Exhibit
10.3


 


EXECUTION COPY




 


 





 


AMENDED AND RESTATED CREDIT
AGREEMENT


 


AMONG


 


BREITBURN OPERATING L.P.


AS THE BORROWER


 


AND


 


BREITBURN ENERGY PARTNERS L.P.,


AS PARENT GUARANTOR


 


WELLS FARGO BANK, NATIONAL
ASSOCIATION,


AS ADMINISTRATIVE AGENT,


SWING LINE LENDER AND ISSUING LENDER


 


AND THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO,


AS LENDERS


 


 






 


BMO CAPITAL
MARKETS FINANCING, INC.,


CITIBANK, N.A. and


THE BANK OF
NOVA SCOTIA


CO-DOCUMENTATION AGENTS


 






 


 


WELLS FARGO BANK, NATIONAL
ASSOCIATION


CO-LEAD ARRANGER


 


 


CREDIT SUISSE SECURITIES (USA)
LLC


CO-LEAD ARRANGER


 


 






 


 


DATED AS OF NOVEMBER 1, 2007


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.01

  	
   

  	
  Certain Defined Terms

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.02

  	
   

  	
  Other Interpretive Provisions

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.03

  	
   

  	
  Accounting Principles

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II. THE CREDIT

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
   

  	
  Amounts and Terms of the
  Commitments

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.02

  	
   

  	
  Procedure for Borrowings

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.03

  	
   

  	
  Conversion and Continuation
  Elections

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.04

  	
   

  	
  Optional Commitment Reductions
  and Optional Prepayments

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.05

  	
   

  	
  Borrowing Base Determinations;
  Mandatory Prepayments of Loans

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.06

  	
   

  	
  Repayment

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.07

  	
   

  	
  Fees

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.08

  	
   

  	
  Computation of Fees and
  Interest

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.09

  	
   

  	
  Payments by the Company; Borrowings
  Pro Rata

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.10

  	
   

  	
  Issuing the Letters of Credit

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.11

  	
   

  	
  Payments to the Administrative
  Agent; Several Obligations of the Lenders

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.12

  	
   

  	
  Sharing of Payments

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.13

  	
   

  	
  Swing Line Loans

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.14

  	
   

  	
  Special Provisions Applicable
  to BEP I

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III. TAXES, YIELD
  PROTECTION AND ILLEGALITY; REPLACEMENT OF LENDERS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.01

  	
   

  	
  Taxes

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.02

  	
   

  	
  Illegality

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.03

  	
   

  	
  Increased Costs and Reduction
  of Return

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.04

  	
   

  	
  Funding Losses

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.05

  	
   

  	
  Inability to Determine Rates

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.06

  	
   

  	
  Certificates of Lenders

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.07

  	
   

  	
  Mitigation Obligations;
  Replacement of Lenders

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.08

  	
   

  	
  Survival

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV. SECURITY

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.01

  	
   

  	
  The Security

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.02

  	
   

  	
  Agreement to Deliver Security
  Documents

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.03

  	
   

  	
  Perfection and Protection of
  Security Interests and Liens

  	
   

  	
  41

  



 


i

















 


	
  4.04

  	
   

  	
  Offset

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.05

  	
   

  	
  Subsidiary Guaranty and
  Security Agreement

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V. CONDITIONS PRECEDENT

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.01

  	
   

  	
  Conditions of Initial Credit
  Extensions

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.02

  	
   

  	
  Conditions to Extensions of
  Credit

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI. REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.01

  	
   

  	
  Organization, Existence and
  Power

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.02

  	
   

  	
  Corporate Authorization; No
  Contravention

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.03

  	
   

  	
  Governmental Authorization

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.04

  	
   

  	
  Binding Effect

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.05

  	
   

  	
  Litigation

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.06

  	
   

  	
  No Default

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.07

  	
   

  	
  ERISA Compliance

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.08

  	
   

  	
  Margin Regulations

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.09

  	
   

  	
  Title to Properties

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.10

  	
   

  	
  Oil and Gas Reserves

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.11

  	
   

  	
  Initial Reserve Report

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.12

  	
   

  	
  Gas Imbalances

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.13

  	
   

  	
  Taxes

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.14

  	
   

  	
  Financial Condition

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.15

  	
   

  	
  Environmental Matters

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.16

  	
   

  	
  Regulated Entities

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.17

  	
   

  	
  No Burdensome Restrictions

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.18

  	
   

  	
  Copyrights, Patents, Trademarks
  and Licenses, Etc

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.19

  	
   

  	
  Subsidiaries and Other Equity
  Interests

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.20

  	
   

  	
  Insurance

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.21

  	
   

  	
  Derivative Contracts

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.22

  	
   

  	
  Full Disclosure

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.23

  	
   

  	
  Solvency

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII. AFFIRMATIVE
  COVENANTS

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.01

  	
   

  	
  Financial Statements

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.02

  	
   

  	
  Certificates; Other Production
  and Reserve Information

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.03

  	
   

  	
  Notices

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.04

  	
   

  	
  Preservation of Company
  Existence, Etc.

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.05

  	
   

  	
  Maintenance of Property

  	
   

  	
  56

  



 


ii

















 


	
  7.06

  	
   

  	
  Title Information

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.07

  	
   

  	
  Additional Collateral

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.08

  	
   

  	
  Insurance

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.09

  	
   

  	
  Payment of Obligations

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.10

  	
   

  	
  Compliance with Laws

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.11

  	
   

  	
  Compliance with ERISA

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.12

  	
   

  	
  Inspection of Property and
  Books and Records

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.13

  	
   

  	
  Environmental Laws

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.14

  	
   

  	
  Pledge of Equity in New
  Subsidiary

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.15

  	
   

  	
  New Subsidiary Guarantors

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.16

  	
   

  	
  Use of Proceeds

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.17

  	
   

  	
  Operating Accounts

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.18

  	
   

  	
  Phase I Reports

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.19

  	
   

  	
  Further Assurances

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. NEGATIVE
  COVENANTS

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.01

  	
   

  	
  Limitation on Liens

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.02

  	
   

  	
  Disposition of Assets

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.03

  	
   

  	
  Consolidations and Mergers

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.04

  	
   

  	
  Loans and Investments

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.05

  	
   

  	
  Limitation on Indebtedness

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.06

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.07

  	
   

  	
  Margin Stock

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.08

  	
   

  	
  Contingent Obligations

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.09

  	
   

  	
  Restricted Payments

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.10

  	
   

  	
  Derivative Contracts

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.11

  	
   

  	
  Change in Business; Amendments
  to Organization Documents and Certain Acquisition Agreements;

  	
   

  	
   

  
	
  Corporate
  Structure; Tax Status

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.12

  	
   

  	
  Accounting Changes

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.13

  	
   

  	
  ERISA Compliance

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.14

  	
   

  	
  Interest Coverage Ratio

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.15

  	
   

  	
  Leverage Ratio

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.16

  	
   

  	
  Current Ratio

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.17

  	
   

  	
  Negative Pledge

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.18

  	
   

  	
  Unrestricted Entities

  	
   

  	
  68

  



 


iii

















 


	
  ARTICLE IX. EVENTS OF DEFAULT

  	
   

  	
  68

  
	
   

  	
   

  	
   

  
	
  9.01

  	
   

  	
  Event of Default

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.02

  	
   

  	
  Remedies

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.03

  	
   

  	
  Rights Not Exclusive

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. ADMINISTRATIVE AGENT

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.01

  	
   

  	
  Appointment and Authority

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.02

  	
   

  	
  Rights as a Lender

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.03

  	
   

  	
  Exculpatory Provisions

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.04

  	
   

  	
  Reliance by Administrative
  Agent

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.05

  	
   

  	
  Delegation of Duties

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.06

  	
   

  	
  Resignation of Administrative
  Agent

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.07

  	
   

  	
  Non-Reliance on Administrative
  Agent and Other Lenders

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.08

  	
   

  	
  Administrative Agent May File
  Proofs of Claim

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.09

  	
   

  	
  Authority of Administrative
  Agent to Release Collateral and Liens

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.10

  	
   

  	
  The Arrangers and other Agents

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI. MISCELLANEOUS

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.01

  	
   

  	
  Amendments and Waivers

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.02

  	
   

  	
  Notices; Effectiveness;
  Electronic Communication

  	
   

  	
  76

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.03

  	
   

  	
  No Waiver; Cumulative Remedies

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.04

  	
   

  	
  Costs and Expenses; Indemnity

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.05

  	
   

  	
  Payments Set Aside

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.06

  	
   

  	
  Successors and Assigns

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.07

  	
   

  	
  Confidentiality

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.08

  	
   

  	
  Right of Set-off

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.09

  	
   

  	
  Interest

  	
   

  	
  82

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.10

  	
   

  	
  Indemnity and Subrogation

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.11

  	
   

  	
  Collateral Matters; Derivative
  Contracts; Termination

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.12

  	
   

  	
  Renewal and Continuation of
  Existing Indebtedness

  	
   

  	
  84

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.13

  	
   

  	
  USA Patriot Act Notice

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.14

  	
   

  	
  Automatic Debits of Fees

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.15

  	
   

  	
  Counterparts

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.16

  	
   

  	
  Severability

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.17

  	
   

  	
  No Third Parties Benefited

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.18

  	
   

  	
  Governing Law, Jurisdiction and
  Waiver of Jury Trial

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.19

  	
   

  	
  NO ORAL AGREEMENTS

  	
   

  	
  86

  



 


iv

















 


	
  SCHEDULES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 2.01

  	
   

  	
  Commitments

  	
   

  
	
  Schedule 4.01

  	
   

  	
  Security
  Documents

  	
   

  
	
  Schedule 6.07

  	
   

  	
  ERISA Compliance

  	
   

  
	
  Schedule 6.09

  	
   

  	
  Title to
  Properties

  	
   

  
	
  Schedule 6.13

  	
   

  	
  Tax Matters

  	
   

  
	
  Schedule 6.15

  	
   

  	
  Environmental
  Matters

  	
   

  
	
  Schedule 6.19

  	
   

  	
  Subsidiaries

  	
   

  
	
  Schedule 6.21

  	
   

  	
  Derivative
  Contracts

  	
   

  
	
  Schedule 8.05

  	
   

  	
  Indebtedness

  	
   

  
	
  Schedule 8.08

  	
   

  	
  Contingent
  Obligations

  	
   

  
	
  Schedule 11.02

  	
   

  	
  Lending
  Offices; Addresses for Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of
  Notice of Revolving Credit Borrowing

  	
   

  
	
  Exhibit A-2

  	
   

  	
  Form of
  Notice of Swing Line Borrowing

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of
  Notice of Conversion/Continuation

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of
  Compliance Certificate

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of
  Assignment and Assumption Agreement

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of Note

  	
   

  
	
  Exhibit F

  	
   

  	
  Form of
  Pricing Grid Certificate

  	
   

  
	
  Exhibit G-1

  	
   

  	
  Form of
  Continuing Guaranty Agreement (Parent)

  	
   

  
	
  Exhibit G-2

  	
   

  	
  Form of
  Continuing Guaranty Agreement (General Partner)

  	
   

  
	
  Exhibit G-3

  	
   

  	
  Form of
  Continuing Guaranty Agreement (Subsidiaries)

  	
   

  
	
  Exhibit H

  	
   

  	
  Form of
  Security Agreement

  	
   

  



 


v

















 


AMENDED
AND RESTATED CREDIT AGREEMENT


 


THIS AMENDED AND RESTATED CREDIT AGREEMENT is
dated as of November 1, 2007, among BREITBURN OPERATING L.P.,
a Delaware limited partnership (the “Company”), BREITBURN
ENERGY PARTNERS, L.P., a Delaware limited partnership (“Parent”), each of the financial institutions
from time to time party hereto (individually, a “Lender” and collectively, the “Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative
agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Administrative
Agent”), , as Swing Line Lender (in such capacity, “Swing Line Lender”),
and as Issuing Lender (in such capacity, “Issuing Lender”).


 


RECITALS


 


A.            The Company, Parent, certain
Subsidiaries of the Company, the Administrative Agent and other lenders and
agents are parties to that certain Credit Agreement dated as of October 10,
2006 as amended by the First Amendment dated as of May 18, 2007 and the Second
Amendment dated as of September 6, 2007 (the “Existing
Credit Agreement”);


 


B.            The parties desire to amend and
restate the Existing Credit Agreement in its entirety as set forth herein, with
such amendment and restatement to be effective as of the Effective Date; and


 


C.            The amendment and restatement of the
Existing Credit Agreement is not intended by the parties hereto to constitute a
novation, or discharge or a satisfaction of Indebtedness outstanding under the
Existing Credit Agreement, which Indebtedness shall remain outstanding
hereunder pursuant to the terms and conditions of this Agreement;


 


D.            NOW THEREFORE, in consideration of
the foregoing recitals, of the representations, warranties, covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
that the Existing Credit Agreement is amended and restated to read in its
entirety as follows:


 


ARTICLE I.



DEFINITIONS


 


1.01        Certain Defined Terms.
The following terms have the following meanings:


 


“Acquisition”
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of any business unit or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock of a corporation (or similar entity), which stock has ordinary voting
power for the election of the members of such entity’s board of directors or
persons exercising similar functions (other than stock having such power only
by reason of the happening of a contingency), or the acquisition of in excess
of 50% of the partnership interests or equity of any Person not a corporation
which acquisition gives the acquiring Person the power to direct or cause the
direction of the management and policies of such Person, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Company or a Subsidiary of the
Company is the surviving entity.


 


“Administrative
Agent” has the meaning specified in the introductory clause
hereto.


 


 

















 


“Administrative
Agent’s Payment Office” means the address for payments as the
Administrative Agent may from time to time specify.


 


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


 


“Affiliate”
means, as to any Person, any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. A
Person shall be deemed to control another Person if the controlling Person
possesses the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.


 


“Aggregate
Maximum Credit Amount” means the amount of $1,500,000,000.00.


 


“Agreement”
means this Amended and Restated Credit Agreement, as the same may from time to
time be amended, supplemented and restated.


 


“Applicable
Margin” means, with respect to Base Rate Loans and LIBOR Loans, the respective margins therefor as determined
under the Pricing Grid.


 


“Approved Fund” means any Fund
that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers or manages a Lender.


 


“Assignment and Assumption”
means an assignment and assumption entered into by a Lender and an Eligible
Assignee (with the consent of any party whose consent is required by Section 11.06), and accepted by the
Administrative Agent, in substantially the form of Exhibit
D or any other form approved by the Administrative Agent.


 


“Availability
Period” has the meaning specified in Section 2.01(c).


 


“Available
Borrowing Base” means, at the particular time in question, the
Borrowing Base then in effect minus the Effective Amount at such time.


 


“Available Cash” means, with respect to
Parent, “Available Cash” as defined in Parent’s partnership agreement on the
Effective Date, as such definition may be amended in a manner reasonably
acceptable to the Administrative Agent.


 


“Bankruptcy Code”
means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.),
as amended, and regulations promulgated thereunder.


 


“Base Rate”
means, for any day, the fluctuating rate of interest in effect for such day
which rate per annum shall be equal to the higher of (a) the rate of interest
as publicly announced from time to time by Administrative Agent as its “reference rate,” and (b) one-half of one percent (0.50%) per
annum above the Federal Funds Rate in effect from time to time. (The “reference rate” is a rate set by Administrative Agent based
upon various factors including costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.) Any change
in the reference rate announced by Administrative Agent shall take effect at
the opening of business on the day specified in the public announcement of such
change.


 


2

















 


“Base Rate Loan”
means a Loan that bears interest based at the Base Rate plus the
Applicable Margin.


 


“BEP I”
means BreitBurn Energy Partners I, L.P., a Texas limited partnership.


 


“BEP I
Default” has the meaning set forth
in Section 2.14(a).


 


“Borrowing”
means a Revolving Credit Borrowing or a Swing Line Borrowing, as the context
may require.


 


“Borrowing Base”
means at the particular time in question, the amount provided for in Section 2.05
provided, however, in no event shall the Borrowing Base ever exceed the
Aggregate Maximum Credit Amount.


 


“Borrowing Base Deficiency”
means at any time, the Effective Amount exceeds the Borrowing Base then in
effect.


 


“Borrowing Base
Period” means the period from the Effective Date to the initial
Scheduled Borrowing Base Determination Date, and thereafter, each six-month
period between Scheduled Borrowing Base Determination Dates.


 


“Borrowing
Date”
means any date on which a Borrowing occurs under Section 2.02.


 


“Business Day”
means any day other than a Saturday, Sunday or other day on which commercial
banks in Houston, Texas, New York, New York, or San Francisco, California are
authorized or required by law to close and, if the applicable Business Day
relates to any LIBOR Loan, means such a day on which dealings are carried on in
the applicable offshore dollar interbank market.


 


“Capital Lease”
means, when used with respect to any Person, any lease in respect of which the
obligations of such Person constitute Capitalized Lease Obligations.


 


“Capitalized Lease
Obligations” means, when used with respect to any Person,
without duplication, all obligations of such Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations shall
have been or should be, in accordance with GAAP, capitalized on the books of
such Person.


 


“Cash
Equivalents” means: (a) securities issued or fully guaranteed or
insured by the United States Government or any agency thereof and backed by the
full faith and credit of the United States and having maturities of not more
than twelve (12) months from the date of acquisition; (b) certificates of
deposit, time deposits, eurodollar time deposits, or bankers’ acceptances
having in each case a tenor of not more than twelve (12) months from the date
of acquisition issued by, and demand deposits with, any U.S. commercial bank or
any branch or agency of a non-U.S. commercial bank licensed to conduct business
in the U.S. having combined capital and surplus of not less than $500,000,000,
whose long term securities are rated at least A (or then equivalent grade) by
S&P and A2 (or then equivalent grade) by Moody’s at the time of
acquisition; (c) commercial paper of an issuer rated at least A-1 by S&P or
P-1 by Moody’s at the time of acquisition, and in either case having a tenor of
not more than twelve (12) months; (d) debt securities which are registered
under the Securities Act of 1933, as amended (the “Securities
Act”) (and not “restricted securities”
in the Company’s hands as defined in Rule 144 under the Securities Act), or
adjustable rate preferred stock traded on a national securities exchange and
issued by a corporation duly incorporated under the laws of a state of the
United States, or


 


3

















 


issued by any state, county or municipality located in the United
States of America, provided, however, that such debt securities are rated A2 by
Moody’s and A or better by S&P at the time of acquisition, and such debt
securities have a maturity not in excess of twelve (12) months from the date of
creation thereof; (e) repurchase agreements with a term of not more than seven
(7) days for underlying securities of the types described in clauses (a) and (b)
above; and (f) money market mutual or similar funds having assets in excess of
$100,000,000.


 


“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 Company or any of its Subsidiaries having a fair market
value in excess of $10,000,000.


 


“Change in Law” means the
occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.


 


“Change of Control” means (a)
Provident Energy Trust shall cease to own, directly or indirectly, the majority
of the issued and outstanding voting shares of BreitBurn GP LLC, in each case
on a fully diluted basis assuming the conversion and exercise of all
outstanding convertible securities (whether or not such securities are then
currently convertible or exercisable); (b) General Partner shall cease to own,
directly or indirectly, all of the general partner interest (including without
limitation, all outstanding securities convertible to general partner
interests) of the Company; or BreitBurn GP LLC shall cease to own, directly or
indirectly, all of the general partner interest (including without limitation,
all outstanding securities convertible to general partner interests) of Parent;
(c) Parent shall cease to own, directly or indirectly, all of the limited
partnership interest (including without limitation, all outstanding Equity convertible
to limited partner interests) of the Company, or shall cease to own, directly
or indirectly, all of the general partnership interest (including without
limitation, all outstanding Equity convertible to general partner interests) of
the Company; (d) a sale of all or substantially all of the assets of the Loan
Parties taken as a whole to any Person or group of Persons; (e) the liquidation
or dissolution of Parent or the Company; or (f) the first day on which a
majority of the Board of Directors of either General Partner or BreitBurn GP
LLC are not Continuing Directors. “Continuing Directors”
means any member of the board of directors (or managers, in the case of a
limited liability company) of General Partner or BreitBurn GP LLC, as
applicable, who (A) is a member of such board of directors or managers as of
the date of this Agreement or (B) was nominated for election or elected to such
board of directors or managers with the affirmative vote of two-thirds of the
Continuing Directors who were members of such board of directors or managers at
the time of such nomination or election (not including as board nominees any
directors which the board is obligated to nominate pursuant to shareholders’
agreements, voting trust arrangements or similar arrangements).


 


“Code”
means the Internal Revenue Code of 1986, as amended, and final and temporary
Treasury regulations promulgated thereunder.


 


“Collateral”
means all property of any kind which is subject to a Lien in favor of
Administrative Agent or which under the terms of any Security Document is
purported to be subject to such Lien.


 


“Commitment”
means, as to each Lender, such Lender’s obligation to make Revolving Credit
Loans and to participate in Letters of Credit and Swing Line Loans up to such
Lender’s Pro Rata Share of the lesser of (a) the then-effective Borrowing Base
or (b) the Aggregate Maximum Credit


 


4

















 


Amount, as such commitment may be terminated and/or reduced from time
to time in accordance with the provisions hereof.


 


“Commitment Fee”
means the variable fee as determined by the Pricing Grid payable pursuant to Section 2.07(a).


 


“Company”
has the meaning specified in the introductory paragraph hereto.


 


“Compliance
Certificate” means a certificate substantially in the form of Exhibit C.


 


“Consolidated
Interest Expense” means, with respect to the Loan Parties, for
any fiscal period, the aggregate amount of all costs, fees and expenses paid by
the Loan Parties in such fiscal period which are classified as interest expense
on the consolidated financial statements of the Loan Parties, all as determined
in conformity with GAAP.


 


“Consolidated
Net Income” means, for any period, the net income (or net loss)
of Parent and its Consolidated Subsidiaries, on a consolidated basis, for such
period determined in accordance with GAAP; provided that (a) the effect, if
any, of non-cash gains, losses or
adjustments under FASB Statement No. 133 as a result of changes in the fair
market value of derivatives shall be excluded from the calculation of
net income (or net loss); and (b) there shall be excluded the net income of any
Subsidiary of Parent to the extent that the declaration or payment of dividends
or similar distributions by such Subsidiary is at the time restricted or not
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirements of Law applicable to such Subsidiary.


 


“Consolidated
Subsidiaries” of Parent means all Restricted Subsidiaries and
Unrestricted Entities that are consolidated in accordance with GAAP.


 


“Contingent
Obligation” means, as to any Person without duplication, any
direct or indirect liability of that Person with or without recourse, (a) with
respect to any Indebtedness, dividend, letter of credit or other similar
obligation (the “primary obligations”) of
another Person (the “primary obligor”),
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a “Guaranty
Obligation”); (b) with respect to any Surety Instrument issued
for the account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person,
other than in the ordinary course of business, if the relevant contract or
other related document or obligation requires that payment for such materials,
supplies or other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in respect of
any Derivative Contract. The amount of any Contingent Obligation shall, in the
case of Guaranty Obligations, be deemed equal to the lesser of (a) the stated
maximum amount, if any, of such Contingent Obligation and (b) the maximum
stated or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the case of
other Contingent Obligations, shall be equal to the lesser of (a) the stated
maximum amount, if any, of such Contingent Obligation and (b) the maximum
reasonably anticipated liability in respect thereof.


 


5

















 


“Continuing Directors” has the
meaning specified in the definition of “Change of Control.”


 


“Contractual
Obligation” means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement
to which such Person is a party or by which it or any of its property is bound.


 


“Conversion/Continuation
Date” means any date on which, under Section 2.03, the
Company (a) converts Base Rate Loans to LIBOR Loans, or (b) continues as LIBOR
Loans having Interest Periods expiring on such date as LIBOR Loans, with a new
Interest Period.


 


“Credit
Extension” means and includes the making of any Loans or
issuance of any Letter of Credit (including the continuation of any existing
Letter of Credit) hereunder.


 


“Current Assets”
means, at any time, the current assets of the Loan Parties at such time, plus, the Available Borrowing
Base at such time, less,
for purposes of this definition, any non-cash gains for any Derivative Contract
resulting from the requirements of FAS 133 at such time.


 


“Current
Liabilities” means, at any time, the current liabilities of the
Loan Parties at such time, less
the sum of (a) current maturities of the Company’s Obligations to the extent
such payments are not past due and (b) non-cash losses or charges on any
Derivative Contract resulting from the requirements of FAS 133 at such time.


 


“Default”
means any event or circumstance which, with the giving of notice, the lapse of
time, or both, would (if not cured or otherwise remedied during such time)
constitute an Event of Default.


 


“Default Rate”
has the meaning specified in Section 2.06(c)(iii).


 


“Derivative
Contract” means all futures contracts, forward contracts, swap, cap or collar
contracts, option contracts, hedging contracts or other derivative contracts or
similar agreements covering oil and gas commodities or prices or financial,
monetary or interest rate instruments.


 


“Dispositions”
has the meaning specified in Section 8.02.


 


“Dollars”,
“dollars”
and “$”
each mean lawful money of the United States.


 


“Domestic
Subsidiary” means any Subsidiary organized under the laws of the
United States or any political subdivision thereof.


 


“EBITDAX” means, for any period, the sum of
Consolidated Net Income for such period (a) plus,
without duplication, the following expenses or charges to the extent deducted
in the determination of Consolidated Net Income in such period: exploration
expense, interest expense, depletion, depreciation, amortization, unrealized
loss on Derivative Contracts, non-cash share-based payments under FASB
Statement No. 123R, loss on sale of assets, cumulative effect of accounting
changes, income taxes, and cash distributions actually received from
Unrestricted Entities and from BEP I and from any entity other than a
Restricted Subsidiary; (b) minus,
without duplication, the following gains or credits to the extent added in the
determination of Consolidated Net Income in such period: unrealized gain on
Derivative Contracts, gain on sale of assets, cumulative effect of accounting
changes, income from Unrestricted Entities, income from BEP I and income from
any other entity other than a Restricted Subsidiary.


 


6

















 


All
calculations of EBITDAX, for any applicable period during which a permitted
acquisition (including the Quicksilver Acquisition) or Disposition is
consummated, shall be determined on a pro forma basis (such calculation to be
acceptable to, and approved by, Administrative Agent) as if such acquisition or
Disposition was consummated on the first day of such applicable period.


 


“Effective
Amount”  means on any
date, the aggregate outstanding principal amount of all Loans thereof after
giving effect to any prepayments or repayments of Loans occurring on such date plus
the LC Obligation.


 


“Effective Date”
means the date on which all conditions precedent set forth in Sections 5.01 and 5.02
are satisfied or waived in accordance with Section 11.01.


 


“Eligible
Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c)
an Approved Fund, and (d) any other Person (other than a natural person)
approved by (i) the Administrative Agent, (ii) in the case of any assignment of
a Commitment, the Issuing Lender and the Swing Line Lender, and (iii) unless an
Event of Default has occurred and is continuing, the Company (each such
approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, “Eligible Assignee” shall not include the
Company or any of the Company’s Affiliates or Subsidiaries.


