity as such.

 

(d)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or the use of the
proceeds thereof.

 

(e)           All amounts due under this Section 12.03 shall be payable within
ten (10) Business Days of written demand therefor.

 

Section 12.04         Successors and Assigns.

 

(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this

 

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Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)           (i) Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

 

(A)          the Borrower, provided that no consent of the Borrower shall be
required if such assignment is to a Lender or an Affiliate of a Lender or, if an
Event of Default has occurred and is continuing, is to any other assignee; and

 

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

 

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

 

(A)          except in the case of an assignment to a Lender or an Affiliate of
a Lender or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

 

(B)           each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;

 

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

 

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

 

(iii)          Subject to Section 12.04(b)(iv) and the acceptance and recording
thereof, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the

 

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case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).

 

(iv)          The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans, each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.  In
connection with any changes to the Register, if necessary, the Administrative
Agent will reflect the revisions on Annex I and forward a copy of such revised
Annex I to the Borrower and each Lender.

 

(v)           Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee’s completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in
Section 12.04(b) and any written consent to such assignment required by
Section 12.04(b), the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this Section 12.04(b).

 

(c)           (i)            Any Lender may, without the consent of the
Borrower, the Administrative Agent, sell participations to one or more banks or
other entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.  Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the proviso to Section 12.02 that affects
such Participant.  In addition such agreement must provide that the Participant
be bound by the provisions of Section 12.03.  Subject to Section 12.04(c)(ii),
the Borrower agrees that each Participant shall be entitled to the benefits of
Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it were a
Lender and had acquired its interest by

 

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assignment pursuant to Section 12.04(b).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 12.08 as though it
were a Lender, provided such Participant agrees to be subject to
Section 4.01(c) as though it were a Lender.

 

(ii)           A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower’s prior written consent.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.03 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 5.03(e) as though it were a Lender.

 

(d)           Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such
pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

Section 12.05         Survival; Revival; Reinstatement.

 

(a)           All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent, any other Agent or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid.  The provisions of Section 5.01,
Section 5.02, Section 5.03, Section 12.03, Section 12.11 and ARTICLE XI shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans or the
termination of this Agreement, any other Loan Document or any provision hereof
or thereof.

 

(b)           To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

 

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Section 12.06         Counterparts; Integration; Effectiveness.

 

(a)           This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.

 

(b)           This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

(c)           Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

 

Section 12.07         Severability.  Any provision of this Agreement or any
other Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof or thereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

Section 12.08         Right of Setoff.  If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations (of
whatsoever kind, including, without limitation, obligations under Swap
Agreements) at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower or any of its Subsidiaries against any of and all
the obligations of the Borrower or any of its Subsidiaries owed to such Lender
now or hereafter existing under this Agreement or any other Loan Document,
irrespective of whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be
unmatured.  The rights of each Lender under this Section 12.08 are in addition
to other rights and remedies (including other rights of setoff) which such
Lender or its Affiliates may have.

 

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Section 12.09         GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

 

(a)           THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED.  CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL
NOT APPLY TO THIS AGREEMENT OR THE NOTES.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.

 

(c)           EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN  SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

 

(d)           EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR

 

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OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS Section 12.09.

 

Section 12.10         Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

Section 12.11         Confidentiality.  Each of the Agents and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority or self-regulatory body, (c) to the extent required
by applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement or any other Loan Document, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section 12.11, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Agreement relating to the Borrower and their obligations,
(g) with the consent of the Borrower, (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section 12.11 or (ii) becomes available to the Administrative Agent or any
Lender on a nonconfidential basis from a source other than the Borrower, or
(i) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender’s investment portfolio in connection with ratings
issued with respect to such Lender.  For the purposes of this Section 12.11,
“Information” means all information received from the Borrower or any of its
Subsidiaries relating to the Borrower or any of its Subsidiaries and their
businesses, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Borrower or any of its Subsidiaries; provided that, in the
case of information received from the Borrower or any of its Subsidiaries after
the date hereof, such information is clearly identified at the time of delivery
as confidential.  Any Person required to maintain the confidentiality of
Information as provided in this Section 12.11 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

 

Each Lender acknowledges that information furnished to it pursuant to this
Agreement or the other Loan Documents may include material non-public
information concerning the Borrower and its Affiliates and their related parties
or their respective securities, and confirms

 

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that it has developed compliance procedures regarding the use of material
non-public information and agrees that it will handle such material non-public
information in accordance with those procedures and applicable law, including
federal and state securities laws.

 

All information, including requests for waivers and amendments, furnished by the
Borrower or the Administrative Agent pursuant to, or in the course of
administering, this Agreement or the other Loan Documents will be
syndicate-level information, which may contain material non-public information
about the Borrower and its Affiliates and their related parties or their
respective securities.  Accordingly, each Lender represents to the Borrower and
the Administrative Agent that it has identified in its Administrative
Questionnaire a credit contact who may receive information that may contain
material non-public information in accordance with its compliance procedures and
applicable law, including federal and state securities laws.

 

Section 12.12         Interest Rate Limitation.  It is the intention of the
parties hereto that each Lender shall conform strictly to usury laws applicable
to it.  Accordingly, if the transactions contemplated hereby would be usurious
as to any Lender under laws applicable to it (including the laws of the United
States of America and the State of Texas or any other jurisdiction whose laws
may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows:  (i) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower); and (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law.  If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest

 

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payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this
Section 12.12.  To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a
Lender, such Lender elects to determine the applicable rate ceiling under such
Chapter by the weekly ceiling from time to time in effect.  Chapter 346 of the
Texas Finance Code does not apply to the Borrower’s obligations hereunder.