 


“Environmental
Claims” means all material claims by any Governmental Authority
or other Person alleging potential liability or responsibility for violation of
any Environmental Law, or for release or injury to the environment.


 


“Environmental
Laws” means all material federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
material administrative orders, requests, licenses, authorizations and permits
of, and agreements with, any Governmental Authorities, in each case having the
force and effect of law and relating to environmental, health, and safety
matters.


 


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


 


“Equity”
means all shares, options, warrants, general or limited partnership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, limited liability company, partnership or equivalent entity
whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other “equity security”
(as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).


 


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


 


“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with the Company within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).


 


7

















 


“ERISA Event”
means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal
by Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated
as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal by the Loan Party or any ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate (other than pursuant to Section 4041(b) of
ERISA), the treatment of a Plan amendment as a termination under Section
4041(c) or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Company or any ERISA Affiliate.


 


“Event of
Default” means any of the events or circumstances specified in Section 9.01.


 


“Exchange Act”
means the Securities and Exchange Act of 1934, and regulations promulgated
thereunder.


 


“Excluded Taxes” means, with
respect to the Administrative Agent, any Lender, the Issuing Lender or any
other recipient of any payment to be made by or on account of any Obligation of
the Company, (a) Taxes imposed on or measured by its overall net income
(however denominated), and franchise Taxes imposed on it (in lieu of net income
Taxes), by the jurisdiction (or any political subdivision thereof) 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
Company is located and (c) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Company under Section
3.07(b)), any withholding Tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party hereto
(or designates a new Lending Office) or is attributable to such Foreign
Lender’s failure or inability (other than as a result of a Change in Law) to
comply with Section 3.01(e), except to
the extent that 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 from the Company with respect to such withholding Tax
pursuant to Section 3.01(a).


 


“Existing Credit Agreement” has
the meaning specified in the recitals hereto.


 


“Existing Letters of Credit” means
the Letters of Credit outstanding on the Effective Date that were issued
pursuant to the Existing Credit Agreement.


 


“FAS 133” means Statement No.
133 of the Financial Accounting Standards Board to Derivative Contracts.


 


“Federal Funds
Rate” means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such
successor, “H.15(519)”) on the preceding Business
Day opposite the caption “Federal Funds (Effective)”;
or, if for any relevant day such rate is not so published on any such preceding
Business Day, the rate for such day will be the arithmetic mean as determined
by the Administrative Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York, New York time) on that day
by each of three leading brokers of Federal funds transactions in New York, New
York selected by the Administrative Agent.


 


8

















 


“Fee Letter”
shall have the meaning specified in Section 2.07(c) hereof.


 


“Florida Crude Oil Contracts”
means collectively (a) the Crude Oil Purchase Contract – Contract Number
6340-1004 dated May 8, 2006, by and between Calumet Florida Division of Plains
Resources and Plains Marketing, L.P., amended by the First Amendment dated
January 18, 2007, and the Amended and Restated Crude Oil Purchase Contract
dated May 16, 2007 as assigned to the Company or a Wholly Owned Subsidiary
pursuant to a Deed and General Conveyance between Calumet Florida, L.L.C. (or a
wholly owned subsidiary of Calumet) (“Calumet”)
and the Company or a Wholly Owned Subsidiary dated May 18, 2007, and (b) the
Crude Oil Purchase Contract - Contract Number 6340-1003 dated February 24,
2006, by and between Calumet Florida Division of Plains Resources and Plains
Marketing, L.P., as amended by the First Amendment dated May 4, 2006, the
Second Amendment dated May 15, 2006, the Third Amendment dated and the Fourth
Amendment dated May 15, 2007, as assigned to the Company or a Wholly Owned
Subsidiary pursuant to Deed and General Conveyance between Calumet and the
Company or a Wholly Owned Subsidiary dated May 18, 2007, provided “Florida Crude Oil Contracts” shall
not include any further amendments, extensions or modifications of such
agreements.


 


“Foreign” means organized
under the laws of a jurisdiction other than the United States or a political
subdivision thereof.


 


“Foreign Lender” means any
Lender that is organized under the laws of a jurisdiction other than that in
which the Company is resident for Tax purposes. 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.


 


“FRB”
means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.


 


“Fund” means any Person (other
than a natural person that is (or will be)) engaged in making, purchasing,
holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business.


 


“GAAP”
means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S.
accounting profession), which are applicable to the circumstances as of the
date of determination.


 


“General Partner” means
BreitBurn Operating GP, LLC, a Delaware limited liability company.


 


“Governmental
Authority” means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.


 


“Guaranties”
means, collectively, each Continuing Guaranty Agreement, substantially in the
form of Exhibit G-1, Exhibit G-2 or
Exhibit G-3 hereto, as applicable,
executed by the Guarantor or Guarantors in favor of Administrative Agent, as
same may be amended, supplemented or otherwise modified from time to time. “Guaranty” means, individually, any
one of the Guaranties.


 


9

















 


“Guarantors”
means, collectively, Parent and each Subsidiary of Parent that executes a
Guaranty pursuant to Section
7.15. “Guarantor”
means, individually, any one of the Guarantors.


 


“Guaranty
Obligation” has the meaning specified in the definition of “Contingent Obligation.”


 


“Hazardous Materials” 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 gas waste, crude oil, and any components, fractions, or
derivatives thereof; and (c) radioactive materials, asbestos containing
materials in a friable condition, polychlorinated biphenyls, or radon.


 


“Highest Lawful
Rate” means, as of a particular date, with respect to any Loan,
the maximum nonusurious interest rate that under applicable federal and Texas
law may then be contracted for, charged or received by the Lender holding such
Loan.


 


“Hydrocarbon
Interests” means leasehold and other interests in or under oil,
gas and other liquid or gaseous hydrocarbon leases wherever located, mineral
fee interests, overriding royalty and royalty interests, net profit interests,
production payment interests relating to oil, gas or other liquid or gaseous
hydrocarbons wherever located including any reserved or residual interest of
whatever nature.


 


“Indebtedness”
of any Person means, without duplication, (a) all indebtedness for borrowed
money; (b) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into
in the ordinary course of business on ordinary terms); (c) all undrawn amounts
under letters of credit; (d) all non-contingent reimbursement or payment
obligations with respect to Surety Instruments; (e) all obligations evidenced
by notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (f) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights and
remedies of the seller or Lender under such agreement in the event of default
are limited to repossession or sale of such property) including, without
limitation, production payments, net profit interests and other Hydrocarbon
Interests subject to repayment out of future Oil and Gas production; (g) all
obligations with respect to Capital Leases; (h) all obligations under
Derivative Contracts; (i) all indebtedness referred to in clauses (a) through
(h) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness; and (j) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (h)
above. The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which such Person is a general
partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.


 


“Indemnified Taxes” means
Taxes other than Excluded Taxes.


 


“Indemnitee” has the meaning
specified in Section 11.04.


 


10

















 


“Independent Auditor” has the
meaning specified in Section 7.01(a).


 


“Independent Engineer” has the
meaning specified in Section 6.11.


 


“Initial Reserve Report” has
the meaning specified in Section 6.11.


 


“Insolvency Proceeding” means
(a) any case, action or proceeding relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. federal, state or foreign law, including the
Bankruptcy Code.


 


“Interest Payment Date” (a) as
to any Base Rate Loan (including a Swing Line Loan), means the last Business
Day of each month prior to the Termination Date, and (b) as to any LIBOR Loan,
the last day of each Interest Period applicable to such Loan, provided, however,
that if any Interest Period for a LIBOR Loan exceeds three months, the date
that falls three months after the beginning of such Interest Period, and the
date that falls three months after each Interest Payment Date thereafter for
such Interest Period, is also an Interest Payment Date.


 


“Interest Period”
means, as to any LIBOR Loan, the period commencing on the Borrowing Date of
such Revolving Credit Loan or on the Conversion/Continuation Date on which the
Revolving Credit Loan is converted into or continued as LIBOR Loan, and ending
on the date one, two, three or six months thereafter as selected by the Company
in its Notice of Revolving Credit Borrowing or Notice of
Conversion/Continuation; provided that: (a) if any Interest Period would
otherwise end on a day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless, in the case of a LIBOR Loan,
the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
preceding Business Day; (b) any Interest Period pertaining to a LIBOR Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and (c) no Interest Period for any
Revolving Credit Loan shall extend beyond the Termination Date.


 


“Interest Rate
Type” means, with respect to any Revolving Credit Loan, the
interest rate, being either the Base Rate or the LIBOR forming the basis upon
which interest is charged against such Revolving Credit Loan hereunder.


 


“IRS”
means the Internal Revenue Service, and any Governmental Authority succeeding
to any of its principal functions under the Code.


 


“Issue”
means with respect to any Letter of Credit, to issue or extend the expiry of,
or to renew or increase the amount of, such Letter of Credit; and the terms “Issued,” “Issuing” and “Issuance” have
corresponding meanings.


 


“Issuing Lender”
has the meaning specified in the introductory clause hereto.


 


“LC Application”
means an application or agreement for a standby Letter of Credit in such form
as shall be acceptable to the Issuing Lender in its sole discretion, and duly
executed by the Company pursuant to Section 2.10(b).


 


11

















 


“LC Collateral
Account” means a blocked deposit account held by the
Administrative Agent.


 


“LC Obligation”
means, at the time in question, the sum of the Matured LC Obligations plus
the aggregate amount available to be drawn under all Letters of Credit then
outstanding.


 


“LC Related
Document” means the Letters of Credit, LC Applications and any
other document relating to any Letter of Credit including any of the Issuing
Lender’s standard form documents for Letter of Credit issuances.


 


“Lenders”
has the meaning specified in the introductory clause hereto and, as the context
requires, includes the Swing Line Lender.


 


“Lender Derivative Contracts”
means all Derivative Contracts (including those listed on Schedule 6.21)
made or entered into, whether directly or indirectly, and whether as a result
of assignment or transfer or otherwise, between any Loan Party or any
Subsidiary and any Lender hereunder (or under the Existing Credit Agreement) or
Affiliate of a Lender hereunder (or under the Existing Credit Agreement), but
only if made or entered into while the Lender is a Lender hereunder (or under
the Existing Credit Agreement) or an Affiliate of a Lender hereunder (or under
the Existing Credit Agreement).


 


“Lender Derivative Provider”
means any Person that is a party to a Lender Derivative Contract with any Loan
Party or any Subsidiary, provided that such Person is or was a Lender hereunder
(or under the Existing Credit Agreement) or an Affiliate of a Lender hereunder
(or under the Existing Credit Agreement) at the time it entered into such
Derivative Contract.


 


“Lending Office”
means, as to any Lender, the office or offices of such Lender specified as its
“Lending Office” or “Domestic
Lending Office” or “Offshore Lending Office”,
as the case may be, on Schedule
11.02, or such other office or offices as such Lender may from
time to time notify the Company and the Administrative Agent.


 


“Letter of
Credit” means any stand-by letter of credit issued by the
Issuing Lender pursuant to this Agreement and upon an LC Application, and shall
include the Existing Letters of Credit.


 


“Letter of Credit Fee” means
the fee specified in Section 2.07(b).


 


“Letter of Credit Sublimit”
means the lesser of (x) $50,000,000 and (y) the Available Borrowing Base.


 


“LIBOR”
means a per annum rate of interest (rounded upwards, if necessary, to the
nearest 1/100th%) equal to the rate at which Administrative Agent is offered
deposits by major banks in dollars in the aggregate amount of the relevant Loans
and for a period comparable to the applicable Interest Period in the London
interbank market at approximately 11:00 a.m. (London time), two (2) Business
Days prior to the beginning of the relevant Interest Period. The determination
and calculation of the LIBOR and each component thereof by Administrative Agent
shall be conclusive and binding, absent manifest error.


 


“LIBOR Loan”
means a Loan that bears interest based on LIBOR plus the Applicable
Margin.


 


12

















 


“Lien”
means any security interest, mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preferential arrangement of any kind or nature whatsoever in respect
of any property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement and the interest of a
lessor under a Capital Lease), any financing lease having substantially the
same economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law and any contingent or
other agreement to provide any of the foregoing, but not including (a) the
interest of a lessor under a lease on Oil and Gas Properties and (b) the
interest of a lessor under an Operating Lease.


 


“Loan” means an extension of
credit by a Lender to the Company under Article II in
the form of a Revolving Credit Loan or a Swing Line Loan.


 


“Loan Documents”  means this Agreement, the Notes, each Guaranty, the
Security Documents, each LC Application and Letter of Credit and all other
documents delivered to the Administrative Agent or any Lender in connection
herewith, including without limitation, the Fee Letter and any commitment
letters.


 


“Loan Parties”  means collectively the Company, the
General Partner and each of the Guarantors. “Loan
Party” means individually, any of the Company or a Guarantor.


 


“Majority Lenders” means, at any
time, the Lenders holding at least fifty percent (50%) of the sum of the
Effective Amount or, if there is no Effective Amount, the Lenders holding at
least fifty percent (50%) of the sum of the Commitments of all of the Lenders.


 


“Margin Stock” means “margin stock” as such term is defined in Regulation U or X
of the FRB.


 


“Material Adverse Effect”
means (a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties or financial condition of the Loan Parties taken
as a whole, or as to the Company, including without limitation, any material
adverse change in commodity prices or reserve estimates of the Oil and Gas
Properties of the Loan Parties taken as a whole; (b) a material impairment of
the ability of any Loan Party to perform its material obligations under the
Loan Documents; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against any Loan Party of any material Loan
Document.


 


“Matured LC
Obligation” means, at any time, the aggregate amount of payments
theretofore made by the Issuing Lender in respect to Letters of Credit and not
theretofore reimbursed by or on behalf of the Company at such time.


 


“Mortgaged
Properties” means such Oil and Gas Properties upon which the
Loan Parties have granted the Administrative Agent for the benefit of the
Lenders a Lien pursuant to the Mortgages.


 


“Mortgages”
means the mortgages from the Loan Parties, as applicable, in favor of
Administrative Agent, for the benefit of the Lenders described on Schedule 4.01 hereto,
and all supplements, assignments, amendments and restatements thereto (or any
agreement in substitution therefor) as the same may be released in whole or in
part from time to time which are executed and delivered to Administrative Agent
for benefit of the Lenders pursuant to Article IV of this Agreement.


 


“Multiemployer
Plan” means a “multiemployer plan”,
within the meaning of Section 4001(a)(3) of ERISA, to which a Loan Party or any
ERISA Affiliate makes, is making, or is obligated to


 


13

















 


make contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.


 


“Notes”
means the promissory notes, whether one or more, specified in Section 2.01,
substantially in the same form as Exhibit E including any amendments,
modifications, renewals or replacements of such promissory notes.


 


“Notice of
Conversion/Continuation” means a notice in substantially the
form of Exhibit B.


 


“Notice of Revolving Credit Borrowing” means a notice in
substantially the form of Exhibit
A-1.


 


“Obligations”
means all advances, debts, liabilities, obligations, covenants and duties owing
or to be owing, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising
or incurred, by the Company or any other Loan Party: (a) to any Lender, the
Issuing Lender, the Administrative Agent, or any Indemnitee under any Loan
Document; (b) to any Lender Derivative Provider under any Lender Derivative
Contract; and (c) all renewals, extensions and rearrangements of the foregoing;
in each case including interest accruing subsequent to the filing of a petition
or other proceeding under the Bankruptcy Code or other similar proceeding,


 


“Oil and Gas”
means petroleum, natural gas and other related hydrocarbons or minerals or any
of them and all other substances produced or extracted in association
therewith.


 


“Oil and Gas
Liens” means Liens which arise in the ordinary course of
business under oil and gas leases, overriding royalty agreements, net profits
agreements, farm-out agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, Operating Agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements that are customary in the oil and gas business
and are entered into by any Loan Party in the ordinary course of business, provided
in all instances that such Liens are limited to the assets that are the subject
of the relevant agreement.


 


“Oil and Gas
Properties” means Hydrocarbon Interests now owned by the Loan
Parties or any Subsidiary thereof and contracts executed in connection
therewith and all tenements, hereditaments, appurtenances, and properties
belonging, affixed or incidental to such Hydrocarbon Interests, including,
without limitation, any and all property, real or personal, now owned by the Loan
Parties and situated upon or to be situated upon, and used, built for use, or
useful in connection with the operating, working or developing of such
Hydrocarbon Interests, including, without limitation, any and all petroleum
and/or natural gas wells, buildings, structures, field separators, liquid
extractors, plant compressors, pumps, pumping units, field gathering systems,
tank and tank batteries, fixtures, valves, fittings, machinery and parts,
engines, boilers, liters, apparatus, equipment, appliances, tools, implements,
cables, wires, towers, taping, tubing and rods, surface leases, rights-of-way,
easements and servitudes, and all additions, substitutions, replacements for,
fixtures and attachments to any and all of the foregoing owned directly or indirectly
by the Loan Parties or any Subsidiary thereof.


 


14

















 


“Operating
Agreements” mean those agreements now or hereafter executed by
any Loan Party and other working interest owners of the Oil and Gas Properties
in connection with the operation of the Oil and Gas Properties.


 


“Operating Lease”
means an operating lease determined in accordance with GAAP.


 


“Organization
Documents” means (a) for any corporation: the articles of incorporation, the
bylaws, any certificate of determination or instrument relating to the rights
of the shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee thereof)
of such corporation; (b) for any limited liability company: the articles of
organization, the regulations or operating agreement, certificate of
organization and all applicable resolutions of the members of such company; and
(c) for any limited partnership:
the limited partnership agreement
and all Organization Documents for its general partner, as any of the foregoing
have been amended or supplemented from time to time.


 


“Other Taxes”
means any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.


 


“Parent”
has the
meaning specified in the introductory clause hereto.


 


“Participant”
has the meaning specified in Section 11.06(d).


 


“PBGC”
means the Pension Benefit Guaranty Corporation, or any Governmental Authority
succeeding to any of its principal functions under ERISA.


 


“Pension Plan”
means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV
of ERISA, other than a Multiemployer Plan, which a Loan Party or any of its
Subsidiaries sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any time
during the immediately preceding five (5) plan years.


 


“Permitted Liens”
has the meaning specified in Section 8.01.


 


“Person”
means an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.


 


“Phase I Report”
means a report detailing the findings of an environmental site assessment
conducted by a qualified third party that satisfies the standards set forth in
the current American Standards and Testing Materials designated protocol for
Phase I Environmental Site Assessments, E1527-05, or any subsequent edition
thereof.


 


“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) which is
subject to ERISA, other than a Multiemployer Plan, which any Loan Party
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.


 


15

















 


“Pricing Grid”
means the annualized variable rates (stated in terms of basis points (“bps”)) set forth below for the
Applicable Margin, Commitment Fee and Letter of Credit Fee, based upon the
ratio of Effective Amount to the Borrowing Base Amount (the “Borrowing Base Utilization Percentage”),
as follows:


 




	
  Effective Amount/

  Borrowing Base

  Amount

  (Borrowing Base

  	
   

  	
  Applicable Margin

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Utilization

  Percentage)

  	
   

  	
  LIBOR

  Rate

  	
   

  	
  Base Rate

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Letter of Credit

  Fee

  	
   

  
	
   

  	
   

  	
  (bps)

  	
   

  	
  (bps)

  	
   

  	
  (bps)

  	
   

  	
  (bps)

  	
   

  
	
  3
  85%

  	
   

  	
  175.00

  	
   

  	
  75.00

  	
   

  	
  37.50

  	
   

  	
  175.00

  	
   

  
	
  <
  85% 3 66%

  	
   

  	
  162.50

  	
   

  	
  62.50

  	
   

  	
  37.50

  	
   

  	
  162.50

  	
   

  
	
  <
  66% 3 33%

  	
   

  	
  137.50

  	
   

  	
  37.50

  	
   

  	
  30.00

  	
   

  	
  137.50

  	
   

  
	
  <
  33%

  	
   

  	
  112.50

  	
   

  	
  12.50

  	
   

  	
  30.00

  	
   

  	
  112.50

  	
   

  






 


Each change in the Applicable Margin shall apply during the period
commencing on the date of such change in the Borrowing Base Utilization Percentage
(as defined above) and ending on the date immediately preceding the effective
date of the next such change in the Borrowing Base Utilization Percentage,
provided, however, that if at any time the Company fails to deliver a Reserve
Report pursuant to Section 7.02, then until such
time as a Reserve Report is delivered the “Applicable Margin” means the rate
per annum set forth on the grid when the Borrowing Base Utilization Percentage
is at its highest level.


 


“Pricing Grid Certificate”
means a Pricing Grid Certificate substantially in the form of Exhibit F hereto.


 


“Principal
Business” means the business of (a) the exploration for, and
development, acquisition, production, processing and upstream marketing and
transportation of Oil and Gas; and (b) the business of providing services in
connection with the production of Oil and Gas.


 


“Property”
means any interest in any kind of property or asset, whether real, personal or
mixed, tangible or intangible.


 


“Pro Rata Share”
means, as to any Lender at any time, the percentage set forth opposite its name
on Schedule 2.01
hereto, as modified by any Assignment and Assumption.


 


“Quarterly
Status Report” for a fiscal quarter means a status report
prepared quarterly by the Company in form, scope and content acceptable to the
Administrative Agent, setting forth as of the last day of each month during
such quarter (a) detailed production from the Oil and Gas Properties, the
volumes of Oil and Gas produced and saved, the volumes of Oil and Gas sold,
gross revenue, net income, related leasehold operating expenses, severance
taxes, other taxes, capital costs and any production imbalances incurred during
such period, (b) information concerning any Derivative Contracts entered into
by the Company or its Subsidiaries, and (c) such additional information with
respect to any of the Oil and Gas Properties as may be reasonably requested by
Administrative Agent.


 


16
















 


“Quicksilver” means Quicksilver
Resources Inc., a Delaware corporation.


 


“Quicksilver Acquisition” means the
acquisition by the Company of (i) the Quicksilver Interests (as defined in the
Quicksilver Acquisition Agreement) and (ii) certain other Oil and Gas
Properties and other assets that were owned directly by Quicksilver pursuant to
the Quicksilver Acquisition Documents.


 


“Quicksilver Acquisition Agreement”
means the Contribution Agreement, dated as of September 11, 2007, between
Quicksilver and the Company, together with such amendments as are acceptable to
the Administrative Agent and the Required Lenders.


 


“Quicksilver Acquisition Documents”
means (a) the Quicksilver Acquisition Agreement and (b) all bills of sale,
assignments, agreements, instruments and documents executed and delivered in
connection therewith.


 


“Quicksilver Acquisition Properties”
means the Oil and Gas Properties of the Quicksilver Acquired Companies and
their Subsidiaries and the Oil and Gas Properties acquired by the Company from
Quicksilver pursuant to the Quicksilver Acquisition Documents.


 


“Quicksilver Material Adverse Effect”
means a Material Adverse Effect, as such term is defined the Quicksilver
Acquisition Agreement.


 


“Quicksilver Target Equity Interests”
means (a) 100% of the issued and outstanding capital stock of (i) Terra Energy
Company LLC, a Michigan limited liability company, (ii) GTG Pipeline LLC, a
Virginia limited liability company and (iii) Mercury Michigan Company, LLC, a
Michigan limited liability company, (b) an undivided 50% of the limited
liability of Beaver Creek Pipeline, L.L.C., a Michigan limited liability
company, and (c) a 5.5385% limited partnership interest of Wilderness – Chester
Gas Processing LP, a Michigan limited partnership.


 


“Regulation U” and “Regulation X” means
Regulation U and Regulation X, respectively, of the FRB from time to time in
effect and shall include any successor or other regulations or official
interpretations of the FRB relating to the subject matter addressed therein.


 


“Related Parties” means, with respect
to any Person, such Person’s Affiliates and the partners, directors, officers,
employees, agents and advisors of such Person and of 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 to such term in Section 7.13.


 


“Reportable Event”
means, any of the events set forth in Section 4043(b) of ERISA or the
regulations thereunder, other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the PBGC.


 


“Required Lenders”
means, at any time, Lenders holding at least sixty-six and two-thirds percent
(662/3%) of the sum of the
Effective Amount or, if there is no Effective Amount, Lenders holding at least
sixty-six and two-thirds percent (662/3%) of the sum of the Commitments of all of the Lenders.


 


17

















 


“Requirement of Law”
means, as to any Person, any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.


 


“Reserve Report” means
a report, in form, scope and content acceptable to the Lenders, covering proved
developed and proved undeveloped Oil and Gas reserves attributable to the Oil
and Gas Properties owned by the Company and its Subsidiaries and setting forth
with respect thereto, (a) the total quantity of proved developed and proved
undeveloped reserves (separately classified as to producing, shut-in, behind
pipe, and undeveloped), (b) the estimated future net revenues and cumulative
estimated future net revenues, (c) the present discounted value of future net
revenues, and (d) such other information and data with respect to such Oil and
Gas Properties as the Administrative Agent may reasonably request.


 


“Responsible Officer”
of a Person means any chief executive officer or co-chief executive officer,
president, vice president with responsibility for financial matters, chief
financial officer or treasurer of (1) such Person, if such Person is a
corporation or limited liability company, or (2) the general partner of such
Person, if such Person is a partnership.


 


“Restricted Subsidiary” means all
subsidiaries of the Company other than Unrestricted Entities.


 


“Revolving Credit Borrowing” a
borrowing hereunder consisting of Revolving Credit Loans of the same Interest
Rate Type made to the Company on the same day by the Lenders under Article II, and, other than in the
case of Base Rate Loans, having the same Interest Period.


 


“Revolving Credit Loan” has the
meaning specified in Section 2.01.


 


“Scheduled Borrowing Base Determination”
means a redetermination of the Borrowing Base in accordance with Section 2.05(a) on each Scheduled
Borrowing Base Determination Date.


 


“Scheduled Borrowing Base Determination Date”
means April 1, 2008 and thereafter October 1 and April 1 of each calendar year.


 


“SEC” means the Securities and
Exchange Commission, or any Governmental Authority succeeding to any of its
principal functions.


 


“Security Agreements” means
collectively, each agreement in substantially the form of Exhibit
H executed by a Loan Party in favor of Administrative Agent for
the benefit of the Lenders.


 


“Security Documents” means the
Mortgages, the Security Agreements and related financing statements as same may
be amended from time to time and any and all other instruments now or hereafter
executed in connection with or as security for the payment of the Obligations.


 


“Solvent” means, as to any Person at
any time, that (a) the fair value of all of the property of such Person is
greater than the amount of such Person’s liabilities (including disputed,
contingent and unliquidated liabilities) as such value is established and
liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code;
(b) the present fair salable value of all of the property of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured; (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature; and


 


18

















 


(d)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person’s property would
constitute unreasonably small capital.


 


“Special Borrowing Base Determination”
has the meaning specified in Section 2.05(b).


 


“subsidiary” of a Person means any
corporation, limited liability company, association, partnership, joint venture
or other business entity of which more than 50% of the voting stock or other
Equity (in the case of Persons other than corporations) having ordinary voting
power for the election of directors or other governing body are owned, or the
management of which is controlled directly or indirectly by such Person, or by
one or more of the subsidiaries of such Person, or a combination thereof. All
references in this Agreement and in the other Loan Documents to the capitalized
terms “Subsidiary” or “Subsidiaries” shall mean Restricted
Subsidiaries and shall not include any Unrestricted Entity.


 


Unless
the context otherwise expressly requires, references herein to a “Subsidiary”
refer to a Subsidiary of the Company or Parent as applicable.


 


“Surety Instruments” means all
letters of credit (including standby), banker’s acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.


 


“Swing Line Borrowing” means a
borrowing of a Swing Line Loan pursuant to Section 2.13.


 


“Swing Line Lender” has the meaning
specified in the introductory clause hereto.


 


“Swing Line Loan” has the meaning
specified in Section 2.13(a).


 


“Swing Line Loan Notice” means a
notice of a Borrowing of a Swing Line Loan pursuant to Section
2.13, which, if in writing, shall be substantially in the form
of Exhibit A-2.


 


“Swing Line Settlement Date” means
the 15th day and the last day of each calendar month, provided
however, that if any such day is not a Business Day, the applicable Swing Line
Settlement Date shall be the Business Day immediately preceding such day.


 


“Swing Line Sublimit” means an amount
equal to the lesser of (a) $25,000,000 and (b) the Borrowing Base.


 


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


 


“Termination Date”
means the earlier of (a) November 1, 2011, or (b) the date on which the Lenders’
Commitments terminate in accordance with the provisions of this Agreement.


 


“Total Indebtedness” means, at any
date, all Indebtedness of the Loan Parties, on a consolidated basis, excluding,
however, all net obligations with respect to Derivative Contracts entered into
in accordance with Section 8.10 and any Guaranty
Obligations thereof by Parent entered into in accordance with Section 8.08(b).


 


“Unfunded Pension Liability”
means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of
ERISA, over the current value of that Plan’s assets, determined in accordance
with


 


19

















 


the
assumptions used for funding the Pension Plan pursuant to Section 412 of the
Code for the applicable plan year.


 


“United States” and “U.S.” each means the
United States of America.


 


“Unrestricted Entity” means (1) the
entities listed on Schedule 6.19 under the
heading “Unrestricted Entities”; and (2) in the event an entity that is
not a Wholly Owned Subsidiary becomes a subsidiary of Parent, then such entity
shall be an Unrestricted Entity, provided, however, in the event
that (a) any of the foregoing entities becomes a Wholly Owned Subsidiary of
Parent, or (b) any of the foregoing entities guarantees any other Indebtedness
of Parent or any Restricted Subsidiary of Parent, then such entity shall no
longer be an Unrestricted Entity and shall be a Restricted Subsidiary, and all
of the covenants and other provisions of this Agreement applicable to
Restricted Subsidiaries shall apply to such Subsidiary. In addition, Parent
may, by notice given to the Administrative Agent, designate an Unrestricted
Entity as a Restricted Subsidiary, provided that the requirements of this
Agreement pertaining to the granting of Collateral and the giving of a Guaranty
by such Subsidiary (including Sections 4.01, 4.02, 7.14
and 7.15) shall be satisfied as a
condition of such designation.


 


“Wholly Owned” means that 100% of the
Equity is owned, either directly or indirectly.


 


1.02                        Other
Interpretive Provisions. The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms. Unless
otherwise specified or the context clearly requires otherwise, the words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a
whole and not to any particular provision of this Agreement; and subsection,
Section, Schedule and Exhibit references are to this Agreement. The term “documents” includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced. The term “including” is
not limiting and means “including without
limitation.” In the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including,” the words “to”
and “until” each mean “to but
excluding,” and the word “through” means “to and including.” Unless otherwise expressly provided
herein, (a) references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent amendments
and other modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan Document, and
(b) references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation. The captions and
headings of this Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement. This Agreement and other Loan
Documents may use several different limitations, tests or measurements to
regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with
their terms. This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Lenders or the Administrative Agent
merely because of the Administrative Agent’s or Lenders’ involvement in their
preparation.


 


1.03                        Accounting
Principles. Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied. References to “consolidated,”
when it precedes any accounting term, means such term as it would apply to the
Loan Parties on a consolidated basis, determined in accordance with GAAP.


 


20

















 


ARTICLE II.



THE CREDIT


 


2.01                        Amounts and Terms of the Commitments.


 


(a)                                  Each Lender severally agrees, on the terms and conditions
set forth herein, to make loans to the Company (each such loan, a “Revolving Credit Loan”) from time to time on any
Business Day during the period from the Effective Date to the Termination Date,
so long as (a) with respect to any Lender, such Revolving Credit Loans then
requested to be made by such Lender do not exceed such Lender’s Pro Rata Share
of the aggregate amount of all Loans then requested from the Lenders, and (b)
the sum of the aggregate principal amount of all Revolving Credit Loans by all
Lenders hereunder plus the aggregate principal amount of all Swing Line Loans
plus the LC Obligation outstanding at any time does not exceed the Borrowing
Base in effect at such time. Subject to the terms and conditions hereof, until
the Termination Date, Company may borrow, repay, and reborrow hereunder.


 


(b)                                 Upon the request of any Lender made through the
Administrative Agent, the Company shall execute and deliver to such Lender
(through the Administrative Agent) a promissory note from the Company payable
to the order of such Lender (herein called such Lender’s “Note” and
collectively, the “Notes”).
The amount of principal owing on any Lender’s Note at any given time shall be
the aggregate amount of all Loans theretofore made by such Lender minus
all payments of principal theretofore received by such Lender on such Note. Interest
on each Note shall accrue and be due and payable as provided herein and
therein.


 


(c)                                  Subject to the terms and conditions of Section 2.10 below
and relying upon the agreements of the Lenders set forth herein, the Issuing
Lender agrees to issue Letters of Credit as support for Derivative Contracts
covering Oil and Gas commodities and other purposes approved by the
Administrative Agent upon the request of the Company at any time and from time
to time on and after the Effective Date and up to, but excluding, the
Termination Date (the “Availability
Period”), and the Lenders severally agree to participate in such
Letters of Credit and drawings thereunder. No Letter of Credit will be issued
in a face amount which, after giving effect to the issuance of such Letter of
Credit, would cause the LC Obligation to exceed $50,000,000 or the Effective
Amount to exceed the Borrowing Base then in effect.


 


2.02                        Procedure for Borrowings.


 


(a)                                  Each Revolving Credit Borrowing of Revolving Credit Loans
shall be made upon the Company’s irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Revolving Credit Borrowing duly
completed; which notice must be received by the Administrative Agent prior to
12:00 noon (Houston, Texas time) (i) three (3) Business Days prior to the
requested Borrowing Date, in the case of LIBOR Loans; and (ii) one (1) Business
Day prior to the requested Borrowing Date, in the case of Base Rate Loans.


 


(b)                                 Each Notice of Revolving Credit Borrowing shall specify (i)
the amount of the Revolving Credit Borrowing, which shall be in an aggregate
minimum amount (A) for Base Rate Loans equal to the lesser of (y) $500,000 or
any multiple integrals of $100,000  in
excess thereof or (z) the unadvanced portion of the Available Borrowing Base
and (B) for LIBOR Loans $3,000,000 or any multiple integrals of $1,000,000 in
excess thereof (if the Available Borrowing Base as of such Borrowing Date will
be less than $3,000,000, then the Company may not request a LIBOR Loan); (ii)
the requested Borrowing Date, which shall be a Business Day; (iii) the Interest
Rate Type of Loans comprising the Revolving Credit Borrowing; and (iv) for
LIBOR Loans the duration of the Interest Period applicable to


 


21

















 


such Revolving Credit Loans. If
the Notice of Revolving Credit Borrowing fails to specify the duration of the
Interest Period for any Revolving Credit Borrowing comprised of LIBOR Loans,
such Interest Period shall be three months.


 


(c)                                  The number of Borrowings outstanding of LIBOR Loans shall
not exceed five (5) at any one time.


 


(d)                                 The Administrative Agent will promptly notify each Lender of
its receipt of any Notice of Revolving Credit Borrowing and of the amount of
such Lender’s Pro Rata Share of that Revolving Credit Borrowing.


 


(e)                                  Provided the applicable conditions in Article V are met,
each Lender will make the amount of its Pro Rata Share of each Revolving Credit
Borrowing available to the Administrative Agent for the account of the Company
at the Administrative Agent’s Payment Office by 11:00 a.m. (Houston, Texas
time) on the Borrowing Date requested by the Company in funds immediately
available to the Administrative Agent. The proceeds of all such Loans will then
be made available to the Company by the Administrative Agent to the Company’s
operating account with the Administrative Agent or by wire transfer in
accordance with written instructions provided to the Administrative Agent by
the Company of like funds as received by the Administrative Agent.


 


2.03                        Conversion and Continuation Elections.


 


(a)                                  During the period from the Effective Date to the Termination
Date, the Company may, upon irrevocable written notice to the Administrative
Agent in accordance with Section
2.03(b): (i) elect, as of any Business Day, in the case of Base
Rate Loans, or as of the last day of the applicable Interest Period, in the
case of LIBOR Loans, to convert any such Revolving Credit Loans into Revolving
Credit Loans of any other Interest Rate Type; or (ii) elect as of the last day
of the applicable Interest Period, to continue any Revolving Credit Loans
having Interest Periods expiring on such day; provided, that if at any
time a LIBOR Loan in respect of any Revolving Credit Borrowing is reduced, by
payment, prepayment, or conversion of part thereof to less than $3,000,000,
such LIBOR Loan shall automatically convert into a Base Rate Loan.


 


(b)                                 The Company shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent not later
than 12:00 noon (Houston, Texas time) at least (i) three (3) Business Days in
advance of the Conversion/Continuation Date, if the Revolving Credit Loans are
to be converted into or continued as LIBOR Loans; and (ii) one (1) Business Day
in advance of the Conversion/Continuation Date, if the Revolving Credit Loans
are to be converted into Base Rate Loans, specifying: (A) the proposed
Conversion/Continuation Date; (B) the aggregate amount of Revolving Credit
Loans to be converted or continued; (C) the Interest Rate Type of Loans
resulting from the proposed conversion or continuation; and (D) other than in
the case of conversions into Base Rate Loans, the duration of the requested
Interest Period.


 


(c)                                  If upon the expiration of any Interest Period applicable to
LIBOR Loans, the Company has failed to select timely a new Interest Period to
be applicable to LIBOR Loans, or if any Default or Event of Default then exists,
the Company shall be deemed to have elected to convert such LIBOR Loans into
Base Rate Loans effective as of the expiration date of such Interest Period.


 


(d)                                 The Administrative Agent will promptly notify each Lender of
its receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective Lender’s Pro
Rata Share


 


22

















 


of outstanding principal amounts of the
Revolving Credit Loans with respect to which the notice was given.


 


2.04                        Optional Commitment Reductions and Optional
Prepayments.


 


(a)                                  The Company shall have the right to terminate or to
permanently reduce the amount of the Aggregate Maximum Credit Amount, the Swing
Line Sublimit or the Letter of Credit Sublimit, at any time, or from time to
time, upon notice given to the Administrative Agent (which shall promptly
notify the Lenders) not less than 12:00 noon Houston, Texas time three (3)
Business Days’ prior to the date of termination or reduction, which notice
shall specify the effective date thereof and the amount of any such reduction
(which shall not be less than (i) $5,000,000.00 or any whole multiple of
$1,000,000.00 in excess thereof for any reduction of the Aggregate Maximum
Credit Amount, and (ii) $1,000,000 or any whole multiple of $500,000 in excess
thereof for the Swing Line Sublimit and the Letter of Credit Sublimit). Any
such notice given shall be irrevocable and effective only upon receipt by the
Administrative Agent. The Aggregate Maximum Credit Amount, the Swing Line
Sublimit and the Letter of Credit Sublimit once terminated or reduced may not
be reinstated.


 


(b)                                 Subject to Section 3.04,
the Company may, at any time or from time to time,


 


(i)                                     prepay Revolving Credit Loans that are Base Rate Loans,
without premium or penalty, upon irrevocable notice to the Administrative Agent
of not less than one (1) Business Day, ratably as to each Lender, in whole or
in part, in aggregate minimum principal amounts of $1,000,000 or multiple
integrals thereof (unless the outstanding principal amount of all Revolving
Credit Loans that are Base Rate Loans is less than $1,000,000, then such
prepayments shall be equal to such outstanding principal amount),


 


(ii)                                  prepay Revolving Credit Loans that are LIBOR Loans, without
premium or penalty (but subject to Section 3.04) upon irrevocable notice to the Administrative
Agent not less than three (3)  Business
Days, ratably as to each Lender, prepay Revolving Credit Loans, in whole or in
part, in aggregate minimum principal amounts of $1,000,000 or multiple
integrals thereof plus all interest and expenses then outstanding. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Interest Rate Type(s) of Revolving Credit Loans to be prepaid. The
Administrative Agent will promptly notify each Lender of its receipt of any
such notice, and of such Lender’s Pro Rata Share of such prepayment. The
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and to the extent previously invoiced, any amounts required
pursuant to Section 3.04,
and


 


(iii)                               upon notice to the Swing Line Lender (with a copy to the
Administrative Agent), voluntarily prepay Swing Line Loans in whole or in part
without premium or penalty; provided that (i) such notice must be received by
the Swing Line Lender and the Administrative Agent not later than 3:00 p.m.
Houston, Texas time on the date of the prepayment, and (ii) any such prepayment
shall be in a minimum principal amount of $200,000. Each such notice shall
specify the date and amount of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein.


 


2.05                        Borrowing Base Determinations; Mandatory
Prepayments of Loans.


 


(a)                                  Scheduled Borrowing Base Determinations. At all times prior to the Termination Date the Effective
Amount shall not exceed the Borrowing Base then in effect. From and after the
Effective Date, the initial Borrowing Base hereunder shall be $700,000,000.00,
until redetermined pursuant to the terms of this Section 2.05. Upon notice to the Company,
the Borrowing Base shall be


 


23

















 


redetermined for each Borrowing Base
Period on each Scheduled Borrowing Base Determination Date, and each such
redetermination shall be effective as of the date set forth in such notice of
redetermination. The Borrowing Base shall be determined based upon the loan
collateral value assigned to the Oil and Gas Properties owned by the Company
and its Subsidiaries and such other credit factors (including without
limitation the assets, liabilities, cash flow, business, properties, prospects,
management and ownership of the Loan Parties) which the Lenders deem
significant. The Lenders’ determination of the Borrowing Base shall be in their
sole discretion and shall not be subject to review or challenge under Sections 11.17 and 11.18 hereof. Upon each
redetermination of the Borrowing Base, the Administrative Agent shall recommend
to the Lenders a new Borrowing Base and the Lenders in accordance with their
customary policies and procedures for extending credit to Oil and Gas
reserve-based customers shall (by unanimous agreement in the case of Borrowing
Base increases and by agreement of the Required Lenders in the case of
Borrowing Base decreases or affirmations) establish the redetermined Borrowing
Base. If the Company does not furnish the Reserve Reports or all such other
information and data by the date required, the Lenders may nonetheless
determine a new Borrowing Base. It is expressly understood that the Lenders
shall have no obligation to determine the Borrowing Base at any particular
amount, either in relation to the Aggregate Maximum Credit Amount or otherwise.


 


(b)                                 Special Borrowing Base Determinations.


 


(i)                                     In addition to Scheduled Borrowing Base Determinations
pursuant to Section
2.05(a), the Company and the Required Lenders may each request
one (1) additional redetermination of the Borrowing Base during each Borrowing
Base Period (“Special
Borrowing Base Determination”). In the event the Company
requests a Special Borrowing Base Determination pursuant to this Section 2.05(b), the
Company shall deliver written notice of such request to the Lenders which shall
include: (i) Reserve Report(s) prepared as of a date not more than thirty (30)
calendar days prior to the date of such request, for the benefit of the
Lenders, and (ii) such other information as the Lenders shall request prepared
as of a date not more than thirty (30) calendar days prior to the date of such
request. Likewise, in the event the Required Lenders exercise their option for
a Special Borrowing Base Determination, the Administrative Agent shall give the
Company notice of the redetermined Borrowing Base.


 


(ii)                                  In addition to the Special Borrowing Base Determination
permitted by Section 2.05(b)(i),
a Special Borrowing Base Determination shall be done at the times set forth in Section 2.14(b)


 


(c)                                  Mandatory Prepayment of Loans.


 


(i)                                     If, after giving effect to any termination or reduction of
the Aggregate Maximum Credit Amounts pursuant to Section 2.04(a), the Effective Amount exceeds the total
Commitments, then the Company shall (A) prepay the Loans on the date of such
termination or reduction in an aggregate principal amount equal to such excess,
and (B) if any excess remains after prepaying all of the Loans as a result of
the LC Obligation, pay to the Administrative Agent on behalf of the Lenders an
amount equal to such excess to be held as cash collateral as provided in Section 2.10(h).


 


(ii)                                  If a Borrowing Base Deficiency shall exist at the time of a
Borrowing Base redetermination or adjustment pursuant to the terms of this
Agreement, then the Company shall, within thirty (30) days after notice from
the Administrative Agent to the Company of the new or adjusted Borrowing Base,
exercise any one or combination of the following: (i) make a mandatory
principal prepayment in an amount equal to the amount of the Borrowing Base
Deficiency, after giving effect to any action taken under (ii) hereof; or (ii)
pledge, or cause its Subsidiaries to pledge, additional unencumbered collateral
of sufficient value and character (as determined by the Lenders in their sole


 


24

















 


discretion) that when added to the
existing Collateral shall cause the Borrowing Base to equal or exceed the
Effective Amount, after giving effect to any action taken under (i) hereof. If,
because of the LC Obligation, a Borrowing Base Deficiency remains after
prepaying all of the Loans, the Company shall pay to the Administrative Agent
on behalf of the Lenders an amount equal to such remaining Borrowing Base
Deficiency to be held as collateral for so long as a Borrowing Base Deficiency
remains as provided in Section
2.10(h).


 


(iii)                               Each prepayment of Loans pursuant to this Section 2.05(c) shall be
applied, first, ratably to any Base Rate Borrowings of Base Rate Loans then
outstanding, and, second, to any LIBOR Borrowings of LIBOR Loans then
outstanding as the Company may direct.


 


(iv)                              Each prepayment of the Loans pursuant to this Section  2.05(c) shall be applied,
first, to the outstanding Swing Line Loans and, second, to outstanding
Revolving Credit Loans.


 


(v)                                 Each prepayment of a Borrowing pursuant to this Section 2.05(c) shall be
applied to the Loans included in such prepaid Borrowing in accordance with each
Lender’s Pro Rata Share thereof. Prepayments pursuant to this Section 2.05(c) shall be
accompanied by accrued interest.


 


(vi)                              Prepayments permitted or required under this Section 2.05(c) shall be
without premium or penalty, but shall be subject to payment of amounts due
pursuant to Section 3.04.


 


2.06                        Repayment.


 


(a)                                  Revolving Credit Loans.
The Company shall repay to the Administrative Agent (for the account of the
Lenders in their respective Pro Rata Shares) the aggregate principal amount of
Revolving Credit Loans outstanding on the Termination Date, on which date all
principal amounts outstanding, plus all accrued but unpaid interest and
other amounts then due hereunder or under the other Loan Documents, if not
sooner paid, shall be due and payable in full.


 


(b)                                 Swing Line Loans.
The Company shall repay each Swing Line Loan on the earlier to occur of (i) the
first Swing Line Settlement Date to occur after such Loan is made and (ii) the
Termination Date.


 


(c)                                  Interest.


 


(i)                                     Each LIBOR Loan shall bear interest on the aggregate
outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the lesser of (A) LIBOR, plus the Applicable Margin, or
(B) the Highest Lawful Rate. Each Revolving Credit Loan that is a Base Rate
Loan and each Swing Line Loan shall bear interest on the aggregate outstanding
principal amount thereof from the applicable borrowing date at a rate per annum
equal to the lesser of (A) the Base Rate plus the Applicable Margin or
(B) the Highest Lawful Rate.


 


(ii)                                  Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Loans under Section
2.04(b) or 2.05(c)
(except in the case of Base Rate Loans) for the portion of the Loans so prepaid
and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Administrative Agent.


 


(iii)                               Notwithstanding Section 2.06(c)(i), while any Event of
Default exists, the Company shall pay interest (after, as well as before, entry
of judgment thereon, to the extent permitted by law) on the principal amount of
all outstanding Loans, at a rate per annum equal to the lesser of (A) the


 


25

















 


Highest Lawful Rate and (B) the Base
Rate plus the Applicable Margin plus two percent (2%) (the “Default Rate”).


 


2.07                        Fees.


 


(a)                                  Commitment Fee.
The Company shall pay to the Administrative Agent, for the account of the
Lenders, an aggregate commitment fee equal to the then-applicable Commitment
Fee indicated in the Pricing Grid times the actual daily amount by which
the Borrowing Base exceeds the sum of (i) the outstanding amount of Revolving
Credit Loans and (ii) the outstanding amount of LC Obligations. Such commitment
fee shall accrue from the Effective Date to the Termination Date and shall be
due and payable quarterly in arrears on the first Business Day of the first
month of each quarter commencing on January 2, 2008, through the Termination
Date, with the final payment to be made on the Termination Date; provided
that, in connection with any reduction or termination of Commitments, the
accrued commitment fee calculated for the period ending on such date shall also
be paid on the date of such reduction or termination, with the following
quarterly payment being calculated on the basis of the period from such
reduction or termination date to the following quarterly payment date. The
commitment fee provided in this subsection shall accrue at all times after the
Effective Date up to the Termination Date, including at any time during which
one or more conditions in Section
5.02 are not met.


 


(b)                                 Letter of Credit Fee.
The Company agrees to pay (i) to Issuing Lender (for the ratable account of the
Lenders in their respective Pro Rata Shares), a fee for each Letter of Credit,
to be paid quarterly in arrears following the Issuance of such Letter of Credit
(including the initial Issuance and any renewal, extension or increase in the
amount thereof) in the amount equal to the greater of (A) $500.00 and (B) the
product equal to the Letter of Credit rate set forth on the Pricing Grid multiplied
by the undrawn amount available under such Letter of Credit (such fee shall
be deemed to be fully earned and owing upon the Issuance of such Letter of
Credit, and no refund shall be due in the event such Letter of Credit is
terminated prior to its expiry date), and (ii) to the Issuing Lender for its
account a fee for the issuance of each Letter of Credit (including the initial
Issuance and any renewal, extension or increase in the amount thereof), at the
Issuance of such Letter of Credit, in an amount equal to the greater of (A)
$500.00 and (B) one-eighth of one percent (0.125%) multiplied by the
aggregate amount available under each Letter of Credit (such fees shall be
prorated for any period less than a full year but shall not be refunded in the
event any such Letter of Credit is terminated prior to its expiry date) and
(iii) Issuing Lender’s usual and customary fees for amendment to transfer of or
negotiation of the terms of each Letter of Credit. The Administrative Agent
shall pay to each Lender its Pro Rata Share of the Letter of Credit Fee paid
pursuant to Section
2.07(b)(i). The Administrative Agent shall pay to the Issuing
Lender the Letter of Credit fees paid pursuant to Section 2.07(b)(ii) and (iii).


 


(c)                                  Agency Fees.
The Company shall pay fees to the Administrative Agent for the Administrative
Agent’s own account, as required by that certain letter agreement (“Fee Letter”) between
the Company and the Administrative Agent dated as of September 10, 2007,
relating hereto.


 


2.08                        Computation of Fees and Interest.


 


(a)                                  All computations of interest for Base Rate Loans shall be
made on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (which results in more interest
being paid than if computed on the basis of a 365-day year). Interest and fees
shall accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.


 


26

















 


(b)                                 Each determination of an interest rate by the Administrative
Agent shall be conclusive and binding on the Company and the Lenders in the
absence of manifest error.


 


2.09                        Payments by the Company; Borrowings Pro
Rata.


 


(a)                                  All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. All payments by the Company shall be made
in immediately available funds to the Administrative Agent by credit to the
Company’s operating account at the Administrative Agent’s Payment Office for
the account of the Administrative Agent or the Lender to whom such payment is
owed, and shall be made in dollars and in immediately available funds, no later
than 12:00 Noon (Houston, Texas time) on the date specified herein. Except to
the extent otherwise provided herein, (i) each payment by the Company of fees
shall be made pro rata in accordance with their respective Pro Rata Shares,
(ii) each payment of principal of Revolving Credit Loans shall be made for the
account of the Lenders pro rata in accordance with their respective outstanding
principal amount of Revolving Credit Loans, and (iii) each payment of interest
on Revolving Credit Loans shall be made for the account of the Lenders pro rata
in accordance with their respective shares of the aggregate amount of interest
due and payable to the Lenders. Notwithstanding the foregoing, to the extent
money is received by the Administrative Agent pursuant to the exercise of
remedies under the Security Documents such money shall be applied to the pro
rata payment of obligations secured by such Security Document.


 


(b)                                 The Administrative Agent will promptly distribute to each
Lender its applicable share of such payment in like funds as received. Any
payment received by the Administrative Agent later than 12:00 Noon (Houston,
Texas time) shall be deemed to have been received on the following Business Day
and any applicable interest or fee shall continue to accrue. When the
Administrative Agent collects or receives money on account of the Obligations
or otherwise pursuant to the Security Documents if such money is insufficient
to pay all such Obligations, such money shall be applied first to any
reimbursements due Administrative Agent under Section 11.04 or 11.05.


 


(c)                                  Subject to the provisions set forth in the definition of “Interest Period” herein, whenever any payment is due on a
day other than a Business Day, such payment shall be made on the following
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.


 


(d)                                 Unless the Administrative Agent receives notice from the
Company prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Lender hereunder that the
Company will not make such payment, the Administrative Agent may assume that
the Company has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing
Lender, as the case may be, the amount due. In such event, if the Company has
not in fact made such payment, then each of the Lenders or the Issuing Lender,
as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or the Issuing
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 Rate and a rate
determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.


 


(e)                                  Except to the extent otherwise expressly provided herein,
each borrowing of Revolving Credit Loans hereunder shall be from the Lenders
pro rata in accordance with their respective Pro Rata Shares.


 


27

















 


2.10                        Issuing the Letters of Credit.


 


(a)                                  Subject to the terms and conditions set forth herein, the
Company may request the Issuing Lender to issue Letters of Credit for its own
account or for any of its Subsidiaries, in a form reasonably acceptable to the
Administrative Agent and the Issuing Lender, at any time and from time to time
during the Availability Period; provided that the Company may not
request the issuance, amendment, renewal or extension of Letters of Credit
hereunder if the Effective Amount exceeds the Borrowing Base at such time or
would exceed the Borrowing Base as a result thereof.