 

Section 12.13         EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”

 

Section 12.14         No Third Party Beneficiaries.  This Agreement, the other
Loan Documents, and the agreement of the Lenders to make Loans hereunder are
solely for the benefit of the Borrower, and no other Person (including, without
limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent or any Lender for any reason whatsoever.  There are no
third party beneficiaries.

 

Section 12.15         USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

 

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Section 12.16         Senior Revolving Credit Documents.  The Lenders
acknowledge that, pursuant to the Senior Revolving Credit Documents, the
Borrower and the Guarantors have granted first priority Liens over all of the
property constituting collateral under the Security Instruments and,
notwithstanding anything to the contrary in this Agreement or any other Loan
Document, any representation, warranty or covenant to the effect that (a) the
Liens of the Senior Revolving Credit Documents do not or shall not exist or
(b) the Liens of the Security Instruments are or shall be senior or equal in
priority to the Liens of the Senior Revolving Credit Documents is qualified
accordingly.  In the event of any conflict between this Section 12.16 and any
other provision of this Agreement or any other Loan Document, this Section 12.16
shall be controlling.

 

[SIGNATURES BEGIN NEXT PAGE]

 

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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

 

BORROWER:

LINN ENERGY, LLC

 

 

 

 

 

 

By:

/s/ Kolja Rockov

 

 

 

Kolja Rockov

 

 

 

Executive Vice President and Chief
Financial Officer

 

1

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BNP PARIBAS, as Administrative Agent and a
Lender

 

 

 

 

 

By:

/s/ Douglas R. Liftman

 

Name:

Douglas R. Liftman

 

Title:

Managing Director

 

 

 

 

 

 

 

By:

/s/ Betsy Jocher

 

Name:

Betsy Jocher

 

Title:

Director

 

2

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RBC CAPITAL MARKETS, as Syndication
Agent and a Lender

 

 

 

 

By:

/s/ Don J. McKinnerney

 

Name:

Don J. McKinnerney

 

Title:

Authorized Signatory

 

3

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

 

 

 

 

 

 

By:

/s/ Elena Robciuc

 

Name:

Elena Robciuc

 

Title:

Director

 

4

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COMERICA BANK, as a Lender

 

 

 

 

 

 

 

By:

/s/ Huma Manal

 

Name:

Huma Manal

 

Title:

Vice President

 

5

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FORTIS CAPITAL CORP., as a Lender

 

 

 

 

 

 

 

By:

/s/ David Montgomery

 

Name:

David Montgomery

 

Title:

Director

 

 

 

 

 

 

 

By:

/s/ Deirdre Sanbom

 

Name:

Deirdre Sanbom

 

Title:

Director

 

6

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BMO CAPITAL MARKETS FINANCING,
INC., as a Lender

 

 

 

 

 

 

 

By:

/s/ James V. Ducote

 

Name:

James V. Ducote

 

Title:

Director

 

7

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CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as a Lender

 

 

 

 

 

 

 

By:

/s/ Vanessa Gomez

 

Name:

Vanessa Gomez

 

 

Title:

Director

 

 

 

 

 

 

 

 

By:

/s/ Morenikeji Ajayi

 

Name:

Morenikeji Ajayi

 

 

Title:

Associate

 

 

8

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GUARANTY BANK, FSB, as a Lender

 

 

 

 

 

 

 

 

By:

/s/ W. David McCarver IV

 

Name:

W. David McCarver IV

 

 

Title:

Vice President

 

 

9

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LEHMAN BROTHERS COMMERCIAL
BANK, as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Brian McNany

 

Name:

Brian McNany

 

 

Title:

Authorized Signatory

 

 

10

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THE ROYAL BANK OF SCOTLAND plc as a
Co-Documentation Agent and a Lender

 

 

 

 

 

 

 

 

By:

/s/ Mark Lumpkin, Jr.

 

Name:

Mark Lumpkin, Jr.

 

 

Title:

Vice President

 

 

11

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UNIONBANCAL EQUITIES, INC., as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Henry Park

 

Name:

Henry Park

 

 

Title:

Senior Vice President

 

 

 

 

 

 

 

 

By:

/s/ Thomas Thompson

 

Name:

Thomas Thompson

 

 

Title:

Senior Vice President

 

 

12

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CIT CAPITAL USA INC., as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Larry Derrett

 

Name:

Larry Derrett

 

 

Title:

Managing Director

 

 

13

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CALYON CORPORATE AND INVESTMENT
BANK, as Co-Documentation Agent and a Lender

 

 

 

 

 

 

 

 

By:

/s/ Page Dillehunt

 

Name:

Page Dillehunt

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

By:

/s/ Sharada Manne

 

Name:

Sharada Manne

 

 

Title:

Vice President

 

 

14

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THE BANK OF NOVA SCOTIA, as a Lender

 

 

 

 

 

 

 

 

By:

/s/ David Mills

 

Name:

David Mills

 

 

Title:

Director

 

 

15

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DEUTSCHE BANK AG CAYMAN ISLANDS
BRANCH, as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Susan LeFevre

 

Name:

Susan LeFevre

 

 

Title:

Director

 

 

 

 

 

 

 

 

By:

/s/ Erin Morrissey

 

Name:

Erin Morrissey

 

 

Title:

Vice President

 

 

16

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USB CAPITAL RESOURCES, INC., as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Brian Harrer

 

Name:

Brian Harrer

 

 

Title:

Vice President

 

 

17

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SUNTRUST BANK, as a Lender

 

 

 

 

 

 

 

 

By:

/s/ Peter Panos

 

Name:

Peter Panos

 

 

Title:

Vice President

 

 

18

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