 


(b)                                 In order to effect the issuance of a Letter of Credit, the
Company shall submit a Notice of Revolving Credit Borrowing and a LC
Application in writing by telecopy to the Administrative Agent (who shall
promptly notify the Issuing Lender) not later than 1:00 p.m., Houston, Texas
time, three (3) Business Days before the requested date of issuance of such
Letter of Credit. Each such Notice of Revolving Credit Borrowing and LC
Application shall be (i) signed by the Company, (ii) specify the Business Day
on which such Letter of Credit is to be issued, (iii) specify the purpose for
the requested Letter of Credit, (iv) specify the availability for Letters of
Credit under (A) the Borrowing Base and (B) the $50,000,000 aggregate LC
Obligation limitation, as of the date of issuance of such Letter of Credit, (v)
specify the expiry date thereof, which shall not be later than the earlier of
(A) twelve (12) months from the date of issuance of such Letter of Credit and
(B) seven (7) Business Days prior to the Termination Date, and (vi) specify
such other matters as may be required by the Issuing Lender.


 


(c)                                  Unless the Issuing Lender has received written notice from
any Lender, the Administrative Agent or any Loan Party, at least one Business
Day prior to the requested date of issuance or amendment of the applicable
Letter of Credit, that one or more applicable conditions set forth in Article V shall not been be satisfied, then, subject
to the terms and conditions hereof, the Issuing Lender shall issue such
Letter of Credit or amendment, as the case may be, to the specified
beneficiary, in each case in accordance with the Issuing Lender’s usual and
customary business practices. The Issuing Bank shall provide the Company with a
copy of each Letter of Credit so issued. Each such Letter of Credit shall,
unless otherwise expressly agreed by the Issuing Lender and the Company at the
time such Letter of Credit is issued, be subject to the rules of the “International Standby Practices 1998” or such later version
as may be published by the Institute of International Banking Law and Practice
(the “ISP 1998”), or any
successor entity, and shall, as to matters not governed by the ISP 1998, be
governed by, and construed and interpreted in accordance with, the laws of the
State of Texas.


 


(d)                                 Upon the issuance date of each Letter of Credit, the Issuing
Lender shall be deemed, without further action by any party hereto, to have
sold to each other Lender, and each other Lender shall be deemed, without
further action by any party hereto, to have purchased from the Issuing Lender,
a participation, to the extent of such Lender’s Pro Rata Share, in such Letter
of Credit, the obligations thereunder and in the reimbursement obligations of
the Company due in respect of drawings made under such Letter of Credit. If
requested by the Issuing Lender, the other Lenders will execute any other
documents reasonably requested by the Issuing Lender to evidence the purchase
of such participation. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this Agreement in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or Event of
Default, the existence of a Borrowing Base Deficiency or reduction or
termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.


 


(e)                                  Upon the presentment of any draft for honor under any Letter
of Credit by the beneficiary thereof which the Issuing Lender determines is in
compliance with the conditions for payment thereunder, the Issuing Lender shall
promptly notify the Company and the Administrative Agent thereof,


 


28

















 


but failure to so notify the Company
shall not in any way affect the Company’s obligations hereunder. The Company
hereby promises and agrees, at the Company’s option, to either (i) pay to the
Administrative Agent for the account of the Issuing Lender, by 2:00 p.m.,
Houston, Texas time, on the date payment is due as specified in such notice,
the full amount of such draft in immediately available funds or (ii) request a
Loan pursuant to the provisions of Section 2.01(a) and Section 2.02 of this
Agreement in the full amount of such draft, which request shall specify that
the Borrowing Date is to be the date payment is due under the Letter of Credit
as specified in the Issuing Lender’s notice. If the Company fails timely to
make such payment because a Loan cannot be made pursuant to Section 2.01(a)
and/or Section 5.02,
each Lender shall, notwithstanding any other provision of this Agreement
(including the occurrence and continuance of a Default or an Event of Default),
make available to the Administrative Agent for the benefit of the Issuing
Lender an amount equal to its Pro Rata Share of the presented draft on the day
the Issuing Lender is required to honor such draft. If such amount is not in
fact made available to the Administrative Agent by such Lender on such date,
such Lender shall pay to the Administrative Agent for the account of the
Issuing Lender, on demand made by the Issuing Lender, in addition to such
amount, interest thereon at the Federal Funds Rate for the first two days
following demand and thereafter until paid at the Base Rate. Upon receipt by
the Administrative Agent from the Lenders of the full amount of such draft,
notwithstanding any other provision of this Agreement (including the occurrence
and continuance of a Default or an Event of Default) the full amount of such
draft shall automatically and without any action by the Company, be deemed to
have been a Base Rate Loan as of the date of payment of such draft. Nothing in
this Section 2.10(e)
or elsewhere in this Agreement shall diminish the Company’s obligation under
this Agreement to provide the funds for the payment of, or on demand to
reimburse the Issuing Lender for payment of, any draft presented to, and duly
honored by, the Issuing Lender under any Letter of Credit, and the automatic
funding of a Loan as in this Section 2.10(e) provided shall not constitute a cure or
waiver of the Event of Default for failure to provide timely such funds as in
this Section 2.10(e) agreed.


 


(f)                                    The Company’s obligation to reimburse the Issuing Lender for
amounts paid on account of drafts honored under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (1) any lack of validity or enforceability of
any Letter of Credit, any LC Application, or any term or provision therein, (2)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (3) payment by the Issuing Lender under a
Letter of Credit issued by the Issuing Lender against presentation of a draft
or other document that does not comply with the terms of such Letter of Credit
or any LC Application, or (4) any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might, but for the
provisions of this Section
2.10(f), constitute a legal or equitable discharge of, or
provide a right of setoff against, the Company’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Lender, nor any of their
Related Parties shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of
the Issuing Lender; provided that the foregoing shall not be construed to
excuse the Issuing Lender from liability to the Company to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Company to the extent permitted by applicable law)
suffered by the Company that are caused by the Issuing Lender’s failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of the Issuing Lender (as finally determined by a court of
competent jurisdiction), such Issuing


 


29

















 


Bank shall be deemed to have exercised
all requisite care in each such determination. In furtherance of the foregoing
and without limiting the generality thereof, the parties agree that, with
respect to documents presented which appear on their face to be in substantial
compliance with the terms of a Letter of Credit, the Issuing Lender that issued
such Letter of Credit may, in its sole discretion, either accept and make
payment upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit. The Company hereby waives
presentment for payment (except the presentment required by the terms of any
Letter of Credit) and notice of dishonor, protest and notice of protest with
respect to drafts honored under the Letters of Credit.


 


(g)                                 In the event that any provision of a LC Application is
inconsistent with, or in conflict of, any provision of this Agreement,
including provisions for the rate of interest applicable to drawings thereunder
or rights of setoff or any representations, warranties, covenants or any events
of default set forth therein, the provisions of this Agreement shall govern.


 


(h)                                 If (i) any Event of Default shall occur and be continuing
and the Company receives notice from the Administrative Agent demanding the
deposit of cash collateral pursuant to this Section 2.10(h), or (ii) the Company is required to pay
to the Administrative Agent the excess attributable to an LC Obligation in
connection with any prepayment pursuant to Section 2.05, then the Company shall deposit, in the LC
Collateral Account, an amount in cash equal to, in the case of an Event of
Default, the LC Obligation, and in the case of a payment required by Section 2.05, the amount of
such excess as provided in Section
2.05, as of such date plus any accrued and unpaid interest
thereon; and reference is further made to Section 9.02 which provides that the obligation to
deposit cash collateral shall become effective immediately, and such deposit
shall become immediately due and payable, without demand or other notice of any
kind, upon the occurrence of certain Events of Default as therein described. The Company hereby grants
to the Administrative Agent, for the benefit of the Issuing Lender and the
Lenders, to secure the Obligations, an exclusive first priority and continuing
perfected security interest in and Lien on such account and all cash, checks,
drafts, certificates and instruments, if any, from time to time deposited or
held in such account, all deposits or wire transfers made thereto, any and all
investments purchased with funds deposited in such account, all interest,
dividends, cash, instruments, financial assets and other property from time to
time received, receivable or otherwise payable in respect of, or in exchange
for, any or all of the foregoing, and all proceeds, products, accessions,
rents, profits, income and benefits therefrom, and any substitutions and
replacements therefor. The Company’s obligation to deposit amounts pursuant to
this Section 2.10(h)
shall be absolute and unconditional, without regard to whether any beneficiary
of any such Letter of Credit has attempted to draw down all or a portion of
such amount under the terms of a Letter of Credit, and, to the fullest extent
permitted by applicable law, shall not be subject to any defense or be affected
by a right of set-off, counterclaim or recoupment which the Company or any of
its Subsidiaries may now or hereafter have against any such beneficiary, the
Issuing Lender, the Administrative Agent, the Lenders or any other Person for
any reason whatsoever. Such deposit shall be held as collateral securing the
payment and performance of the Company’s and any Guarantor’s obligations under
this Agreement and the other Loan Documents. The Administrative Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Monies in such account shall be applied by the
Administrative Agent to reimburse the Issuing Lender for payments under Letters
of Credit for which it has not been reimbursed and, to the extent not so applied,
shall be held for the satisfaction of the reimbursement obligations of the
Company for the LC Obligation at such time or, if the maturity of the Loans has
been accelerated, be applied to satisfy other obligations of the Company and
the Guarantors, if any, under this Agreement or the other Loan Documents. If
the Company is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, and the Company is not
otherwise required to pay to the Administrative Agent the excess attributable
to an LC Obligation in connection with any prepayment


 


30

















 


pursuant to Section 2.05, then such amount (to the extent not
applied as aforesaid) shall be returned to the Company within three Business
Days after all Events of Default have been cured or waived.


 


2.11                        Payments to the
Administrative Agent; Several Obligations of the Lenders.


 


(a)                                  Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Revolving Credit Borrowing of
LIBOR Loans (or, in the case of any Revolving Credit Borrowing of Base Rate
Loans, prior to 10:00 a.m. Houston, Texas time on the date of such Revolving
Credit Borrowing) that such Lender will not make available to the
Administrative Agent such Lender’s share of such Revolving Credit Borrowing,
the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with Section
2.02 (or, in the case of a Revolving Credit Borrowing of Base
Rate Loans, that such Lender has made such share available in accordance with
and at the time required by Section
2.02) and may, in reliance upon such assumption, make available
to the Company a corresponding amount. In such event, if a Lender has not in
fact made its share of the applicable Revolving Credit Borrowing available to
the Administrative Agent, then the applicable Lender and the Company 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 Company to but excluding the date of payment to
the Administrative Agent, at (i) in the case of a payment to be made by such
Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by the Administrative Agent in connection with the foregoing, and (ii)
in the case of a payment to be made by the Company, the interest rate
applicable to Base Rate Loans. If the Company and such Lender shall pay such
interest to the Administrative Agent for the same or an overlapping period, the
Administrative Agent shall promptly remit to the Company the amount of such
interest paid by the Company for such period. If such Lender pays its share of
the applicable Revolving Credit Borrowing to the Administrative Agent, then the
amount so paid shall constitute such Lender’s Revolving Credit Loan included in
such Revolving Credit Borrowing. Any payment by the Company shall be without
prejudice to any claim the Company may have against a Lender that shall have
failed to make such payment to the Administrative Agent.


 


(b)                                 Unless the Administrative Agent shall have received notice
from the Company prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Lender
hereunder that the Company will not make such payment, the Administrative Agent
may assume that the Company has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders
or the Issuing Lender, as the case may be, the amount due. In such event, if
the Company has not in fact made such payment, then each of the Lenders or the
Issuing Lender, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or the Issuing 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
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.


 


(c)                                  The failure of any Lender to make any Loan on any Borrowing
Date, to fund any participation or to make a payment pursuant to Section 11.04(c) shall not
relieve any other Lender of its obligation to do so, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on any Borrowing Date, to fund any participation to be funded
by such other Lender, or to make any payment pursuant to Section 11.04(c) to be made
by such Lender.


 


2.12                        Sharing of
Payments. If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Credit Loans or the participations in LC
Obligations or in Swing Line Loans held by it


 


31

















 


resulting in such Lender’s
receiving payment of a proportion of the aggregate amount of its Revolving
Credit Loans or participations and accrued interest thereon greater than its
Pro Rata Share thereof as provided herein, then the Lender receiving such
greater proportion shall


 


(a)                                  notify the Administrative Agent of such fact, and


 


(b)                                 purchase (for cash at face value) participations in the
Revolving Credit Loans and subparticipations in LC Obligations and Swing Line
Loans of the other Lenders, or make such other adjustments as shall be
equitable, so that the benefit of all such payments shall be shared by the Lenders
ratably in accordance with the aggregate amount of principal of and accrued
interest on their respective Revolving Credit Loans and other amounts owing
them, 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 2.12b(ii) shall not be construed to
apply to (x) any payment made by the Company pursuant to and in accordance with
the express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Revolving Credit Loans or subparticipations in LC Obligations or Swing Line
Loans to any assignee or participant, other than to the Company or any
Subsidiary thereof (as to which the provisions of this Section 2.12(b)(ii)
shall apply).


 


Each
Loan Party 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 each
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of each Loan Party in the
amount of such participation.


 


2.13                        Swing Line Loans.


 


(a)                                  The Swing Line.
Subject to the terms and conditions set forth herein, the Swing Line Lender
agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.13(a), to make
loans (each such loan, a “Swing
Line Loan”), to the Company from time to time on any Business
Day during the period from the Effective Date to the Termination Date in an
aggregate amount not to exceed at any time outstanding the amount of the Swing
Line Sublimit, notwithstanding the fact that such Swing Line Loans, when
aggregated with the Pro Rata Share of the outstanding amount of Revolving
Credit Loans and LC Obligations of the Lender acting as Swing Line Lender, may
exceed the amount of such Lender’s Commitment; provided, however, that after
giving effect to any Swing Line Loan, (A) the sum of the aggregate outstanding
amount of the Revolving Credit Loans plus the Swing Line Loans plus LC Obligations
shall not exceed the aggregate Commitments at such time, and (B) the sum of the
aggregate outstanding amount of the Revolving Credit Loans of any Lender at
such time, plus such Lender’s Pro Rata Share of the outstanding amount of all
LC Obligations at such time, plus such Lender’s Pro Rata Share of the
outstanding amount of all Swing Line Loans at such time shall not exceed such
Lender’s Commitment. Within the foregoing limits, and subject to the other
terms and conditions hereof, the Company may borrow under this Section 2.13(a), prepay under
Section 2.04(b)(iii),
and reborrow under this Section
2.13(a). Each Swing Line Loan shall bear interest at a rate
based on the Base Rate. Immediately upon the making of a Swing Line Loan, each
Revolving Credit Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Swing Line Lender a risk
participation in such Swing Line Loan in an amount equal to the product of such
Revolving Credit Lender’s Pro Rata Share times the amount of such Swing Line
Loan.


 


32

















 


(b)                                 Borrowing Procedures.
Each Swing Line Borrowing shall be made upon the Company’s irrevocable notice
to the Swing Line Lender and the Administrative Agent, which may be given by
telephone. Each such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 3:00 p.m., Houston, Texas time on the
requested borrowing date, and shall specify (A) the amount to be borrowed,
which shall be a minimum of $200,000 or any whole multiple of $50,000 in excess
thereof, and (B) the requested borrowing date, which shall be a Business Day. Each
such telephonic notice must be confirmed promptly by delivery to the Swing Line
Lender and the Administrative Agent of a written Swing Line Loan Notice,
appropriately completed and signed by a Responsible Officer of the Company. Promptly
after receipt by the Swing Line Lender of any telephonic Swing Line Loan
Notice, the Swing Line Lender will confirm with the Administrative Agent (by
telephone or in writing) that the Administrative Agent has also received such
Swing Line Loan Notice and, if not, the Swing Line Lender will notify the
Administrative Agent (by telephone or in writing) of the contents thereof. Unless
the Swing Line Lender has received notice (by telephone or in writing) from the
Administrative Agent (including at the request of any Lender) prior to 4:00
p.m., Houston, Texas time on the date of the proposed Swing Line Borrowing (I)
directing the Swing Line Lender not to make such Swing Line Loan as a result of
the limitations set forth in the proviso to the first sentence of Section 2.13(a), or (II) that
one or more of the applicable conditions specified in Article V is not then satisfied, then subject to the
terms and conditions hereof, the Swing Line Lender will, not later than 5:00
p.m., Houston, Texas time on the borrowing date specified in such Swing Line
Loan Notice, make the amount of its Swing Line Loan available to the Company at
its office by crediting the account of the Company on the books of the Swing
Line Lender in immediately available funds.


 


(c)                                  Refinancing of Swing Line Loans.


 


(i)                                     The Swing Line Lender at any time in its sole and absolute
discretion, may request, on behalf of the Company (which hereby irrevocably
authorizes the Swing Line Lender to so request on its behalf), that each Lender
make a Revolving Credit Loan (which shall be a Base Rate Loan) in an amount
equal to such Lender’s Pro Rata Share of the amount of Swing Line Loans then outstanding.
Such request shall be made in writing (which written request shall be deemed to
be a Notice of Revolving Credit Borrowing for purposes hereof) and in
accordance with the requirements of Section
2.02, without regard to the minimum and multiples specified
therein for the principal amount of Base Rate Loans, but subject to the
unutilized portion of the aggregate Commitments and the conditions set forth in
Section 5.02. The
Swing Line Lender shall furnish the Company with a copy of the applicable borrowing
notice promptly after delivering such notice to the Administrative Agent. Each
Lender shall make an amount equal to its Pro Rata Share of the amount specified
in such notice available to the Administrative Agent in immediately available
funds for the account of the Swing Line Lender at the Administrative Agent’s
Payment Office not later than 2:00 p.m. Houston, Texas time on the day
specified in such borrowing notice, whereupon, subject to Section 2.13(c)(ii), each
Lender that so makes funds available shall be deemed to have made a Revolving
Credit Loan that is a Base Rate Loan to the Company in such amount. The
Administrative Agent shall remit the funds so received to the Swing Line
Lender.


 


(ii)                                  If for any reason any Swing Line Loan cannot be refinanced
by such a Revolving Credit Loan in accordance with Section 2.13(c)(i), the request for Revolving Credit
Loans submitted by the Swing Line Lender as set forth herein shall be deemed to
be a request by the Swing Line Lender that each of the Lenders fund its risk
participation in the relevant Swing Line Loan and each Lender’s payment to the
Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.13(c)(i) shall be
deemed payment in respect of such participation.


 


(iii)                               If any Lender fails to make available to the Administrative
Agent for the account of the Swing Line Lender any amount required to be paid
by such Lender pursuant to the


 


33

















 


foregoing provisions of this Section 2.13(c) by the time
specified in Section 2.13(c)(i),
the Swing Line Lender shall be entitled to recover from such Lender (acting
through the Administrative Agent), on demand, such amount with interest thereon
for the period from the date such payment is required to the date on which such
payment is immediately available to the Swing Line Lender at a rate per annum
equal to the greater of the Federal Funds Rate and a rate determined by the
Swing Line Lender in accordance with banking industry rules on interbank compensation,
plus any administrative, processing or similar fees customarily charged by the
Swing Line Lender in connection with the foregoing. If such Lender pays such
amount (with interest and fees as aforesaid), the amount so paid shall
constitute such Lender’s Revolving Credit Loan included in the relevant
borrowing or funded participation in the relevant Swing Line Loan, as the case
may be. A certificate of the Swing Line Lender submitted to any Lender (through
the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be
conclusive absent manifest error.


 


(iv)                              Each Lender’s obligation to make Revolving Credit Loans or
to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.13(c) shall be absolute
and unconditional and shall not be affected by any circumstance, including (A)
any setoff, counterclaim, recoupment, defense or other right which such Lender
may have against the Swing Line Lender, the Company or any other Person for any
reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any
other occurrence, event or condition, whether or not similar to any of the
foregoing. No such funding of risk participations shall relieve or otherwise
impair the obligation of the Company to repay Swing Line Loans, together with
interest as provided herein.


 


(d)                                 Repayment of Participations.


 


(i)                                     At any time after any Lender has purchased and funded a risk
participation in a Swing Line Loan, if the Swing Line Lender receives any
payment on account of such Swing Line Loan, the Swing Line Lender will
distribute to such Revolving Credit Lender its Pro Rata Share thereof in the
same funds as those received by the Swing Line Lender.


 


(ii)                                  If any payment received by the Swing Line Lender in respect
of principal or interest on any Swing Line Loan is required to be refunded by
the Swing Line Lender under any of the circumstances described in Section 11.05 (including
pursuant to any settlement entered into by the Swing Line Lender in its
discretion), each Lender shall pay to the Swing Line Lender its Pro Rata Share
thereof on demand of the Administrative Agent, plus interest thereon from the
date of such demand to the date such amount is returned, at a rate per annum
equal to the Federal Funds Rate. The Administrative Agent will make such demand
upon the request of the Swing Line Lender. The obligations of the Lenders under
this clause shall survive the payment in full of the Obligations and the
termination of this Agreement.


 


(e)                                  Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing
the Company for interest on the Swing Line Loans. Until each Lender funds it
Revolving Credit Loan or risk participation pursuant to this Section 2.13(e) to refinance
such Lender’s Pro Rata Share of any Swing Line Loan, interest in respect of
such Pro Rata Share shall be solely for the account of the Swing Line Lender.


 


(f)                                    Payments Directly to Swing Line Lender. The Company shall make all payments of principal and
interest in respect of the Swing Line Loans directly to the Swing Line Lender.


 


2.14                        Special Provisions Applicable to BEP I.


 


(a)                                  Notwithstanding anything to the contrary set forth in this
Agreement or any other Loan Document, for so long as BEP I is not a Wholly
Owned Subsidiary of Parent, (x) BEP I shall not be


 


34

















 


required to execute a Guaranty or grant
Liens on its property or assets to secure the Obligations, and (y) the
occurrence of a BEP I Default shall not constitute a Default or an Event of
Default under this Agreement. Any
of the following shall constitute a “BEP I
Default”: (i) BEP I incurs any Indebtedness, (ii) the failure of
the Loan Parties to cause BEP I to comply with one or more covenants in this
Agreement that are applicable to Restricted Subsidiaries and expiration of the
applicable grace period set forth in this Agreement, if any, (iii) failure of a
representation and warranty contained in this Agreement to be correct with
respect to BEP I or the Oil and Gas Properties owned by it, and (iv) any of the
events or circumstances described in Section
9.01(f) or 9.01(g)
occur with respect to BEP I or any of its subsidiaries.


 


(b)                                 Upon the occurrence of a BEP I Default, the Required Lenders
may request a Special Borrowing Base Determination.


 


(c)                                  This Section
2.14 shall cease to apply when BEP I is a Wholly Owned
Subsidiary of Parent, or, if earlier, when agreed by the Company.


 


ARTICLE III.



TAXES, YIELD PROTECTION AND ILLEGALITY; 

REPLACEMENT OF LENDERS


 


3.01                        Taxes.


 


(a)                                  Payments Free of Taxes.
Any and all payments by or on account of any
Obligation of the Company shall be made free and clear of and without reduction
or withholding for any Indemnified Taxes or Other Taxes, provided that
if the Company shall be required by a Requirement of Law to deduct any
Indemnified Taxes (including any 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) the Administrative Agent, Lender or Issuing 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 Company shall make such deductions and (iii) the
Company shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with Requirements of Law.


 


(b)                                 Payment of Other Taxes by the Company. Without limiting the provisions of Section 3.01(a) above,
the Company shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with Requirements of Law.


 


(c)                                  Indemnification by the Company. The Company shall indemnify the Administrative Agent, each
Lender and the Issuing Lender, within 10 days after demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) paid by the Administrative Agent, such Lender or the
Issuing Lender, as the case may be, 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 as to the amount of such
payment or liability delivered to the Company by a Lender or the Issuing Lender
(with a copy to the Administrative Agent), or by the Administrative Agent on
its own behalf or on behalf of a Lender or the Issuing Lender, 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 Company to a Governmental Authority, the Company shall deliver to the


 


35

















 


Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.


 


(e)                                  Status of 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 Company is
resident for Tax purposes, or any treaty to which such jurisdiction is a party,
with respect to payments hereunder or under any other Loan Document shall
deliver to the Company (with a copy to the Administrative Agent), at the time
or times prescribed by Requirements of Law or reasonably requested by the Company
or the Administrative Agent, such properly completed and executed documentation
prescribed by Requirements of Law as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if requested by the Company or the Administrative Agent, shall deliver
such other documentation prescribed by Requirements of Law or reasonably
requested by the Company or the Administrative Agent as will enable the Company
or the Administrative Agent to determine whether or not such Lender is subject
to backup withholding or information reporting requirements.


 


Without limiting the
generality of the foregoing, in the event that the Company is resident for Tax
purposes in the United States of America, any Foreign Lender shall deliver to
the Company and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Company or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is
applicable:


 


(i)                                     duly completed copies of Internal Revenue Service Form
W-8BEN claiming eligibility for benefits of an income tax treaty to which the
United States of America is a party,


 


(ii)                                  duly completed copies of Internal Revenue Service Form
W-8ECI,


 


(iii)                               in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of the Company within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or


 


(iv)                              any other form prescribed by Requirements of Law as a basis
for claiming exemption from or a reduction in United States Federal withholding
Tax duly completed together with such supplementary documentation as may be
prescribed by Requirements of Law to permit the Company to determine the
withholding or deduction required to be made.


 


(f)                                    Treatment of Certain Refunds.
If the Administrative Agent, a Lender or the Issuing Lender determines, in its
sole discretion, that it has received a refund of any Taxes or Other Taxes as
to which it has been indemnified by the Company or with respect to which the
Company has paid additional amounts pursuant to this Section, it shall pay to
the Company an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by the Company under this Section
with respect to the Taxes or Other Taxes giving rise to such refund), net of
all out-of-pocket expenses of the Administrative Agent, such Lender or the
Issuing Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Company, upon the request of the Administrative
Agent, such Lender or the Issuing Lender, agrees to repay the amount paid over
to the Company (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent, such Lender or


 


36

















 


the Issuing Lender in the event the
Administrative Agent, such Lender or the Issuing Lender is required to repay
such refund to such Governmental Authority. This Section 3.01(f) shall not be construed
to require the Administrative Agent, any Lender or the Issuing Lender to make
available its tax returns (or any other information relating to its Taxes that
it deems confidential) to the Company or any other Person.


 


3.02                        Illegality.


 


(a)                                  If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has, since the
Effective Date, made it unlawful, or that, since the Effective Date, any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make LIBOR Loans, then, on
notice thereof by the Lender to the Company through the Administrative Agent,
any obligation of that Lender to make LIBOR Loans shall be suspended until the
Lender notifies the Administrative Agent and the Company that the circumstances
giving rise to such determination no longer exist; such notice to be promptly
given upon the determination that such circumstances no longer exist.


 


(b)                                 If a Lender determines that it is unlawful to maintain any
LIBOR Loan, the Company shall, upon its receipt of notice of such fact and
demand from such Lender (with a copy to the Administrative Agent), convert such
LIBOR Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 3.04 into a Base Rate Loan without
regard to conditions precedent described in Section 5.02(b), either on the last day
of the Interest Period thereof, if the Lender may lawfully continue to maintain
such LIBOR Loans to such day, or immediately, if the Lender may not lawfully
continue to maintain such LIBOR Loan. If the Company is required to so prepay
any LIBOR Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Lender, in the amount of such repayment, a Base Rate
Loan.


 


(c)                                  If the obligation of any Lender to make or maintain LIBOR
Loans has been so terminated or suspended, all Loans which would otherwise be
made by the Lender as LIBOR Loans shall be instead Base Rate Loans.


 


(d)                                 Before giving any notice to the Administrative Agent under
this Section, the affected Lender shall designate a different Lending Office
with respect to its LIBOR Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Lender, be illegal or otherwise disadvantageous to the Lender.


 


3.03                        Increased Costs and Reduction of Return.


 


(a)                                  Increased Costs Generally.
If any Change in Law shall:


 


(i)                                     impose, modify or deem applicable any reserve, special
deposit, compulsory loan, insurance charge or similar requirement against
assets of, deposits with or for the account of, or credit extended or
participated in by, any Lender (except any reserve requirement included in the
calculation of the LIBOR) or the Issuing Lender;


 


(ii)                                  subject any Lender or the Issuing Lender to any tax of any
kind whatsoever with respect to this Agreement, any Letter of Credit, any
participation in a Letter of Credit or any LIBOR Loan made by it, or change the
basis of taxation of payments to such Lender or the Issuing Lender in respect
thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the
imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender or the Issuing Lender); or


 


37
















 


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


 


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


 


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


 


(c)                                  Certificates for Reimbursement. A certificate of a Lender or the Issuing Lender setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Lender or its holding company, as the case may be, as specified in Sections 3.03(a) or (b) and delivered to the
Company shall be conclusive absent manifest error. The Company shall pay such
Lender or the Issuing Lender, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.


 


(d)                                 Delay in Requests.
Failure or delay on the part of any Lender or the Issuing Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Lender’s right to demand such compensation, provided
that the Company shall not be required to compensate a Lender or the Issuing
Lender pursuant to this Section for any increased costs incurred or reductions
suffered more than nine months prior to the date that such Lender or the
Issuing Lender, as the case may be, notifies the Company of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the
Issuing Lender’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the nine-month period referred to above shall be extended to include the
period of retroactive effect thereof).


 


3.04                        Funding
Losses. The Company shall reimburse each Lender and hold each Lender
harmless from any loss or expense excluding consequential losses which the
Lender may sustain or incur as a consequence of: (a) the failure of the Company
to make on a timely basis any payment of principal of any LIBOR Loan; (b) the
failure of the Company to borrow, continue or convert a Loan after the Company
has given (or is deemed to have given) a Notice of Revolving Credit Borrowing
or a Notice of Conversion/Continuation (including by reason of the failure to
satisfy any condition precedent thereto);


 


38

















 


(c) the failure of the Company
to make any prepayment in accordance with any notice delivered under Section 2.04; (d) the
prepayment (including pursuant to Section 2.05 or 2.06)
or other payment (including after acceleration thereof) of a LIBOR Loan on a
day that is not the last day of the relevant Interest Period; or (e) the
automatic conversion under Section
2.03 of any LIBOR Loan to a Base Rate Loan on a day that is not
the last day of the relevant Interest Period; including any such loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain its LIBOR Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating amounts payable by
the Company to the Lenders under this Section and under Section 3.03(a), each
LIBOR Loan made by a Lender (and each related reserve, special deposit or
similar requirement) shall be conclusively deemed to have been funded at the
LIBOR used in determining the LIBOR for such LIBOR Loan by a matching deposit
or other borrowing in the interbank eurodollar market for a comparable amount
and for a comparable period, whether or not such LIBOR Loan is in fact so
funded.


 


3.05                        Inability
to Determine Rates. If Administrative Agent determines that for any reason
adequate and reasonable means do not exist for determining the LIBOR for any
requested Interest Period with respect to a proposed LIBOR Loan, or that the
LIBOR applicable pursuant to Section 2.06(c) for any requested Interest Period with
respect to a proposed LIBOR Loan does not adequately and fairly reflect the
cost to the Lender of funding such Loan, the Administrative Agent will promptly
so notify the Company and each Lender. Thereafter, the obligation of the
Lenders to make or maintain LIBOR Loans hereunder shall be suspended until the
Administrative Agent upon the instruction of the Lenders revokes such notice in
writing; such written revocation to be promptly given upon determination that
such circumstances no longer exist. Upon receipt of such notice, the Company
may revoke any Notice of Revolving Credit Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such notice, the Lenders shall make, convert or continue the Loans, as proposed
by the Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Loans.


 


3.06                        Certificates
of Lenders. Any Lender claiming reimbursement or compensation under this Article III shall
deliver to the Company (with a copy to the Administrative Agent) a certificate
setting forth in reasonable detail the amount payable to the Lender hereunder
and such certificate shall be conclusive and binding on the Company in the
absence of manifest error provided, however, that such Lender shall only be
entitled to collect amounts incurred within 180 days of such notice.


 


3.07                        Mitigation Obligations; Replacement of
Lenders.


 


(a)                                  Designation of a Different Lending Office. If any Lender requests compensation under Section 3.03, or requires the
Company to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another of
its offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable
pursuant to Section 3.01
or 3.03, 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 in
its sole discretion. The Company 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 3.03, (ii) the Company is required to pay any
additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section
3.01, (iii) any Lender defaults in its obligation to fund Loans
hereunder, or (iv) any Lender refuses to consent to any amendment, waiver or
other modification of any Loan Document requested by the Company that requires
the consent of a


 


39

















 


greater percentage of the Lenders than
the Majority Lenders and such amendment, waiver or other modification is
consented to by the Majority Lenders, then the Company may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in, and consents required by, Section 11.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:


 


(i)                                     the Company shall have paid to the Administrative Agent the
assignment fee specified in Section 11.06;


 


(ii)                                  such Lender shall have received payment of an amount equal
to the outstanding principal of its Loans and participations in LC Obligations,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder and under the other Loan Documents (including any amounts under Section 3.04) from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Company (in the case of all other amounts);


 


(iii)                               in the case of any such assignment resulting from a claim
for compensation under Section
3.03 or payments required to be made pursuant to Section 3.01, such assignment
will result in a reduction in such compensation or payments thereafter; and


 


(iv)                              such assignment does not conflict with applicable law.


 


A Lender shall not be
required to make any such assignment or delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Company to require such assignment and delegation cease to apply.


 


3.08                        Survival.
The agreements and obligations of the Company in this Article III shall
survive the payment of all other Obligations.


 


ARTICLE IV.



SECURITY


 


4.01                        The
Security. The Obligations will be secured by the Security Documents
described in Schedule
4.01 and any additional Security Documents hereafter delivered
by the Loan Parties and accepted by the Administrative Agent.


 


4.02                        Agreement
to Deliver Security Documents. The Loan Parties agree to deliver to further
secure the Obligations whenever requested by the Administrative Agent in its
sole and absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security Documents in form
and substance reasonably satisfactory to the Administrative Agent for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests on substantially all assets of Parent, the Company and their
present and future Subsidiaries, including Oil and Gas Properties representing
not less than 80% of the total value of all Oil and Gas Properties now owned or
hereafter acquired by the Loan Parties, as applicable, subject to Permitted
Liens. The Loan Parties also agree to deliver whenever requested by the
Lenders, title opinions from legal counsel reasonably acceptable to the Lenders
or such other evidence of title reasonably satisfactory to the Lenders with
respect to the Mortgaged Properties designated by the Lenders, based upon
abstract or record examinations to dates reasonably acceptable to the Lenders
and (a) stating that the Loan Party, as applicable, has good and defensible
title to such properties and interests, free and clear of all Liens except
Permitted Liens,


 


40

















 


(b) confirming that such Oil
and Gas Properties are subject to Security Documents securing the Obligations
that constitute and create legal, valid and duly perfected deed of trust or
mortgage liens in such Oil and Gas Properties and assignments of and security
interests in the Oil and Gas attributable to such Oil and Gas Properties and
the proceeds thereof, in each case subject only to Permitted Liens, and (c)
covering such other matters as the Lenders may reasonably request.


 


4.03                        Perfection and Protection of Security Interests
and Liens.


 


(a)                                  The Loan Parties will from time to time deliver to the
Administrative Agent any financing statements, amendment, assignment and
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by each Loan Party, as
applicable, in form and substance reasonably satisfactory to the Administrative
Agent, which the Administrative Agent reasonably requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.


 


(b)                                 In the case of properties other than Oil and Gas Properties,
this Agreement and the other Loan Documents shall not require the creation or
perfection of Liens in particular properties or assets if and for so long as,
in the judgment of the Administrative Agent, the cost of creating or perfecting
such Liens in such property shall be excessive in view of the benefits to be
obtained by the Lenders therefrom. The Administrative Agent may grant extensions
of time for the creation and perfection of Liens in particular assets or
property where it determines, in consultation with the Company, that such
action cannot be accomplished without undue effort or expense by the time or
times at which it would otherwise be required by this Agreement or the other
Loan Documents.


 


4.04                        Offset.
To secure the repayment of the Obligations the Company hereby grants the
Administrative Agent and each Lender a security interest, a lien, and a right
of offset, each of which shall be in addition to all other interests, liens,
and rights of the Administrative Agent at common law, under the Loan Documents,
or otherwise, and each of which shall be upon and against (a) any and all
moneys, securities or other property (and the proceeds therefrom) of the
Company now or hereafter held or received by or in transit to the
Administrative Agent or any Lender from or for the account of the Company,
whether for safekeeping, custody, pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of the Company with the Administrative Agent or any
Lender, and (c) any other credits and claims of the Company at any time
existing against the Administrative Agent or any Lender, including claims under
certificates of deposit. During the existence of any Event of Default, the
Administrative Agent or any Lender is hereby authorized to foreclose upon,
offset, appropriate, and apply, at any time and from time to time, without
notice to the Company, any and all items hereinabove referred to against the
Obligations then due and payable.


 


4.05                        Subsidiary Guaranty and Security Agreement.


 


(a)                                  Each Subsidiary of a Loan Party now existing or created,
acquired or coming into existence after the date hereof, including without
limitation, each of the Guarantors, shall pursuant to Section 7.15,
promptly upon request by the Administrative Agent, execute and deliver to the
Administrative Agent an absolute and unconditional guaranty of the timely
repayment, and the due and punctual performance, of the Obligations of the
Company hereunder, which Guaranty shall be substantially in the form and
substance of Exhibit
G-2, a Security
Agreement substantially in the form of Exhibit H,  and Security Documents as required by Section 4.02. The Company and its Subsidiaries
will cause each of their Subsidiaries to deliver to the Administrative Agent,
simultaneously with its delivery of such Guaranty and Security Agreement, (x)
written evidence satisfactory to the Administrative Agent that such Subsidiary
has taken all organizational action necessary to duly approve and authorize its
execution,


 


41

















 


delivery and performance of such
Guaranty, Security Agreement and any other documents which it is required to
execute, and (y) such additional closing documents, certificates and opinions
of counsel as the Administrative Agent shall require.


 


(b)                                 Each Loan Party is mutually dependent on each other in the
conduct of their respective businesses, with the credit needed from time to
time by each often being provided by another or by means of financing obtained
by one such Affiliate with the support of the other for their mutual benefit
and the ability of each to obtain such financing is dependent on the successful
operations of the other. The board of directors, managers or general partner,
where applicable, of each Guarantor has determined that such Guarantor’s
execution, delivery and performance of this Agreement may reasonably be expected
to directly or indirectly benefit such Guarantor and is in the best interests
of such Guarantor.


 


(c)                                  The direct or indirect value of the consideration received
and to be received by such Guarantor in connection herewith is reasonably worth
at least as much as the liability and obligations of each Guarantor hereunder,
and the incurrence of such liability and obligations in return for such
consideration may reasonably be expected to benefit such Guarantor, directly or
indirectly.


 


(d)                                 Neither the Company nor any Guarantor is insolvent on the
date hereof (that is, the sum of each Person’s absolute and contingent
liabilities, including the Obligations, does not exceed the fair market value
of such Person’s assets, including any rights of contribution, reimbursement or
indemnity). Each Loan Party has capital which is adequate for the businesses in
which such Person is engaged and intends to be engaged. None of the Company nor
any Guarantor has incurred (whether hereby or otherwise), nor does the Company
or Guarantor intend to incur or believe that it will incur, liabilities which
will be beyond its ability to pay as such liabilities mature.


 


ARTICLE V.



CONDITIONS PRECEDENT


 


5.01                        Conditions
of Initial Credit Extensions. The effectiveness of this Agreement and the
obligation of each Lender to make its initial Loan hereunder and the obligation
of the Issuing Lender to issue Letters of Credit hereunder, are subject to the
condition that the Administrative Agent shall have received all of the
following, in form and substance satisfactory to the Administrative Agent:


 


(a)                                  Credit Agreement and Notes.
This Agreement, the Notes, the Guaranties, the Security Documents and the other
Loan Documents executed by each party thereto;


 


(b)                                 Resolutions; Incumbency; Organization Documents, Good
Standing. A
certificate of the Secretary or Assistant Secretary or a Responsible Officer
with similar responsibilities of each Loan Party, or in the event that such
Loan Party is a limited partnership, such Person’s general partner, certifying
as of the Effective Date: (i) Resolutions of its board of directors or members,
authorizing the transactions contemplated hereby; (ii) the names and genuine
signatures of the Responsible Officers of such Person, authorized to execute,
deliver and perform, as applicable, this Agreement, the Notes, the Guaranties,
the Security Documents, and all other Loan Documents to be delivered by such
Person; (iii) the Organization Documents of such Person as in effect as of the
Effective Date; (iv) the good standing certificate for such Person, from its
state of incorporation, formation or organization, as applicable, dated as of a
recent date; and (v) as may be required by the Administrative Agent,
certificate(s) of authority for such Person from states wherein such Person
conducts business, evidencing such Person’s qualification to do business in
such state. dated as of a recent date;


 


42

















 


(c)                                  Certificate of a Responsible Officer of Parent. A certificate signed by a Responsible Officer of Parent
follows:


 


(i)                                     certifying as to the sources and uses of funding for the
Quicksilver Acquisition;


 


(ii)                                  certifying:


 


(A)                              that attached thereto is a true and complete executed copy
of the Quicksilver Acquisition Agreement;


 


(B)                                that the Company is consummating the Quicksilver Acquisition
on the Effective Date substantially concurrently with the making of the Loans
on the date of such certificate, in accordance with the terms of the
Quicksilver Acquisition Agreement and with the conditions precedent thereto
having been satisfied (other than payment of the cash purchase price in the
amount specified in such Certificate), except as may be acceptable to the
Administrative Agent (provided that the Company may waive the
requirement that Quicksilver deliver audited financial statements as a
condition precedent to the closing of the Quicksilver Acquisition);


 


(C)                                as to the final purchase price for the Quicksilver
Acquisition Properties and the Quicksilver Target Equity Interests after giving
effect to all adjustments as of the Effective Date contemplated by the
Quicksilver Acquisition Documents and specifying, by category (e.g., working capital, capital expenditures, title defect or
environmental defect), the amount of such adjustment;


 


(D)                               that attached thereto is a true and complete list of the
Quicksilver Acquisition Properties, if any, which have been excluded from the
Quicksilver Acquisition pursuant to the terms of the Quicksilver Acquisition
Documents, specifying with respect thereto the basis of exclusion (e.g., title
defect or environmental defect);


 


(E)                                 that attached thereto is a true and complete list of all
Quicksilver Acquisition Properties for which any seller has elected to cure a
title defect;


 


(F)                                 that attached thereto is a true and complete list of all
Quicksilver Acquisition Properties for which any seller has elected to
remediate an adverse environmental condition; and


 


(G)                                that attached thereto is a true and complete list of all
Quicksilver Acquisition Properties which are currently pending final decision
by a third party regarding purchase of such property in accordance with any
preferential right;


 


(iii)                               certifying that Parent received gross proceeds of not less
than $350,000,000 through an offering of common equity or private placement of
its common units and contributed the net proceeds of such offering to the
Company;


 


(iv)                              certifying no Quicksilver Material Adverse Effect shall have
occurred;


 


(v)                                 certifying that all applicable waiting periods specified
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to
the transactions contemplated by the Quicksilver Acquisition Agreement shall
have lapsed or terminated;


 


43

















 


(vi)                              certifying that the Company has received all Permits of any
Governmental Entity (other than Customary Post-Closing Consents) as are
necessary in connection with (A) the transfer of the Interests to the Company
except where failure to have received such Permit would not have a Quicksilver
Material Adverse Effect and (B) the issuance of the Common Units comprising the
Equity Consideration to Quicksilver (capitalized terms used in this clause (vi) that are not
defined in this Agreement shall have the meanings given to them in the
Quicksilver Acquisition Agreement);


 


(vii)                           certifying that there shall be no order of any nature by any
Governmental Entity that is in effect that restrains or prohibits the
consummation of any of the transactions contemplated by the Quicksilver
Acquisition Agreement, and no Action before any Governmental Entity shall have
been instituted or threatened by any Person which seeks to prevent or delay the
consummation of any of the transactions contemplated by the Quicksilver
Acquisition Agreement or which challenges the enforceability of the Quicksilver
Acquisition Agreement or any of the Loan Documents (capitalized terms used in
this clause (vii) that
are not defined in this Agreement shall have the meanings given to them in the
Quicksilver Acquisition Agreement);


 


(viii)                        certifying that there shall be no Actions pending and, to
the Company’s Knowledge, no Action threatened in law or in equity or before any
Governmental Entity, against Quicksilver (with regard to the Quicksilver
Acquisition Properties) or any of the Quicksilver Target Equity Interests,
that, if determined or resolved adversely, could result in a Quicksilver
Material Adverse Effect (capitalized terms used in this clause (viii) that are not defined in this Agreement
shall have the meanings given to them in the Quicksilver Acquisition
Agreement);


 


(ix)                                certifying that no Default or Event of Default exists or
will result, under Sections
9.01(a) through (j) or
Sections 9.01(l) through
(o), both before
and after giving effect to the making of extensions of credit by the Lenders on
the Effective Date and the closing of the Quicksilver Acquisition;


 


(x)                                   certifying that the representations and warranties of the
Company and the other Loan Parties contained in Article VI and in the other Loan Documents delivered on
the Effective Date are true and correct in all material respects, provided
that (1) the representation and warranty pursuant to Section 6.14 is made without giving effect to the
extensions of credit by the Lenders on the Effective Date or the closing of the
Quicksilver Acquisition, and (2) with respect to the Quicksilver Acquisition
Properties the Company makes only (A) those representations that Quicksilver
makes in the Quicksilver Acquisition Agreement, the breach of which would
result in the Company having the right to terminate its obligations under the
Quicksilver Acquisition Agreement, and (B) the representations contained in Sections 6.01, 6.02, 6.06(b), 6.08
and 6.16;


 


(xi)                                certifying as to the solvency of the Company and its
Subsidiaries taken as a whole and Parent and its Subsidiaries taken as a whole,
after giving effect to the Quicksilver Acquisition and the incurrence on the
Effective Date of Indebtedness hereunder;


 


(xii)                             certifying that the Company has entered into one or more
Derivative Contracts which cover at least 80% of the reasonably anticipated
projected production from the Quicksilver Acquisition Properties constituting
proved developed producing Oil and Gas Properties;


 


(xiii)                          attaching and certifying a pro forma consolidated balance
sheet and related pro forma consolidated statement of income of Parent as of
and for the twelve month period ending on the last day of the most recently
completed four fiscal quarter period, prepared after giving effect to the
Quicksilver Acquisition as if the Quicksilver Acquisition had occurred as of
such date (in the case of such balance sheet) or at the beginning of such
period (in the case of such other financial


 


44

















 


statements), which financial statements
shall not be materially inconsistent with the reserve reports previously
provided to the Administrative Agent; and


 


(xiv)                         attaching calculations demonstrating pro forma compliance
with Sections 8.14, 8.15 and 8.16, giving effect to the
Quicksilver Acquisition, as of the end of the most recent fiscal quarter of the
Company for which financial statements have been filed with the SEC;


 


(xv)                            attaching and certifying insurance certificates from the
Company’s insurance carriers reflecting the current insurance policies required
under Section 7.08
including any necessary endorsements to reflect the Administrative Agent as
additional insured and loss payee for the ratable benefit of the Lenders;


 


(d)                                 Certificate of a Responsible Officer of Parent. A certificate signed by a Responsible Officer of Parent
follows:


 


(i)                                     certifying that attached thereto are true and complete
copies of the assignments, deeds and leases for all of the Quicksilver
Acquisition Properties;


 


(ii)                                  certifying that, based upon a due diligence review of title
covering the Quicksilver Acquisition Properties consistent with the due
diligence protocol and procedures furnished to the Administrative Agent dated
September 10, 2007 (A) such due diligence review covers not less than 70% of
the total net present value (determined by a discount factor of 10%) of the
Quicksilver Oil and Gas Properties that constitute proved Oil and Gas
Properties, and (B) the Loan Parties have good and defensible title to their
Oil and Gas Properties, subject to no other liens, other than (1) Permitted
Liens, and (2) Title Defects (as defined in the Quicksilver Acquisition
Agreement) with respect to which the Company has asserted its rights pursuant
to Section 6.12(d) of the Quicksilver
Acquisition Agreement, and certifying that no Title Defects exist that would
permit termination of the Quicksilver Acquisition Agreement pursuant to Section 8.1(c) thereof; and


 


(iii)                               attaching copies of environmental review reports prepared by
an independent consultant for the Company covering the Quicksilver Acquisition
Properties, such report to be addressed to the Administrative Agent or to be
accompanied by a reliance letter reasonably satisfactory to the Administrative
Agent, and certifying that (A) to the extent there are Environmental Defects
(as defined in the Quicksilver Acquisition Agreement) the Company has asserted
its rights pursuant to Section 6.14(b)
of the Quicksilver Acquisition Agreement, and (B) there does not exist
Environmental Defects that would permit termination of the Quicksilver
Acquisition Agreement pursuant to Section 8.1(c)
thereof;


 


(e)                                  Pricing Grid Certificate.
A Pricing Grid Certificate, prepared by giving effect to the Quicksilver
Acquisition and the initial Loans on the Effective Date;


 


(f)                                    Payment of Fees.
Evidence of payment by the Company of all accrued and unpaid fees, costs and
expenses owed pursuant to this Agreement to the extent then due and payable on
the Effective Date, including any such costs, fees and expenses arising under
or referenced in Sections
2.07 and 11.04;


 


(g)                                 Opinion of Counsel.
Opinions of Company’s general counsel, Vinson & Elkins L.L.P., as counsel
for the Loan Parties, and opinion of local counsel for the Loan Parties,
covering such matters as the Administrative Agent may require and in form and
substance satisfactory to the Administrative Agent, dated as of the Effective
Date;


 


45

















 


(h)                                 Notice. The
Administrative Agent shall have received a Notice of Revolving Credit
Borrowing, a request for a Letter of Credit pursuant to Section 2.10 or a request for a Swing Line Loan pursuant
to Section 2.13, as
applicable; and


 


(i)                                     Other Documents.
Such other approvals, opinions, documents or materials as the Administrative
Agent or any Lender may reasonably request.


 


5.02                        Conditions
to Extensions of Credit. The obligation of each Lender to make any Loan
after the Effective Date or to convert any Revolving Credit Loan into a LIBOR
Loan under Section 2.03
(but specifically excluding the continuation of LIBOR Loans on the last day of
the Interest Period therefor), and the obligation of the Issuing Lender to
issue, amend, renew or extend any Letter of Credit after the Effective Date, is
subject to the satisfaction of the following conditions precedent; provided that
this Section 5.02 shall not apply to any
Credit Extensions to be made on the Effective Date:


 


(a)                                  Notice. The
Administrative Agent shall have received a Notice of Revolving Credit
Borrowing, a Notice of Conversion/Continuation, a request for a Letter of Credit
pursuant to Section 2.10
or a request for a Swing Line Loan pursuant to Section 2.13, as applicable;


 


(b)                                 Continuation of Representations and Warranties. The representations and warranties of the Company and the
Guarantors in Article VI
and in the other Loan Documents shall be true and correct in all material
respects on and as of the date of such Credit Extension or conversion, as
applicable, before and after giving effect to such Credit Extension or
conversion (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they shall be true and correct as of
such earlier date, and except that for purposes of this Section 5.02(b), the representations and warranties
contained in Sections (a)
and (b) of Section 6.14 shall be deemed
to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 7.01).


 


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


 


(d)                                 No Existing Default.
At the time of and immediately after giving effect to such Borrowing or conversion
or the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable,  no Default or Event of
Default shall exist.


 


Each
Notice of Revolving Credit Borrowing, Notice of Conversion/Continuation and
request for issuance, amendment, renewal or extension of a Letter of Credit
submitted by the Company hereunder shall constitute a representation and
warranty by the Company on the date thereof that the conditions in Section 5.02 are
satisfied.


 


ARTICLE VI.



REPRESENTATIONS AND WARRANTIES


 


Each of the Loan Parties
represents and warrants to the Administrative Agent and each Lender that:


 


6.01                        Organization,
Existence and Power. Each Loan Party and each of its Subsidiaries: (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation; (b) has the power and authority and all material
governmental licenses, authorizations, consents and approvals to own its
assets, carry on its business and to execute, deliver, and perform its
obligations under


 


46

















 


the Loan Documents; (c) is duly
qualified as a foreign corporation and is licensed and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification or license,
except where failure to do so would not reasonably be expected to have a
Material Adverse Effect; and (d) is in compliance in all material respects with
all Requirements of Law.


 


6.02                        Corporate
Authorization; No Contravention. The execution, delivery and performance by
each Loan Party of this Agreement and each other Loan Document to which such
Person is a party, have been duly authorized by all necessary organizational
action, and do not and will not: (a) contravene the terms of any of that Person’s
Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which such Person is a party that would be prior
to the Liens granted to the Administrative Agent for the benefit of the Lenders
or otherwise that would constitute a Material Adverse Effect or any order,
injunction, writ or decree of any Governmental Authority to which such Person or
its property is subject; or (c) violate any Requirement of Law, that would
constitute a Material Adverse Effect, including, without limitation, any
California Requirement of Law promulgated with respect to preparedness and
damage prevention associated with earthquakes.


 


6.03                        Governmental
Authorization. No approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority is
necessary or required in connection with the execution, delivery or performance
by, or enforcement against, any Loan Party of this Agreement or any other Loan
Document to which it is a party, except for filings necessary to obtain and
maintain perfection of Liens; routine filings related to the Loan Parties and
the operation of their business; and such filings as may be necessary in
connection with Lenders’ exercise of its remedies hereunder.


 


6.04                        Binding
Effect. This Agreement and each other Loan Document to which any Loan Party
is a party constitute the legal, valid and binding obligations of such Person
to the extent it is a party thereto, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors’ rights generally or by equitable principles relating to
enforceability.


 


6.05                        Litigation.
There are no actions, suits, proceedings, claims or disputes pending, or to the
knowledge of the Loan Parties, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against any Loan Party or
any of its subsidiaries, or any of their respective Properties which: (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b) if determined
adversely, would reasonably be expected to have a Material Adverse Effect. To
the knowledge of each Loan Party, no injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of this Agreement or any other Loan Document, or directing that
the transactions provided for herein or therein not be consummated as herein or
therein provided.


 


6.06                        No Default.


 


(a)                                  No Default or Event of Default exists or would be reasonably
expected to result from the incurring of any Obligations by the Loan Parties.


 


(b)                                 No Loan Party or any Restricted Subsidiary or any Unrestricted
Entity is in default under or with respect to any Contractual Obligation in any
respect which, individually or together with all such defaults, would
reasonably be expected to have a Material Adverse Effect, or that would create
an Event of Default under Section
9.01(e). Each Loan
Party and its subsidiaries is in compliance


 


47

















 


with all requirements of any
Governmental Authority 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 in each case where the failure to do
so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.


 


6.07                        ERISA
Compliance. Except as specifically disclosed in Schedule 6.07:


 


(a)                                  Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
Each Loan Party and each ERISA Affiliate has made all required contributions to
any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.


 


(b)                                 There are no pending or, to the knowledge of any Loan Party,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect.


 


(c)                                  (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Loan
Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) no Loan
Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) no Loan Party nor
any ERISA Affiliate has engaged in a transaction that could be subject to
Section 4069 or 4212(c) or ERISA.


 


6.08                        Margin
Regulations. The proceeds of the Loans shall be used solely for the
purposes set forth in and permitted by Section 7.16. No Loan Party is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock. No proceeds of
any Loan shall be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U) or to extend credit to others for the
purpose of purchasing or carrying margin stock or to refund indebtedness
originally incurred for such purpose.


 


6.09                        Title
to Properties. Subject to Permitted Liens, the Loan Parties and their
Subsidiaries shall each have good and defensible title to all of their
respective Oil and Gas Properties evaluated in the most recently delivered
Reserve Report, and except for such defects in title as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
and each Loan Party and its Subsidiaries shall have good title to all other Oil
and Gas Properties necessary or used in the ordinary conduct of their
respective businesses. After giving full effect to the Permitted Liens, any
Loan Party or Subsidiary thereof specified as the owner under the most recently
delivered Reserve Report owns the net interests in production attributable to
the Oil and Gas Properties as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate such Loan Party or Subsidiary thereof 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


 


48

















 


in the most recently delivered
Reserve Report that is not offset by a corresponding proportionate increase in
such Loan Party’s or Subsidiary’s net revenue interest in such Property. Other
than as set forth on Schedule 6.09,
no consents or rights of first refusal exist or remain outstanding with respect
to such Loan Party’s or Subsidiary’s interest in the Mortgaged Properties
assigned to it pursuant to any Acquisition of Oil and Gas Properties other than
Permitted Liens. Other than as set forth on Schedule
6.09, as of the Effective Date, the property of the Loan Parties
and their Subsidiaries is subject to no Liens, other than Permitted Liens.


 


6.10                        Oil
and Gas Reserves. Each Loan Party and each of its Subsidiaries is and will
hereafter be, in all material respects, the owner of the Oil and Gas that it
purports to own from time to time in and under its Oil and Gas Properties,
together with the right to produce the same. The Oil and Gas Properties are not
subject to any Lien other than as set forth in the financial statements
referred to in Section
6.14, as disclosed to the Lenders in writing prior to the date
of this Agreement and Permitted Liens. All Oil and Gas have been and will
hereafter be produced, sold and delivered in accordance in all material
respects with all applicable laws and regulations of governmental authority;
each of the Loan Parties and its Subsidiaries has complied in all material
respects and will hereafter use commercially reasonable efforts to comply with
all material terms of each oil, gas and mineral lease and any other agreement
comprising its Oil and Gas Properties; and all such oil, gas and mineral leases
and other agreements have been and will hereafter be maintained in full force
and effect. Provided, however that nothing in this Section 6.10 shall
prevent any Loan Party or its Subsidiaries from abandoning any well or forfeiting,
surrendering, releasing or defaulting under any lease in the ordinary course of
business which is not disadvantageous in any way to the Lenders and which, in
the opinion of such Loan Party, is in its best interest, and such Loan Party
and its Subsidiaries is and will hereafter be in compliance with all
obligations hereunder. All of the Loan Parties’ and their Subsidiaries’
Operating Agreements and Operating Leases with respect to their Oil and Gas
Properties are and will hereafter be enforceable in all material respects in
accordance with their terms except as such may be modified by applicable
bankruptcy law or an order of a court in equity.


 


6.11                        Initial
Reserve Report. The Company has heretofore delivered to the Lenders a true
and complete copy of (x) a report, dated effective as of December 31, 2006,
prepared by Netherland, Sewell and Associates, Inc. (collectively, the “Initial Reserve Reports”)
relating to an evaluation of the Oil and Gas attributable to certain of the
Mortgaged Properties described therein. To the knowledge of the Company, (a)
the assumptions stated or used in the preparation of the Initial Reserve Report
are reasonable, (b) all information furnished by the Company to Netherland,
Sewell and Associates, Inc.  (the “Independent Engineer”)
for use in the preparation of the Initial Reserve Report, was accurate in all
material respects, (c) there has been no material adverse change in the amount
of the estimated Oil and Gas shown in the Initial Reserve Report since the date
thereof, except for changes which have occurred as a result of production in
the ordinary course of business, and (d) the Initial Reserve Report do not omit
any material statement or information necessary to cause the same not to be
misleading to the Lenders.


 


6.12                        Gas
Imbalances. There are no gas imbalances, take or pay or other prepayments
with respect to any of the Oil and Gas Properties which would require the Loan
Parties or their Subsidiaries to deliver Oil and Gas produced from any of the
Oil and Gas Properties at some future time without then or thereafter receiving
full payment therefor exceeding 300,000 Mcf of gas (on an Mcf equivalent basis)
in the aggregate.


 


6.13                        Taxes.
Unless specifically disclosed on Schedule 6.13,
the Loan Parties and their Subsidiaries have filed all federal tax returns and
reports required to be filed, and have paid all federal taxes, assessments,
fees and other governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. The Loan Parties and their
Subsidiaries have filed all state and other non-federal tax returns and reports


 


49

















 


required to be filed, and have
paid all state and other non-federal taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets prior to delinquency thereof, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. To the knowledge of the Loan Parties, there
is no proposed tax assessment against any Loan Party or any of its subsidiaries
that would, if made, reasonably be expected to have a Material Adverse Effect.


 


6.14                        Financial
Condition.


 


(a)                                  The audited consolidated balance sheet of the Company and
its Consolidated Subsidiaries for the fiscal year ended December 31, 2006 (i)
were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein; (ii)
fairly present the financial condition of the Company and its Consolidated Subsidiaries
as of the date thereof and their results of operations for the period covered
thereby in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein; and (iii) show
all material indebtedness and other liabilities, direct or contingent, of the
Company and its Consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Indebtedness.


 


(b)                                 The unaudited consolidated balance sheets of the Company and
its Consolidated Subsidiaries dated June 30, 2007, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows for the
fiscal quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present the financial condition of the
Company and its Consolidated Subsidiaries as of the date thereof and their
results of operations for the period covered thereby, subject, in the case of
clauses (i) and (ii), to the absence of footnotes and to normal year-end audit
adjustments.


 


(c)                                  Since December 31, 2006, there has been no event,
development or circumstance that has had or could reasonably be expected to
have a Material Adverse Effect and the business of Parent and the Loan Parties
have been conducted only in the ordinary course consistent with past business
practices.


 


6.15                        Environmental
Matters. Except as described on Schedule 6.15 hereto or that, either
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect (or with respect to (c) and (d) below, where the
failure, either individually or in the aggregate, to take such actions could
not be reasonably expected to have a Material Adverse Effect):


 


(a)                                  neither any Property of any Loan Party or any of its
Subsidiaries, nor the operations conducted thereon, violate Environmental Laws.


 


(b)                                 no Property of any Loan Party or any of its Subsidiaries,
nor the operations currently conducted thereon by any Loan Party, or, to the
knowledge of such Loan Party, no operations conducted thereon by any prior
owner or operator of such Property, are in violation of or subject to any
existing, or to the knowledge of such Loan Party, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any Governmental
Authority under Environmental Laws.


 


(c)                                  all notices, permits, licenses, exemptions, and approvals,
if any, required to be obtained or filed under any Environmental Law in
connection with the operation or use of any and all Property by each Loan
Party, including, without limitation, any treatment, storage, disposal or
Release of any Hazardous Materials into the environment, have been duly obtained
or filed or requested, and each


 


50

















 


Loan Party and its Subsidiaries is in
compliance with the material terms and conditions of all such notices, permits,
licenses, exemptions and approvals.


 


(d)                                 Hazardous Materials, if any, generated by the Loan Parties
or any of their Subsidiaries at any and all Property of any such Subsidiary
have in the past been transported, treated and disposed of in compliance with
Environmental Laws then in effect, and, to the knowledge of such Loan Party,
transport carriers and treatment and disposal facilities known by such Loan
Party to have been used by it are not the subject of any existing action,
investigation or inquiry by any Governmental Authority under any Environmental
Laws.


 


(e)                                  no Hazardous Materials have been disposed of or otherwise
Released by any Loan Party or any Subsidiary thereof on or to any Property of
such Loan Party or Subsidiary except in compliance with Environmental Laws.


 


(f)                                    no Loan Party has any known pending assessment,
investigation, monitoring, removal or remedial obligations under applicable
Environmental Laws in connection with any Release or threatened Release of any
Hazardous Materials into the environment by any Loan Party or any Subsidiary thereof.


 


6.16                        Regulated
Entities. Neither Parent nor any of its Subsidiaries, is an “investment company” or is a company “controlled by” an “investment company” within the meaning of the Investment
Company Act of 1940. None of the Loan Parties, or any Person controlling the
Company or the Guarantors, is subject to regulation under the Federal Power
Act, the Interstate Commerce Act, any state public utilities code, or any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.


 


6.17                        No
Burdensome Restrictions. No Loan Party or any of its Subsidiaries is a
party to or bound by any Contractual Obligation, or subject to any restriction
in any Organization Document, or any Requirement of Law, which would reasonably
be expected to have a Material Adverse Effect.


 


6.18                        Copyrights,
Patents, Trademarks and Licenses, Etc. Each Loan Party and each of its
Subsidiaries owns or is licensed or otherwise has the right to use all of the
material patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of its business, without material conflict with the
rights of any other Person. To the knowledge of any Loan Party, no slogan or
other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by any Loan Party or
any Subsidiary thereof infringes in a material respect upon any rights held by
any other Person. No claim or litigation regarding any of the foregoing is
pending or threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is pending or, to the
knowledge of any Loan Party, proposed, which, in either case, could reasonably
be expected to have a Material Adverse Effect.


 


6.19                        Subsidiaries
and Other Equity Interests. No Loan Party has any Subsidiary, Unrestricted
Entity or other equity investment other than those specifically disclosed in Schedule 6.19 hereto.
The Company owns the percentage interest of all issued and outstanding Equity
in each Subsidiary, Unrestricted Entity or other material equity investment
described on Schedule
6.19. Parent owns one hundred percent (100%) of the issued and
outstanding equity in the Company. The Company may update and replace Schedule 6.19 from time to time to
reflect changes resulting from transactions or other events permitted
hereunder.


 


51

















 


6.20                        Insurance.
The Properties of each Loan Party and its Subsidiaries is insured with
financially sound and reputable insurance companies not Affiliates of the
Company, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such other Loan Party or
Subsidiary operates.


 


6.21                        Derivative
Contracts. As of the date hereof Schedule 6.21 sets forth, a true and complete
list of all Derivative Contracts of the Loan Parties and their Subsidiaries,
the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net mark-to-market value
thereof, all credit support agreements relating thereto (including any margin
required or supplied) and the counterparty to each such agreement.


 


6.22                        Full
Disclosure. None of the representations or warranties made by any Loan
Party in the Loan Documents as of the date such representations and warranties
are made or deemed made, and none of the statements contained in any exhibit,
report, written statement or certificate (other than any financial projections,
forecasts or estimates) furnished by or on behalf of any Loan Party in
connection with the Loan Documents, taken as whole, contains any untrue
statement of a material fact known to any Loan Party, or omits any material
fact known to any Loan Party, required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.


 


6.23                        Solvency.
The Loan Parties, taken as a whole, and individually, are Solvent.


 


ARTICLE VII.



AFFIRMATIVE COVENANTS


 


So long as the Issuing
Lender or any Lender shall have any Commitment hereunder, or any Loan, Letter
of Credit or other Obligation shall remain unpaid or unsatisfied, or any Letter
of Credit remains outstanding, unless the Lenders waive compliance in writing:


 


7.01                        Financial
Statements. Each of the Loan Parties shall maintain, for itself and each of
its Consolidated Subsidiaries, on a consolidated basis, a system of accounting
established and administered in accordance with GAAP and deliver, or cause to
be delivered, to Administrative Agent, with sufficient copies for each Lender:


 


(a)                                  no later than fifteen (15) days following the date required
by applicable SEC rules (without giving effect to any extensions available
thereunder) for the filing of such financial statements:


 


(i)                                     the audited consolidated balance sheet and related
statements of income, partners equity and cash flows of Parent 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 (A) reported on by a nationally recognized independent
public accounting firm (the “Independent Auditor”) (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, results of operations and cash flows of Parent and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, and (B) certified by a Responsible Officer as fairly
presenting in all material respects, the financial condition, results of
operations and cash flows of Parent and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;


 


52

















 


(ii)                                  unaudited annual consolidating balance sheet and
consolidating statement of income for Parent and its Consolidated Subsidiaries
as of the end of such year, certified by a Responsible Officer as fairly
presenting in all material respects, the financial condition, results of
operations of Parent and its Consolidated Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied; and


 


(iii)                               the unaudited consolidated balance sheet and related
statements of income, partners equity and cash flows of the Company as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous final year, and unaudited consolidating balance sheets
and statements of income, all certified by a Responsible Officer as fairly
presenting in all material respects, the financial condition, results of
operations and cash flows of the Company and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to the
absence of footnotes.


 


(b)                                 fifteen (15) days following the date required by applicable
SEC rules (without giving effect to any extensions available thereunder) for
the filing of such financial statements after the end of each of the first
three fiscal quarters of each fiscal year of Parent:


 


(i)                                     the unaudited consolidated balance sheet and related
statements of income, partners equity and cash flows of Parent as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of), the previous fiscal year, all certified by a Responsible Officer
as fairly presenting in all material respects, the financial condition, results
of operations and cash flows of Parent and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to the
absence of footnotes; and


 


(ii)                                  the unaudited consolidated balance sheet and related
statements of income, partners equity and cash flows of the Company as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by a Responsible Officer as
fairly presenting in all material respects, the financial condition, results of
operations and cash flows of the Company and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to the
absence of footnotes.


 


7.02                        Certificates;
Other Production and Reserve Information. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Lender:


 


(a)                                  As soon as available, but not later than 45 days after the
close of each fiscal quarter of Parent (including the fourth quarter), a
Quarterly Status Report covering each of the three months during such fiscal
quarter;


 


(b)                                 Concurrently with any delivery of financial statements under
Sections 7.01(a)
and 7.01(b), a
certificate of a Responsible Officer, in form and substance satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such fiscal
quarter or fiscal year, a true and complete list of all Derivative Contracts of
each Loan Party, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net
mark-to-market value therefor, any new credit support agreements relating
thereto not listed on Schedule
8.05, any margin required or supplied under any credit support
document, and the counterparty to each such agreement;


 


53

















 


(c)                                  Concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and 7.01(b),
a Pricing Grid Certificate executed by a Responsible Officer of Parent;


 


(d)                                 Concurrently with the delivery of the statements and reports
referred to in Sections
7.01(a) and 7.01(b),
a Compliance Certificate executed by a Responsible Officer of Parent;


 


(e)                                  Annually commencing March 1, 2008, dated as of January 1st
of such year, a Reserve Report prepared by the Independent Engineer or other
independent petroleum engineer reasonably acceptable to Administrative Agent
and the Company, and annually, commencing August 15, 2008, dated as of July 1st
of such year, a Reserve Report prepared by personnel of the Company and certified
by a Responsible Officer of the Company as true and correct in all material
respects. Each Reserve Report shall be in form and substance reasonably
satisfactory to the Lenders. With the delivery of each Reserve Report, the
Company shall provide to the Administrative Agent and the Lenders a certificate
from a Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (ii) the Loan Parties own (and in
the case of Oil and Gas Properties owned by BEP I, BEP I 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 8.01,
(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
6.12 with respect to their Oil and Gas Properties evaluated in
such Reserve Report that would require any Loan Party to deliver (or, in the
case of Oil and Gas Properties owned by BEP I, would require BEP I to deliver)
Oil and Gas 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 proved Oil and Gas Properties have been sold since the date
of the last Borrowing Base determination except as set forth on an exhibit to
the certificate, which certificate shall list all of its proved 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 most recently delivered Reserve Report 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;


 


(f)                                    [Intentionally Omitted];


 


(g)                                 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 7.02;


 


(h)                                 Promptly after available, copies of each annual report,
proxy or other report or communication sent to the equity owners of Parent, and
copies of all annual , regular, periodic and special reports and registration
statements which Parent may file or be required to file with the SEC and not
otherwise required to be deliver to the Administrative Agent pursuant hereto;


 


(i)                                     Concurrently with the delivery of any Reserve Report to the
Administrative Agent pursuant to Section 7.02(e), or after an Event of
Default, upon request, a list of all Persons purchasing Oil and Gas from any of
the Loan Parties or BEP I;


 


(j)                                     Prompt written notice, and in any event within three (3)
Business Days, of the occurrence of any Casualty Event;


 


54

















 


(k)                                  Prompt written notice (and in any event within thirty (30)
days prior thereto) of any change (i) in any Loan Party’s organizational 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 any
Loan Party’s chief executive office or principal place of business, (iii) in
any Loan Party’s identity or organizational structure or in the jurisdiction in
which such Person is incorporated or formed, (iv) in any Loan Party’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in any Loan Party’s
federal taxpayer identification number, if any;


 


(l)                                     Promptly upon the request of the Administrative Agent, such
copies of all geological, engineering and related data contained in any of Loan
Parties’ files or readily accessible to the Loan Party relating to the Oil and
Gas Properties as may reasonably be requested;


 


(m)                               On request by the Administrative Agent, based upon the
Administrative Agent’s or Lenders’ good faith belief that any Loan Party’s
title to the Mortgaged Properties (or BEP I’s title to Oil and Gas Properties
owned by it) or the Administrative Agent’s lien on the Loan Parties’ properties
is subject to claims of third parties, or if required by regulations to which
the Administrative Agent or any of the Lenders is subject, title and mortgage
lien evidence satisfactory to the Administrative Agent covering such Mortgaged
Property as may be designated by the Administrative Agent, covering such Loan
Party’s title thereto (or BEP I’s title to Oil and Gas Properties owned by it)
and evidencing that the Obligations are secured by liens and security interests
as provided in this Agreement and the Security Documents;


 


(n)                                 As soon as available, and in any event within 90 days after
the end of each fiscal year, a business and financial plan for Parent (in form
reasonably satisfactory to the Administrative Agent), prepared by a Responsible
Officer, setting forth for the fiscal year most recently ended, quarterly
financial projections and budgets for Parent, and for four fiscal years
thereafter yearly financial projections and budgets; and


 


(o)                                 Promptly, such additional information regarding the
business, financial or corporate affairs of the Loan Parties as the
Administrative Agent, at the reasonable request of any Lender, may from time to
time request.


 


Documents
required to be delivered pursuant to Sections 7.01(a),
7.01(b) and 7.02(h)
may be delivered electronically and if so delivered, shall be deemed to have
been delivered on the date (i) on which the Company posts such documents, or
provides a link thereto on the Company’s website on the Internet or (ii) on
which such documents are posted on the Company’s behalf on an Internet or
intranet website, if any, to which each Lender and the Administrative Agent have
access (whether a commercial, third-party website or whether sponsored by the
Administrative Agent ); provided, however, that (x) the Company
shall deliver paper copies of such documents to the Administrative Agent or any
Lender that requests the Company to deliver such paper copies until a written
request to cease delivering paper copies is given by the Administrative Agent
or such Lender and (y) the Company shall notify the Administrative Agent and
each Lender (by telecopier or electronic mail) of the posting of any such
documents and provide to the Administrative Agent by electronic mail electronic
versions (i.e., soft copies) of such documents. Notwithstanding anything
contained herein, in every instance the Company shall be required to provide
paper copies of the compliance certificates required by Section
7.02(d) to the Administrative Agent.


 


7.03                        Notices.
The Company shall promptly notify the Administrative Agent:


 


(a)                                  of the occurrence of any Default, Event of Default or BEP I
Default, or any event or circumstance that would reasonably be expected to
become a Default, Event of Default or BEP I Default;


 


55

















 


(b)                                 of any matter that has resulted or may reasonably be
expected to result in a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a Contractual Obligation of Parent,
the Company or any subsidiary thereof; (ii) any dispute, litigation,
investigation, proceeding or suspension between Parent, the Company or any
subsidiary thereof and any Governmental Authority; (iii) the commencement of,
or any material development in, any litigation, proposed legislation, ordinance
or regulation of a Governmental Authority, or proceeding affecting Parent, the
Company or any subsidiary thereof; including pursuant to any applicable
Environmental Laws; or (iv) revocation, cancellation or failure to renew any
license, permit or franchise where such revocation, failure or loss could
reasonably be expected to have a Material Adverse Effect;


 


(c)                                  of any material change in accounting policies or financial
reporting practices by Parent, the Company or any of its subsidiaries; or


 


(d)                                 of the formation or acquisition of any Restricted Subsidiary
or Unrestricted Entity.


 


Each
notice under this Section
7.03 shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to
therein, and stating what action such Loan Party proposes to take with respect
thereto and at what time. Each notice under Section 7.03(a) shall describe with
particularity any and all clauses or provisions of this Agreement or other Loan
Document that have been (or foreseeably will be) breached or violated.


 


7.04                        Preservation
of Company Existence, Etc. Each Loan Party shall, and shall cause its
Subsidiaries to:


 


(a)                                  preserve and maintain in full force and effect its legal
existence, and maintain its good standing under the laws of its state or
jurisdiction of formation, provided however, that the wind-up of any Subsidiary
shall be permitted either to the extent assets of such Subsidiary are not
transferred to any party other than the Company or another Subsidiary;


 


(b)                                 preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect;


 


(c)                                  use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill except where the failure to do
so would not reasonably be expected to have a Material Adverse Effect; and


 


(d)                                 preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably
be expected to have a Material Adverse Effect.


 


7.05                        Maintenance
of Property. Each Loan Party shall, and shall cause its Subsidiaries to,
maintain and preserve all its Property which is used or useful in its business
in good working order and condition, ordinary wear and tear excepted and to use
the standard of care typical in the industry in the operation and maintenance
of its facilities except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect provided, however, that nothing in
this Section 7.05
shall prevent such Loan Party or its Subsidiaries from abandoning any well or
forfeiting, surrendering, releasing or defaulting under any lease in the
ordinary course of business which is not materially


 


56

















 


disadvantageous in any way to
the Lenders and which, in its opinion, is in the best interest of such Loan
Party, and each such Loan Party is and will hereafter be in compliance with all
obligations hereunder.


 


7.06                        Title Information.


 


(a)                                  On or before December 3, 2007 the Company will deliver to
the Administrative Agent a written due diligence report satisfactory to the
Administrative Agent with respect to title covering the Quicksilver Acquisition
Properties, which report shall be consistent with the due diligence protocol
and procedures furnished to the Administrative Agent dated September 10, 2007
and shall cover not less than 70% of the total net present value (determined by
a discount factor of 10%) of the Quicksilver Oil and Gas Properties that
constitute proved Oil and Gas Properties; and


 


(b)                                 (i)                                     On or before the delivery to the Administrative Agent and
the Lenders of each Reserve Report required by Section 7.02(e), the Company will
deliver title information in form and substance 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,
satisfactory title information on at least 80% of the total net present value
(determined by a discount factor of 10%) of the proved Oil and Gas Properties
(other than the Quicksilver Oil and Gas Properties) evaluated by such Reserve
Report.


 


(ii)                                  If the Company has provided title information for additional
Properties under Section
7.06(a), the Company 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
8.01 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Permitted
Liens having an equivalent value or (iii) deliver title information in form and
substance reasonably acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the net present value (determined by a discount
factor of 10%) of the Oil and Gas Properties (other than the Quicksilver Oil
and Gas Properties) evaluated by such Reserve Report.


 


(iii)                               If the Company 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 Company does not comply with the requirements to provide acceptable
title information covering 80% of the net present value (determined by a
discount factor of 10%) of the Oil and Gas Properties (other than the
Quicksilver Oil and Gas Properties) evaluated in the most recent Reserve
Report, 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 80% requirement”,
and the Administrative Agent may send a notice to the Company and the Lenders
that the then outstanding Borrowing Base shall be reduced by an amount as
determined by the Majority Lenders to cause the Company to be in compliance
with the requirement to provide acceptable title information on 80% of the net
present value (determined by a discount factor of 10%) of the Oil and Gas
Properties (other than the Quicksilver Oil and Gas Properties). This new
Borrowing Base shall become effective immediately after receipt of such notice.


 


57

















 


7.07                        Additional
Collateral. In connection with each redetermination of the Borrowing Base,
the Company shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section  7.02(e)) to
ascertain whether the Mortgaged Properties represent at least 80% of the total
net present value (determined by a discount factor of 10%) 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 net present value, then the Company shall, and shall
cause each Loan Party to, grant, within thirty (30) days of delivery of the
certificate required under Section
7.02(e), to the Administrative Agent or its designee as security
for the Obligations a first-priority Lien interest on additional Oil and Gas
Properties not already subject to a Lien of the Security Documents such that
after giving effect thereto, the Mortgaged Properties will represent at least
80% of such total net present 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 Documents, 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.


 


7.08                        Insurance.
Each Loan Party shall, and shall cause its Subsidiaries to, maintain, with
financially sound and reputable independent insurers, insurance with respect to
its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar
circumstances by such other Persons except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect. The loss payable
clauses or provisions in said insurance policy or policies insuring any of the
Collateral for the Loan 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
insured” and provide that the insurer will give at least 30 days
prior notice of any cancellation to the Administrative Agent.


 


7.09                        Payment
of Obligations. Each Loan Party shall, and shall cause its Subsidiaries to,
pay and discharge prior to delinquency, all their respective obligations and
liabilities, including: (a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by such Loan Party or its
Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien
upon its Property; and (c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness; except in each of (a), (b) and (c),
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.


 


7.10                        Compliance
with Laws. Each Loan Party shall, and shall cause its Subsidiaries to,
comply in all material respects with all Requirements of Law of any
Governmental Authority having jurisdiction over it or its business (including
Environmental Laws, the Federal Fair Labor Standards Act and any California
Requirement of Law promulgated with respect to earthquakes), except (a) such as
may be contested in good faith or as to which a bona fide dispute may exist or
(b) where the failure to do so would not reasonably be expected to have a
Material Adverse Effect.


 


7.11                        Compliance
with ERISA. Each Loan Party shall, and shall cause each of its ERISA
Affiliates to: (a) maintain each Plan in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law; (b) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required contributions to any
Plan subject to Section 412 of the Code.


 


58
















 


7.12                        Inspection
of Property and Books and Records. Each Loan Party shall, and shall cause
its Subsidiaries to, maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving the assets
and business of such Loan Party or its Subsidiary, as applicable. Each Loan
Party shall, and shall cause its Subsidiaries to, permit, representatives and
independent contractors of the Administrative Agent or any Lender to visit and
inspect any of their respective properties, to examine their respective
company, financial and operating records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective managers, directors, officers, and independent public
accountants, all at the expense of the Loan Parties and at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to such Loan Party; provided, however,
when an Event of Default exists the Administrative Agent or any Lender may do
any of the foregoing at the expense of the Company at any time during normal
business hours and without advance notice.


 


7.13                        Environmental Laws.


 


(a)                                  Each Loan Party shall, and shall cause its Subsidiaries to,
comply with all applicable Environmental Laws and maintain all environmental,
health and safety permits, licenses and authorizations necessary for its
operations and will maintain such in full force and effect except where such
noncompliance or the failure to maintain such permits, licenses and
authorizations would not reasonably be expected to have a Material Adverse
Effect. Each Loan Party shall, and shall cause its Subsidiaries 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 under applicable Environmental Laws
because of or in connection with the actual or suspected past, present or
future Release of any Hazardous Materials on, under, about or from any of the
Loan Parties’ Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect.


 


(b)                                 Each Loan Party shall, and shall cause its Subsidiaries to,
establish and implement, such procedures as may be reasonably necessary to
continuously determine and assure that the Loan Party’s obligations under this Section 7.13 are
timely and fully satisfied, which failure to establish and implement could
reasonably be expected to have a Material Adverse Effect


 


(c)                                  Each Loan Party will, and will cause its Subsidiaries to,
promptly furnish to the Administrative Agent all written notices of violation,
orders, claims, citations, complaints, penalty assessments, suits or other
proceedings received by such Loan Party or Subsidiary, or of which it has
notice, pending or threatened against such Loan Party or any of its
Subsidiaries, by any Governmental Authority with respect to any alleged
violation of or non-compliance with any Environmental Laws or any permits,
licenses or authorizations in connection with its ownership or use of its
Properties or the operation of its business, except where any such alleged
violations or incidents of non-compliance would not, individually or in the
aggregate, result in a penalty, assessment, fine or other cost or liability
exceeding $1,000,000.


 


(d)                                 Each Loan Party will, and will cause its Subsidiaries to,
promptly furnish to the Administrative Agent all requests for information,
notices of claim, demand letters, and other notifications, received by such
Loan Party or Subsidiary in connection with its ownership or use of its
Properties or the conduct of its business, relating to potential responsibility
with respect to any investigation or clean-up of Hazardous Materials at any
location, except where any such alleged responsibility would not, individually
or in the aggregate, result in a penalty, assessment, fine or other cost or
liability exceeding $1,000,000.


 


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7.14                        Pledge
of Equity in New Subsidiary. If, at any time after the date of this
Agreement, any new Subsidiary is acquired or created, then the applicable Loan
Party shall pledge all of the Equity of such Subsidiary and deliver such
documentation as the Administrative Agent requires in connection with such
pledge, including original stock or other ownership certificates evidencing
such Equity, together with undated stock powers for each such certificate duly
executed in blank and such additional closing documents, certificates and legal
opinions as the Administrative Agent shall reasonably require.


 


7.15                        New
Subsidiary Guarantors. If, at any time after the date of this Agreement,
there exists any subsidiary of a Loan Party (other than BEP I and the
Unrestricted Entities) that is not a Guarantor hereunder, or if BEP I or any
Unrestricted Entity becomes a Wholly Owned Subsidiary of a Loan Party, then
such Loan Party shall cause BEP I or each such Subsidiary, as applicable, to
execute and deliver to the Administrative Agent a Guaranty or supplement to
existing Guaranty, and a Security Agreement or supplement to existing Security
Agreement, and other documents and opinions as required pursuant to Sections 4.02 and 4.05.


 


7.16                        Use
of Proceeds. The Company shall use the proceeds of the Loans (a) to pay a
portion of the purchase price for the Quicksilver Acquisition and related
expenses, (b) for standby letters of credit up to the amount of the Letter of
Credit Sublimit, (c) for working capital purposes (including capital
expenditures made for the exploration and development of Oil and Gas
Properties) of the Company and its Subsidiaries, (d) for general company
purposes of the Company and its Subsidiaries, and (e) for acquisitions
permitted under Section 8.04 and Restricted
Payments permitted under Section 8.09.
The Company shall use the Letters of Credit as support for Derivative Contracts
and for other general company purposes of the Company and its Subsidiaries.


 


7.17                        Operating
Accounts. The Loan Parties and their Subsidiaries shall maintain with
Administrative Agent all primary operating and depository accounts.


 


7.18                        Phase
I Reports. As soon as available, and in any case within fifteen (15) days
prior to acquiring any Oil and Gas Properties directly or indirectly through a
Subsidiary each Loan Party shall deliver to the Lenders a Phase I Report
covering such Oil and Gas Properties to be acquired in form and substance
reasonably satisfactory to the Administrative Agent.


 


7.19                        Further Assurances.


 


(a)                                  Each Loan Party will promptly cure any defects in the creation
and issuance of the Notes and the execution and delivery of this Agreement, the
Security Documents or any other instruments referred to or mentioned herein or
therein. The Company at its expense will promptly do all acts and things, and
will execute and file or record, all instruments reasonably requested by the
Administrative Agent, to establish, perfect, maintain and continue the
perfected security interest of the Administrative Agent
in or the Lien of the Administrative Agent on the Mortgaged Properties. Upon
request by the Administrative Agent, each Loan Party shall promptly execute
such additional Security Documents covering any new Oil and Gas Properties
reflected on the Quarterly Status Reports or any new Subsidiaries of the Loan
Parties. The Company will pay the costs and expenses of all filings and
recordings and all searches deemed
necessary by the Administrative Agent to establish and determine the validity
and the priority of the Liens created or intended to be created by the Security
Documents; and such Loan Party will satisfy all other claims and charges which
in the reasonable opinion of the Administrative Agent might prejudice, impair
or otherwise affect any of the Mortgaged Properties or any Liens thereon in
favor of the Administrative Agent for the benefit of the Issuing Lender and the
Lenders.


 


(b)                                 Each Loan Party hereby authorizes the Administrative Agent
to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Mortgaged


 


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Property without the signature of such
Loan Party where permitted by law. A carbon, photographic or other reproduction
of the Security Documents 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 such Loan Party
any financing or continuation statements it files without the signature of such
Loan Party and the Administrative Agent will promptly send the Company the
filing or recordation information with respect thereto.


 


ARTICLE VIII.



NEGATIVE COVENANTS


 


So long as any Lender shall
have any Commitment hereunder, or any Loan or other Obligation shall remain
unpaid or unsatisfied, or any Letter of Credit remains outstanding, unless the
Lenders waive compliance in writing:


 


8.01                        Limitation
on Liens. Each Loan Party agrees that it shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following (“Permitted Liens”):


 


(a)                                  any Lien created under any Loan Document;


 


(b)                                 Liens for Taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 7.09;


 


(c)                                  carriers’, warehousemen’s, mechanics’, landlords’,
materialmen’s, repairmen’s or other similar Liens arising in the ordinary
course of business (whether by law or by contract) which are not delinquent or
remain payable without penalty or which are being contested in good faith and
by appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;


 


(d)                                 Liens consisting of pledges or deposits required in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other social security legislation;


 


(e)                                  Liens on the Property of such Loan Party securing (i) the
non-delinquent performance of bids, trade contracts (other than for borrowed
money), statutory obligations, (ii) contingent obligations on surety and appeal
bonds, and (iii) other non-delinquent obligations of a like nature; in each
case, incurred in the ordinary course of business;


 


(f)                                    easements, rights-of-way, restrictions, defects or other
exceptions to title (including, but not limited to, the contractual nature of
the Company’s interest in the Brea Oil Field, Orange County, California, and
the failure of certain Indian Tribes to act on assignment consents in certain
Wyoming properties in connection with the acquisition by the Company of
Properties from Nautilus Resources, LLC and Phoenix Production Company)  and other similar encumbrances incurred in
the ordinary course of business which, in the aggregate, are not substantial in
amount, are not incurred to secure Indebtedness, and which do not in any case
materially detract from the value of the Property subject thereto or interfere
with the ordinary conduct of the businesses of the Loan Parties;


 


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(g)                                 Liens arising solely by virtue of any statutory or common
law provision relating to bankers’ liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; or under any deposit account agreement entered into in
the ordinary course of business; provided that (i) such deposit account
is not a dedicated cash collateral account and is not subject to restrictions
against access by the Loan Party, (ii) the Loan Party maintains (subject to
such right of set off) dominion and control over such account(s), and (iii)
such deposit account is not intended by the Loan Party to provide cash
collateral to the depository institution; and


 


(h)                                 Oil and Gas Liens.


 


8.02                        Disposition
of Assets. Each Loan Party agrees that it shall not, and  shall not permit any of its Subsidiaries to, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) (collectively, “Dispositions”) any
Oil and Gas Properties or any other property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:


 


(a)                                  as permitted under Sections 7.05, 8.03,
8.04 or 8.09;


 


(b)                                 Dispositions of inventory, including produced Oil and Gas,
in the ordinary course of business;


 


(c)                                  Dispositions by the Company’s Subsidiaries to the Company;


 


(d)                                 used, worn-out or surplus equipment in the ordinary course
of business; and


 


(e)                                  Dispositions not otherwise permitted under Sections 8.02(a) – (d) above which are made in the
ordinary course of business; provided that, (i) no Event of Default
shall exist at the time of such Disposition or result therefrom, and (ii) the
aggregate value (as determined by the value assigned to such properties under
the most recent Reserve Report) of all Dispositions of Oil and Gas Properties
made by the Loan Parties, together, shall not exceed in any Borrowing Base
Period five percent (5%) of the Borrowing Base then in effect; further
provided that, the Borrowing Base shall be automatically reduced by an amount
equal to the aggregate value of such Oil and Gas Properties and to the extent a
Borrowing Base Deficiency results from such reduction, up to one-hundred
percent (100%) of the proceeds of such Dispositions, net of usual and customary
reasonable fees, expenses and taxes, shall be applied, as necessary, to cure
such Borrowing Base Deficiency.


 


8.03                        Consolidations
and Mergers. No Loan Party shall, or permit any of its Subsidiaries to,
merge, consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:


 


(a)                                  any Subsidiary may merge with any Loan Party, provided
that the Company or other Loan Party, as applicable, shall be the
continuing or surviving entity;


 


(b)                                 any Subsidiary may sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise), to the Company or any other Subsidiary that is a
Guarantor; and


 


(c)                                  Dispositions permitted under Section 8.02(e).


 


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8.04                        Loans
and Investments. No Loan Party shall, or permit any of its Subsidiaries to,
purchase, acquire, or own, or permit any of its Subsidiaries to purchase,
acquire, or own any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person (including any Unrestricted
Entity), or make any Acquisition, or make any advance, loan, extension of
credit or capital contribution to or any other investment in (collectively, “Investments”) any
Person including any Restricted Subsidiary, Unrestricted Entity, Affiliate of
the Company or other Person, except for:


 


(a)                                  Investments made on or prior to the Effective Date in the
entities described in Schedule
6.19;


 


(b)                                 Investments in Cash Equivalents;


 


(c)                                  extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;


 


(d)                                 Investments (i) by Parent in or to the Company, and (ii) by
the Company or any Subsidiary in or to a Domestic Subsidiary that is a
Guarantor or that becomes a Guarantor upon the making of such Investments, provided,
however, that in the case of this clause (ii) no Event of Default exists;


 


(e)                                  Investments permitted under Section 8.02(c);


 


(f)                                    Investments in Derivative Contracts permitted under Section 8.10;


 


(g)                                 Investments with third parties that (i) are customary in the
oil and gas business, (ii) are made in the ordinary course of such Person’s
business, and (iii) are made in the form of or pursuant to Operating
Agreements, process agreements, farm-in agreements, farm-out agreements,
development agreements, unitization agreements, pooling agreements, joint
bidding agreements, service contracts and other similar agreements;


 


(h)                                 extensions of credit by the Company to any of its full time
employees which do not exceed $500,000 at any time outstanding in the aggregate
to all such employees;


 


(i)                                     non-hostile Acquisitions of Equity or other Acquisitions, provided
that: (i) immediately prior to and after giving effect to such
Acquisition, no Default or Event of Default exists or would result therefrom;
(ii) if such Acquisition is of Equity of a Person, (x) all of the Equity of
such Person is acquired and such Person becomes a Guarantor and grants a lien
on its assets, and all the Equity in such Person is pledged as Collateral for
the Obligations, in accordance with Section
4.01 and (y) such Person is principally engaged in the same
business as the Loan Parties; and (iii) the Company shall be in pro forma
compliance with the covenants set forth in Section 8.14, 8.15,
and 8.16 based on the
trailing four (4) quarters and as adjusted on a pro forma basis for such
Acquisition; and


 


(j)                                     other Investments made after the Effective Date in an amount
not to exceed $5,000,000 in the aggregate.


 


8.05                        Limitation
on Indebtedness. No Loan Party shall, or permit any of its Subsidiaries to,
create, incur, assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:


 


(a)                                  Indebtedness incurred pursuant to this Agreement or the
other Loan Documents;


 


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(b)                                 Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08;


 


(c)                                  Indebtedness incurred in connection with the issuance of
Derivative Contracts permitted under Section 8.10 hereof;


 


(d)                                 Specific Indebtedness outstanding on the date hereof and
listed in Schedule 8.05
hereto; and


 


(e)                                  Unsecured Indebtedness not otherwise permitted under Sections 8.05(a) – (d) above in an aggregate principal
amount not exceeding $10,000,000 at any time outstanding.


 


8.06                        Transactions
with Affiliates. No Loan Party shall, or permit any of its Subsidiaries to,
enter into any transaction with or make any payment or transfer to
(collectively, “Transactions”)
any Affiliate of the Company or such Loan Party, except in the ordinary course
of business and upon fair and reasonable terms no less favorable to the Company
or such other Person than would obtain in a comparable arm’s-length transaction
with a Person not an Affiliate of the Company or such other Person or to the
extent permitted under Section
8.09, provided that the foregoing restriction shall not
apply to Transactions between or among the Company and the Guarantors.


 


8.07                        Margin
Stock. No Loan Party shall use any portion of the Loan proceeds, directly
or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act. If requested by the
Administrative Agent, the Company 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 or
Regulation X of the FRB, as the case may be.


 


8.08                        Contingent
Obligations. No Loan Party shall, or permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Contingent Obligations except:


 


(a)                                  endorsements for collection or deposit in the ordinary
course of business;


 


(b)                                 Derivative Contracts permitted under Section 8.10 hereof and Guaranty Obligations of Parent
with respect to the Florida Crude Oil Purchase Contracts.


 


(c)                                  Contingent Obligations of the Loan Parties listed in Schedule 8.08 hereto, not to
exceed $1,000,000 in the aggregate;


 


(d)                                 plugging bonds, performance bonds and fidelity bonds issued
for the account of the Company or its Subsidiaries, obligations to indemnify or
make whole any surety and similar agreements incurred in the ordinary course of
business, provided that such obligations shall not exceed $10,000,000 in
the aggregate;


 


(e)                                  this Agreement and the Loan Documents; and


 


(f)                                    any other Contingent Obligations of the Loan Parties to the
extent not described in Sections
8.08(a) - (e) not to
exceed an aggregate amount of $10,000,000 outstanding at any time.


 


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8.09                        Restricted
Payments. No Loan Party shall, or permit any of its Subsidiaries to,
purchase, redeem or otherwise acquire for value any membership interests,
partnership interests, capital accounts, shares of its capital stock or any
warrants, rights or options to acquire such membership interest, partnership
interest or shares, now or hereafter outstanding from its members, partners or
stockholders or declare or pay any distribution, dividend or return capital to
its members, partners or stockholders, or make any distribution of assets in
cash or in kind to its members, partners or stockholders (collectively “Restricted Payments”);
except (a) Parent may declare and pay dividends with respect to its Equity
payable solely in additional shares of its Equity, (b) Subsidiaries of the
Company may declare and pay dividends ratably with respect to their Equity, (c)
the Company may declare and pay dividends to Parent, and (d) Parent may declare
and pay to its Equity owners quarterly cash dividends of Available Cash in
accordance with its partnership agreement, so long as no Event of Default
exists or would result therefrom, and after giving effect to such Restricted
Payment, (i) the Loan Parties exhibit pro-forma compliance with all terms and
conditions of this Agreement, (ii) the Available Borrowing Base equals an
amount no less than ten percent (10%) of the Borrowing Base, (iii) the Company
would have the ability to draw at least ten percent (10%) of the Borrowing Base
and remain in compliance with all terms and conditions hereof, and (iv) such
Restricted Payment would not impair the ability of the Company to fulfill its
obligations hereunder. By making a Restricted Payment pursuant to clause (d)
above, Parent specifically represents and warrants to Administrative Agent and
the Lenders that the conditions for making such Restricted Payment have been
satisfied.


 


8.10                        Derivative
Contracts. No Loan Party shall, or permit any of its Subsidiaries to, enter
into or in any manner be liable on any Derivative Contract except:


 


(a)                                   Derivative Contracts entered into by the Company with the
purpose and effect of limiting or reducing the market price risk of Oil and Gas
expected to be produced by the Company and each Subsidiary provided that
at all times: (i) the aggregate of all such Derivative Contracts limits or
reduces such market price risk for a term of no more than sixty (60) months;
(ii) no such contract, when aggregated with all Derivative Contracts permitted
under this Section 8.10(a)
(but excluding put option contracts that are not related to
corresponding calls, collars or swaps) requires the Loan Parties to deliver
more than 85% of the reasonably anticipated production for each month for the
total Oil and Gas classified as either “proved producing” or “proved developed
non-producing” on (x) the Company’s Oil and Gas Properties covered under the
most recent Reserve Report delivered to the Administrative Agent and (y) any
Oil and Gas Properties acquired by the Company after the effective date of such
Reserve Report classified as “proved producing” or “proved developed
non-producing,” (provided however, the “proved developed non-producing”
reserves included in such calculation shall not exceed 20% of the “proved
producing” reserves) and (iii) each such contract shall be between the Company
or a Subsidiary and any of the Lenders or their Affiliates, or with an
unsecured counterparty or have a guarantor of the obligation of the unsecured
counterparty who, at the time the contract is made, has long-term obligations
rated BBB+ or Baal or better, respectively, by Standard & Poor’s
Corporation or Moody’s Investors Services, Inc. (or a successor credit rating
agency) (excluding (x) Derivative Contracts offered by national commodity
exchange for which no credit rating is required and (y) the Florida Crude Oil
Purchase Contracts for so long as such contracts are with Plains Marketing,
L.P. or a wholly owned subsidiary of Plains All American Pipeline, L.P.);


 


(b)                                 Derivative Contracts entered into by the Company with the
purpose and effect of fixing interest rates on a principal amount of
Indebtedness of the Company that is accruing interest at a variable rate, provided
that (i) the floating rate index of each such contract generally matches
the index used to determine the floating rates of interest on the corresponding
Indebtedness of the Company to be hedged by such contract, (ii) no such
contract, except those with a Lender or its Affiliate, when aggregated with all
Derivative Contracts permitted under Sections 8.10(a) and (b), requires the Company to put up money, assets,
letters of credit, or other security against the event of its non-performance
prior to


 


65

















 


actual default by the Company in
performing obligations thereunder, and (iii) each such contract shall be with a
Lender or its Affiliate, or with an unsecured counterparty or have a guarantor
of the obligation of an unsecured counterparty who, at the time the contract is
made, has long-term obligations rated A+ or A1 or better, respectively, by
Standard & Poor’s Corporation or Moody’s Investors Services, Inc. (or a
successor credit rating agency);


 


(c)                                  In the event of a Derivative Contract between the Company
and any of the Lenders, the Contingent Obligation evidenced under such
Derivative Contract shall not be applied against such Lender’s Commitment nor
against the Effective Amount. Any Indebtedness to any Lender or its Affiliate
incurred under any Derivative Contract shall be treated as an Obligation pari passu and secured pro rata under the Security Documents
with all Obligations otherwise incurred hereunder or under the other Loan
Documents as more particularly provided under Section 11.11; and


 


(d)                                 The Company shall not modify in any material respect or
terminate any Derivative Contracts to which it is currently a party or
subsequently becomes a party without the consent of the Majority Lenders,
except that Derivative Contracts with a party who ceases to be a Lender (or an
Affiliate of a Lender) may be terminated in connection with the assignment, amendment
or other transaction pursuant to which such party ceases to be a Lender or an
Affiliate of a Lender.


 


8.11                        Change in Business; Amendments to
Organization Documents and Certain Acquisition Agreements; Corporate Structure; Tax Status.


 


(a)                                  The Loan Parties shall not, and shall not permit any of
their Subsidiaries to (i) own Equity of any Foreign Person, or make any
expenditure in or related to Oil and Gas Properties not located within the
geographic boundaries of the United States, or (ii) enter into, or allow any
Subsidiary to enter into, any joint ventures except as permitted by Section 8.04.


 


(b)                                 The Loan Parties shall not, and shall not permit any
subsidiary to, engage in any business or activity other than its Principal
Business.


 


(c)                                  The Loan Parties shall not alter, amend or modify in any
manner materially adverse to the Lenders any of its Organization Documents.


 


(d)                                 Parent shall not alter its status as a partnership for
United States federal income tax purposes. Parent shall not have any Subsidiaries,
or own any Equity in any Person, other than the Company. 


 


(e)                                  Parent and the Company shall not amend or fail to enforce
the terms of any indemnity obligations under the Quicksilver Acquisition
Agreement, if such amendment or failure could reasonably be expected to have a
Material Adverse Effect.


 


8.12                        Accounting
Changes. Except as expressly permitted by the Lenders, no Loan Party shall,
or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of any Loan Party.


 


8.13                        ERISA
Compliance. Except as would not reasonably be expected to result in a
Material Adverse Effect, no Loan Party will, or permit any Subsidiary to, at
any time:


 


(a)                                  engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which any Loan Party or any ERISA Affiliate
could be subjected to either a civil penalty


 


66

















 


assessed pursuant to subsections (c),
(i) or (l) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D
of the Code.


 


(b)                                 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 such Loan Party or any ERISA Affiliate to the
PBGC.


 


(c)                                  fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, any Loan Party or any ERISA
Affiliate is required to pay as contributions thereto.


 


(d)                                 permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency within the meaning of section 302 of
ERISA or section 412 of the Code, whether or not waived, with respect to any
Plan.


 


(e)                                  permit, or allow any ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
any Loan Party or any ERISA Affiliate which is regulated under Title IV of
ERISA to exceed 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. The term “actuarial present value of the benefit
liabilities” shall have the meaning specified in section 4041 of ERISA.


 


(f)                                    incur, or permit any ERISA Affiliate to incur, any
withdrawal liability pursuant to Section 4201 or 4202 of ERISA.


 


(g)                                 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 such Loan Party or with respect to any ERISA Affiliate of such
Loan Party 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 with respect to which such Person
has an outstanding withdrawal liability under Section 4201 or 4202 of ERISA, 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.


 


(h)                                 incur, or permit any ERISA Affiliate to incur, a liability
to or on account of a Plan under sections 515, 4062, 4063, 4064, or 4204 of
ERISA.


 


(i)                                     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 employee welfare benefit plan, as defined in section 3(1) of
ERISA, that provides retiree benefits to former employees of such entities
(other than coverage mandated by applicable law), that may not be terminated by
such entities in their sole discretion at any time without any material
liability.


 


(j)                                     amend, or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that such Loan Party or any
ERISA Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.


 


8.14                        Interest
Coverage Ratio. Parent shall not permit, as of the last day of each fiscal
quarter beginning with the fiscal quarter ended September 30, 2007, the ratio
of EBITDAX for the four (4) fiscal


 


67

















 


quarters ending on such date to
Consolidated Interest Expense for the four (4) fiscal quarters ending on such
date to be less than 2.75 to 1.00.


 


8.15                        Leverage
Ratio. Parent shall not permit, as of the last day of each fiscal quarter
beginning with the fiscal quarter ended September 30, 2007, the ratio of Total
Indebtedness to EBITDAX for the four (4) fiscal quarters ending on such date to
be greater than 3.50 to 1.00.


 


8.16                        Current
Ratio. Parent shall not permit, as of the last day of each fiscal quarter
ending on the date set forth below, the ratio of Current Assets to Current
Liabilities to be less than the ratio set forth below:


 


September 30, 2007: 1.10 to
1.00


December 31, 2007 and
thereafter: 1.00 to 1.00


 


8.17                        Negative
Pledge. Enter into or permit to exist any contractual obligation (other
than this Agreement or any other Loan Document) that limits the ability (a) of
any Subsidiary to make Restricted Payments to or otherwise transfer property to
Parent, the Company or any Guarantor, (b) of Parent to Guarantee the
Indebtedness of the Company, or any Subsidiary to Guarantee the Indebtedness of
the Company, or (c) of Parent, the Company, or any Subsidiary to create, incur,
assume or suffer to exist Liens on property of such Person to secure the
Obligations. 


 


8.18                        Unrestricted Entities.


 


No Loan Party or any of its
Subsidiaries shall guarantee or otherwise become liable in respect of any
Indebtedness or any other obligations, or grant any Lien on any of its property
to secure any Indebtedness of or other obligations of, or provide any other
form of credit support to, any Unrestricted Entity. 


 


ARTICLE IX.



EVENTS OF DEFAULT


 


9.01                        Event
of Default. Any of the following shall constitute an “Event of Default”:


 


(a)                                  Non-Payment.
The Company or any other Loan Party fails to pay, when and as required to be
paid herein, any amount of principal or interest of any Loan, or fails to pay
within five (5) Business Days of when due any fee or other amount payable
hereunder or under any other Loan Document; or


 


(b)                                 Representation or Warranty.
Any representation or warranty by any Loan Party made or deemed made herein, in
any other Loan Document, or which is contained in any certificate, document or
financial or other statement by the Company, any other Loan Party, or any
Responsible Officer of such Person, furnished at any time under this Agreement,
or in or under any other Loan Document, is incorrect on or as of the date made
or deemed made and causes a Material Adverse Effect; or


 


(c)                                  Specific Defaults.
Any Loan Party fails to perform or observe any term, covenant or agreement
contained in Section 7.03(a) or
Article VIII
(except for such Liens under Section
8.01 other than arising by consensual action of such Loan Party)
or there is a change in the tax status of any Loan Party; or


 


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(d)                                 Other Defaults.
An Event of Default as defined in any Security Document shall occur, or any
Loan Party fails to perform or observe any other term or covenant contained in
this Agreement (other than described in this Section 9.01) or any other Loan
Document, and same shall continue unremedied for a period of 30 days after the
earlier of (i) the date upon which a Responsible Officer knew or reasonably
should have known of such default or (ii) the date upon which written notice
thereof is given to the Company by the Administrative Agent or any Lender; or


 


(e)                                  Cross-Acceleration.
(i) any Loan Party or any Subsidiary thereof fails to make any payment in respect
of any Indebtedness or Contingent Obligation having an aggregate principal
amount (including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than the $10,000,000 when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and such failure continues
after the applicable grace period, if any, specified in the relevant document
on the date of such failure; or (ii) any Loan Party or any Subsidiary thereof
fails after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation having an aggregate principal amount of more than $10,000,000 which
results in such Indebtedness or such Contingent Obligation being declared due
and payable (or becoming subject to mandatory repurchase or redemption) prior
to its stated maturity; or


 


(f)                                    Insolvency; Voluntary Proceedings. Any Loan Party, any Subsidiary thereof or BreitBurn GP LLC
(i) generally fails to pay, or admits in writing its inability to pay, its
debts as they become due, subject to applicable grace periods, if any, whether
at stated maturity or otherwise; (ii) commences any Insolvency Proceeding with
respect to itself; or (iii) takes any action to effectuate or authorize any of
the foregoing; or


 


(g)                                 Involuntary Proceedings.
(i) Any involuntary Insolvency Proceeding is commenced or filed against any
Loan Party, any Subsidiary thereof or BreitBurn GP LLC, or any writ, judgment,
warrant of attachment, execution or similar process, is issued or levied
against all or a substantial part of any such Person’s properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) any Loan
Party, any Subsidiary thereof or BreitBurn GP LLC admits the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) any Loan Party, any Subsidiary thereof or BreitBurn GP LLC
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar
Person for itself or a substantial portion of its property or business; or


 


(h)                                 Change in Management or Control. Both Halbert Washburn and Randall Breitenbach shall cease
for any reason to serve and function as Co-CEO of BreitBurn GP LLC and neither
shall be succeeded in such position or other comparable position acceptable to
the Majority Lenders, within sixty (60) days by a Person acceptable to the
Majority Lenders; or there shall occur a Change of Control; or


 


(i)                                     Monetary Judgments.
One or more non-interlocutory judgments, non-interlocutory orders, decrees or
arbitration awards is entered against any Loan Party, any Subsidiary thereof or
General Partner involving in the aggregate a liability (to the extent not
covered by independent third-party insurance as to which the insurer does not
dispute coverage) as to any single or related series of transactions, incidents
or conditions, of $10,000,000 or more, and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of 30 days after the entry
thereof; or


 


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(j)                                     Loss of Permit.
Any Governmental Authority revokes or fails to renew any material license,
permit or franchise of any Loan Party, or any Loan Party for any reason loses
any material license, permit or franchise, or any Loan Party suffers the
imposition of any restraining order, escrow, suspension or impounding of funds
in connection with any proceeding (judicial or administrative) with respect to
any material license, permit or franchise; and, in each case such revocation,
failure or loss could reasonably be expected to have a Material Adverse Effect;
and such default remains unremedied for a period of 30 days after the earlier
of (i) the date upon which a Responsible Officer knew or reasonably should have
known of such default or (ii) the date upon which written notice thereof is
given to the Company by the Administrative Agent or any Lender; or


 


(k)                                  Adverse Change.
There occurs a Material Adverse Effect; or


 


(l)                                     Invalidity of Loan Documents.
A Guaranty or any other Loan Document is for any reason partially (including
with respect to future advances) or wholly revoked or invalidated, or otherwise
ceases to be in full force and effect, or a Guarantor or any other Person
contests in any manner the validity or enforceability thereof or any Loan Party
denies that it has any further liability or obligation thereunder; or


 


(m)                               Material Agreements.
Any Loan Party shall fail to observe, perform or comply with any material
covenant, agreement, condition or provision of any material Contractual
Obligation including without limitation the following: (i) or Derivative
Contracts required under Section
8.10, (ii) material leases associated with the Mortgaged
Properties and (iii) material agreements governing the transportation of Oil
and Gas from the Mortgaged Properties; or


 


(n)                                 ERISA. The
occurrence of any of the following events: (i) the happening of a Reportable
Event which has resulted or could reasonably be expected to result in a
Material Adverse Effect (if not waived by the PBGC or by the Majority Lenders,
or if such event can be avoided by any corrective action of the Loan Party
affected thereby, such corrective action is not completed within ninety (90)
days after the occurrence of such Reportable Event) with respect to any Pension
Plan; (ii) the termination of any Pension Plan in a “distress termination”
under the provisions of Section 4041 of ERISA; (iii) the appointment of a
trustee by an appropriate United States District Court to administer any
Pension Plan; and (iv) the institution of any proceedings by the PBGC to
terminate any Pension Plan or to appoint a trustee to administer any such plan;
or


 


(o)                                 Environmental Claims.
An Environmental Claim shall have been asserted against any Loan Party, any
subsidiary thereof which could have a Material Adverse Effect.


 


9.02                        Remedies.
If any Event of Default occurs and is continuing, the Administrative Agent
shall, at the request of, or may, with the consent of, the Majority Lenders:


 


(a)                                  declare the Commitment, if any, of each Lender to make Loans
and issue Letters of Credit to be terminated, and/or declare all or any part of
the unpaid principal of the Loans, all interest accrued and unpaid thereon and
all other amounts payable under the Loan Documents to be immediately due and
payable, whereupon the same shall become due and payable, without presentment,
demand, protest, notice of intention to accelerate, notice of acceleration or
any other notice of any kind, all of which are hereby expressly waived by each
Loan Party;


 


(b)                                 require that the Company deposit cash collateral pursuant to
Section 2.10(h);
and


 


(c)                                  exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law; 


 


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provided, however, that upon the occurrence of any event
specified in Subsection
(f) or (g)
of Section 9.01
(in the case of clause (i) of Subsection (g) upon the expiration of the 60-day period
mentioned therein), the obligation of each Lender to make Loans and issue
Letters of Credit shall automatically terminate and the unpaid principal amount
of all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of the Company to cash
collateralize Letters of Credit shall automatically become effective, without
further act of the Administrative Agent, or any Lender and without presentment,
demand, protest, notice of intention to accelerate, notice of acceleration or
any other notice of any kind, all of which are hereby expressly waived by each
Loan Party.


 


(d)                                 All proceeds realized from the liquidation or other
disposition of Collateral or otherwise received after maturity of the Loans,
whether by acceleration or otherwise, shall be applied: first,
to reimbursement of expenses and indemnities provided for in this Agreement and
the other Loan Documents; second, to
accrued interest on the Loans; third, to fees owed
to the Administrative Agent, any Lender or the Issuing Lender; fourth, pro rata to principal outstanding on the Loans and
the Indebtedness referred to in Clause (h) of the definition of “Indebtedness” owing to
Lender Derivative Providers; fifth, to serve
as cash collateral to be held by the Administrative Agent to secure the LC
Obligation; sixth, to any other Obligations; and any
excess shall be paid to the Company or as otherwise required by any
Governmental Authority.


 


9.03                        Rights
Not Exclusive. The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.


 


ARTICLE X.



ADMINISTRATIVE AGENT


 


10.01                 Appointment
and Authority. Each of the Lenders and the Issuing Lender hereby
irrevocably appoints Administrative Agent to act on its behalf as the
Administrative Agent hereunder and under the other Loan Documents 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 or thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the
Administrative Agent, the Lenders and the Issuing Lender, and neither the
Company nor any other Loan Party shall have rights as a third party beneficiary
of any of such provisions.


 


10.02                 Rights
as a Lender. The Person serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent and
the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or
unless the context otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity. Such Person and its
Affiliates may accept deposits from, lend money to, act as the financial
advisor or in any other advisory capacity for and generally engage in any kind
of business with Parent or any Subsidiary or other Affiliate thereof as if such
Person were not the Administrative Agent hereunder and without any duty to
account therefor to the Lenders.


 


10.03                 Exculpatory
Provisions. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan
Documents. Without limiting the generality of the foregoing, the Administrative
Agent:


 


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(a)                                  shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing;


 


(b)                                 shall not have any 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 as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be
expressly provided for herein or in the other Loan Documents), provided that
the Administrative Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose the Administrative Agent to
liability or that is contrary to any Loan Document or applicable law; and


 


(c)                                  shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, and shall not be liable for
the failure to disclose, any information relating to the Company or any of its
Affiliates that is communicated to or obtained by the Person serving as the
Administrative Agent or any of its Affiliates in any capacity.


 


The
Administrative Agent shall not be liable for any action taken or not taken by
it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 9.02 and
11.01) or (ii) in the absence of its
own gross negligence or willful misconduct. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until notice describing
such Default is given to the Administrative Agent by the Company, a Lender or
the Issuing Lender.


 


The
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of
any certificate, report or other document delivered hereunder or thereunder 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
therein or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any
condition set forth in Article V
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Administrative Agent.


 


10.04                 Reliance
by Administrative Agent. The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper Person. The Administrative Agent also
may rely upon any statement made to it orally or by telephone and believed by it
to have been made by the proper Person, and shall not incur any liability for
relying thereon. In determining compliance with any condition hereunder to the
making of a Loan, or the issuance of a Letter of Credit, that by its terms must
be fulfilled to the satisfaction of a Lender or the Issuing Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender or the Issuing Lender unless the Administrative Agent shall have
received notice to the contrary from such Lender or the Issuing Lender prior to
the making of such Loan or the issuance of such Letter of Credit. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Company), 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.


 


10.05                 Delegation
of Duties. The Administrative Agent may perform any and all of its duties
and exercise its rights and powers hereunder or under any other Loan Document
by or through any one or


 


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


 


10.06                 Resignation
of Administrative Agent. The Administrative Agent may at any time give notice
of its resignation to the Lenders, the Issuing Lender and the Company. Upon
receipt of any such notice of resignation, the Required Lenders shall have the
right, in consultation with the Company, to appoint a successor, which shall be
a bank with an office in the United States, or an Affiliate of any such bank
with an office in the United States. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the
Lenders and the Issuing Lender, appoint a successor Administrative Agent
meeting the qualifications set forth above provided that if the Administrative
Agent shall notify the Company and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any collateral security
held by the Administrative Agent on behalf of the Lenders or the Issuing Lender
under any of the Loan Documents, the retiring Administrative Agent shall
continue to hold such collateral security until such time as a successor
Administrative Agent is appointed) and (2) all payments, communications and
determinations provided to be made by, to or through the Administrative Agent
shall instead be made by or to each Lender and the Issuing Lender directly,
until such time as the Required Lenders appoint a successor Administrative
Agent as provided for above in this Section 10.06. Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section 10.06). The fees payable by the
Company to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Company and such
successor. After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article
X and Section 11.04
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.


 


10.07                 Non-Reliance
on Administrative Agent and Other Lenders. Each Lender and the Issuing
Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender and
the Issuing Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender or any of their
Related Parties 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
or any related agreement or any document furnished hereunder or thereunder.


 


10.08                 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 Company 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


 


73

















 


declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Company) 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 11.04(a)) 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
11.04(a).


 


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.


 


10.09                 Authority
of Administrative Agent to Release Collateral and Liens. Each Lender and
Issuing 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 and Issuing Lender hereby authorizes the
Administrative Agent to execute and deliver to the Company, at the Company’s
sole cost and expense, any and all releases of Liens, termination statements,
assignments, or other documents reasonably requested by the Company 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 8.02 or is
otherwise authorized by the terms of the Loan Documents.


 


10.10                 The
Arrangers and other Agents. Anything herein to the contrary
notwithstanding, no Person listed as a Co-Lead Arranger or as a
Co-Documentation Agent on the cover page of this Agreement shall have any
powers, duties or responsibilities under this Agreement or any of the other
Loan Documents, except in its capacity, as applicable, as the Administrative
Agent, a Lender or the Issuing Lender hereunder.


 


ARTICLE XI.



MISCELLANEOUS


 


11.01                 Amendments
and Waivers. No amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company or any applicable Loan Party therefrom,
shall be effective unless the same shall be in writing and signed by the
Majority Lenders (or by the Administrative Agent at the written request of the
Majority Lenders) and the Company and acknowledged by the Administrative Agent,
and then any such


 


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waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment,
modification, termination or consent shall:


 


(a)                                  increase or extend the Commitment of any Lender, without the
written consent of such Lender (or reinstate any Commitment terminated pursuant
to Section 9.02);


 


(b)                                 postpone the final maturity date of any Loan, or postpone or
delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees or other amounts due to the Lenders (or
any of them) hereunder or under any other Loan Document, without the written consent
of each Lender directly affected thereby;


 


(c)                                  reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document, without the written consent of each Lender directly
affected thereby;


 


(d)                                 change in any manner the definition of “Majority
Lenders” or “Required Lenders”,
or change Section 2.12
or Section 9.02(d) in
a manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender;


 


(e)                                  amend this Section 11.01 or any provision of this Agreement which,
by its terms, expressly requires the approval or concurrence of all Lenders,
without the written consent of each Lender;


 


(f)                                    release all, substantially all, or any material portion of
the Collateral, or release any Subsidiary from any Guaranty (in each case
releases in connection with dispositions of assets which are permitted
hereunder or under any Loan Document), without the written consent of each
Lender; provided that the Administrative Agent may release Collateral as
permitted by Section 10.09;


 


(g)                                 increase the Borrowing Base pursuant to Section 2.05, without
the written consent of each Lender, provided, the Required Lenders may
maintain or decrease the Borrowing Base pursuant to Section 2.05; or


 


(h)                                 amend the definition of “Lender Derivative
Contracts” or “Lender Derivative Provider”
or clause (b) of the
definition of “Obligations” in a manner
materially adverse to any Lender Derivative Provider who is a Lender at such
time or who is an Affiliate of a Lender at such time, without the written
consent of each such Lender;


 


and
provided  further, that (i) any amendment, modification,
termination or waiver of any of the provisions contained in Article V shall be effective
only if evidenced by a writing signed by or on behalf of the Administrative
Agent and the Majority Lenders, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Issuing Lender in addition to the Majority
Lenders or all the Lenders, as the case may be, affect the rights or duties of
the Issuing Lender under this Agreement or any LC Related Document relating to
any Letter of Credit Issued or to be Issued by it, (iii) no amendment, waiver
or consent shall, unless in writing and signed by the Swing Line Lender in
addition to the Majority Lenders or all the Lenders, as the case may be, affect
the rights or duties of the Swing Line Lender under this Agreement, (iv) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Majority Lenders or all the Lenders, as
the case may be, affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document; and (v) the Fee Letter may be
amended and terms thereof may be waived by a writing signed by the parties
thereto.


 


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If any Lender refuses to
consent to any amendment, waiver or other modification of any Loan Document
requested by the Company that requires the consent of a greater percentage of
the Lenders than the Majority Lenders and such amendment, waiver or other
modification is consented to by the Majority Lenders, then the Company may
replace such Lender in accordance with the provisions of Section
3.07(b).


 


11.02                 Notices; Effectiveness; Electronic
Communication.


 


(a)                                  General.
Except in the case of notices and other communications expressly permitted to
be given by telephone (and except as provided in subsection (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier, or delivered by electronic mail to the electronic mail
address, specified for notices on Schedule 11.02 (for the Company, the Guarantors, the Issuing Lender, the Swing Line
Lender and the Administrative Agent) or on the Administrative Questionnaire
(for the Lenders). Notices sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices sent by telecopier shall be deemed to have been given when
sent if the sender receives an acknowledgment of receipt (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection(b)
below, shall be effective as provided in said subsection (b).


 


(b)                                 Electronic Communications.
Notices and other communications to the Lenders and the Issuing Lender
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by
the Administrative Agent, provided that the foregoing shall not apply to
notices to any Lender or the Issuing Lender pursuant to Article II if such Lender or the Issuing Lender, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication. The
Administrative Agent or the Company 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.


 


Unless the Administrative
Agent otherwise prescribes, (i) notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.


 


(c)                                  Change of Address, Etc.
Each of the Company, the Administrative Agent, the Issuing Lender and the Swing
Line Lender may change its address, telecopier or telephone number for notices
and other communications hereunder by notice to the other parties hereto. Each
other Lender may change its address, telecopier or telephone number for notices
and other communications hereunder by notice to the Company, Administrative
Agent, the Issuing Lender and the Swing Line Lender.


 


(d)                                 Notice to Administrative Agent. Each Lender shall notify the Administrative Agent in
writing of any changes in the address to which notices to the Lender should be
directed, of addresses of any Lending Office, of payment instructions in
respect of all payments to be made to it


 


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hereunder and of such other
administrative information as the Administrative Agent shall reasonably
request.


 


(e)                                  Effectiveness of Facsimile and PDF Documents and Signatures. Loan Documents may be transmitted and/or signed by
facsimile and PDF. The effectiveness of any such documents and signatures
shall, subject to applicable Law, have the same force and effect as
manually-signed originals and shall be binding on all Loan Parties, the
Administrative Agent and the Lenders. The Administrative Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile or PDF document or
signature.


 


11.03                 No
Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.


 


11.04                 Costs and Expenses; Indemnity.


 


(a)                                  Costs and Expenses.
The Company shall pay (i) all reasonable out-of-pocket expenses incurred
by the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent) in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Lender in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, any Lender or the Issuing Lender (including the fees,
charges and disbursements of any counsel for the Administrative Agent, any Lender
or the Issuing Lender) in connection with the enforcement or protection of its
rights (A) in connection with this Agreement and the other Loan Documents,
including its rights under this Section,
or (B) in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.


 


(b)                                 Indemnification by the Company. The Company shall indemnify the Administrative Agent (and
any sub-agent thereof), each Lender and the Issuing 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 any Indemnitee
or asserted against any Indemnitee by any third party or by the Company or any
other Loan Party arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement, any other Loan Document
or any agreement or instrument contemplated hereby or thereby, the performance
by the parties hereto of their respective obligations hereunder or thereunder
or the consummation of the transactions contemplated hereby or thereby,
(ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the Issuing Lender to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or Release of
Hazardous Materials on or from any property owned or operated by the Company or
any of its Subsidiaries, or any Environmental Liability related in any way to
the Company or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the


 


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foregoing, whether based on contract,
tort or any other theory, whether brought by a third party or by the Company or
any other Loan Party, and regardless of whether any Indemnitee is a party
thereto, provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages, liabilities or
related expenses (x) 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 or (y) result from a claim
brought by the Company or any other Loan Party against an Indemnitee for breach
in bad faith of such Indemnitee’s obligations hereunder or under any other Loan
Document, if the Company or such Loan Party has obtained a final and
nonappealable judgment in its favor on such claim as determined by a court of
competent jurisdiction.


 


(c)                                  Reimbursement by Lenders.
To the extent that the Company for any reason fails to indefeasibly pay any
amount required under paragraph (a) or (b) of this Section to be paid
by it to the Administrative Agent (or any sub-agent thereof), the Issuing
Lender or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing
Lender or such Related Party, as the case may be, such Lender’s Pro Rata Share
(determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) or the Issuing Lender in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Administrative Agent (or any such sub-agent) or Issuing Lender in
connection with such capacity. The obligations of the Lenders under this
paragraph (c) are several.


 


(d)                                 Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the
Company 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, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or
the use of the proceeds thereof. No Indemnitee referred to in paragraph (b)
above shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby.


 


(e)                                  Payments.
All amounts due under this Section shall be payable not later than ten Business
Days after demand therefor.


 


(f)                                    Survival.
The agreements in this Section shall survive the resignation of the
Administrative Agent, the Issuing Lender and the Swing Line Lender, the
replacement of any Lender, the termination of the Commitments and the
repayment, satisfaction or discharge of all other Obligations.


 


11.05                 Payments
Set Aside. To the extent that the Company makes a payment to the
Administrative Agent or the Lenders, or the Administrative Agent or the Lenders
exercise their right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its discretion)
to be repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred, and (b) each Lender severally agrees to pay to
the Administrative Agent upon demand its Pro Rata Share of any amount so
recovered from or repaid by the Administrative Agent.


 


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11.06                 Successors and Assigns.


 


(a)                                  Successors and Assigns Generally. 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 neither the Company nor any other Loan
Party may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of the Administrative Agent and
each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an assignee in accordance with the
provisions of Section
11.06(b), (ii) by way of participation in accordance with the
provisions of Section  11.06(d) or (iii) by way of
pledge or assignment of a security interest subject to the restrictions of Section  11.06(f) (and any other
attempted assignment or transfer by any party hereto shall be null and void).
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  11.06(d) 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)                                 Assignments by Lenders.
Any Lender may at any time 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); provided that any
such assignment shall be subject to the following conditions:


 


(i)                                     Minimum Amounts.


 


(A)                              in the case of an assignment of the entire remaining amount
of the assigning Lender’s Commitment and the Loans at the time owing to it or
in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund, no minimum amount need be assigned; and


 


(B)                                in any case not described in Section  11.06(b)(i)(A),
the aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance of the 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 or, if
“Trade Date” is specified in the Assignment and Assumption, as of the Trade Date)
shall not be less than $5,000,000, unless each of the Administrative Agent and,
so long as no Event of Default has occurred and is continuing, the Company
otherwise consents (each such consent not to be unreasonably withheld or
delayed).


 


(ii)                                  Proportionate Amounts.
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 with
respect to the Loan or the Commitment assigned, except that this Section 11.06(b)(ii) shall
not apply to Swing Line Lender’s rights and obligations in respect of Swing
Line Loans.


 


(iii)                               Required Consents.
No consent shall be required for any assignment except to the extent required
by Section  11.06(b)(i)(B) and, in
addition:


 


(A)                              the consent of the Company (such consent not to be
unreasonably withheld or delayed) shall be required unless (x) an Event of
Default  has occurred and is continuing at the
time of such assignment or (y) such assignment is to a Lender, an Affiliate of
a Lender or an Approved Fund;


 


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(B)                                the consent of the Administrative Agent (such consent not to
be unreasonably withheld or delayed) shall be required if such assignment is to
a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund
with respect to such Lender;


 


(C)                                the consent of the Issuing Lender (such consent not to be
unreasonably withheld or delayed) shall be required for any assignment that
increases the obligation of the assignee to participate in exposure under one
or more Letters of Credit (whether or not then outstanding); and


 


(D)                               the consent of the Swing Line Lender (such consent not to be
unreasonably withheld or delayed) shall be required for any assignment.


 


(iv)                              Assignment and Assumption.
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 $3,000.00, and the
assignee, if it is not a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.


 


(v)                                 No Assignment to the Company.
No such assignment shall be made to the Company or any of the Company’s
Affiliates or Subsidiaries.


 


(vi)                              No Assignment to Natural Persons. No such assignment shall be made to a natural person.


 


Subject
to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) below, from and after
the effective date specified in each Assignment and Assumption, the assignee
thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and
11.04  with respect
to facts and circumstances occurring prior to the effective date of such
assignment. Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph 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
11.06(d).


 


(c)                                  Register.
The Administrative Agent, acting solely for this purpose as an agent of the
Company, shall maintain at the Administrative Agent’s office listed on Schedule 11.02 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 Commitments of,
and principal amounts of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, and the Company, 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 Company and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.


 


(d)                                 Participations.
Any Lender may at any time, without the consent of, or notice to, the Company
or the Administrative Agent, sell participations to any Person (other than a
natural person or the Company or any of the Company’s Affiliates or
Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it); provided
that (i) such Lender’s obligations under this


 


80

















 


Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Company, the Administrative Agent
and the Lenders, and Issuing Lender 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 Section 11.01  that affects such Participant. Subject to Section  11.06(e),
the Company agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.03,
and 3.07  to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section  11.06(b). To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 11.08  as
though it were a Lender, provided such Participant agrees to be subject to Section 2.12  as
though it were a Lender.


 


(e)                                  Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater
payment under Sections 3.01
and 3.03  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 Company’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 3.01  unless the
Company is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Company, to comply with Section 3.01(e)  as though it were a Lender.


 


(f)                                    Certain Pledges.
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; provided that no such pledge or assignment shall release
such Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.


 


11.07                 Confidentiality.
Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective managers, administrators, trustees, partners, directors,
officers, employees, agents, advisors and other representatives (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 purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any 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, 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 managers, administrators,
trustees, partners, directors, officers, employees, agents, advisors and other
representatives) to any swap or derivative or similar transaction under which
payments are to be made by reference relating to Parent, the Company or any
Guarantor and their respective obligations, this Agreement or payments
hereunder, (iii) any rating agency, or (iv) the CUSIP Service Bureau or any
similar organization, (g) with the consent of the Company, or (h) to the extent
such Information (x) becomes publicly available other than as a result of a
breach of this Section or (y) becomes available to


 


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the Administrative Agent, any
Lender, the Issuing Lender or any of their respective Affiliates on a
nonconfidential basis from a source other than the Company.


 


For purposes of this
Section, “Information” means all information received from the Company or any
of its Subsidiaries relating to Parent, the Company or any of its Subsidiaries
or any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Lender or the Issuing Lender on a
nonconfidential basis prior to disclosure by the Company or any of its
Subsidiaries, provided that, in the case of information received from the
Company 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
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.


 


11.08                 Right
of Set-off. If an Event of Default shall have occurred and be continuing,
each Lender, the Issuing Lender, and each of their respective Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by applicable law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by
such Lender, the Issuing Lender or any such Affiliate to or for the credit or
the account of the Company or any other Loan Party against any and all of the
obligations of the Company or such Loan Party now or hereafter existing under
this Agreement or any other Loan Document to such Lender or the Issuing Lender,
irrespective of whether or not such Lender or the Issuing Lender shall have
made any demand under this Agreement or any other Loan Document and although
such obligations of the Company or such Loan Party may be contingent or
unmatured or are owed to a branch or office of such Lender or the Issuing
Lender different from the branch or office holding such deposit or obligated on
such indebtedness. The rights of each Lender, the Issuing Lender and their
respective Affiliates under this Section 11.08 are
in addition to other rights and remedies (including other rights of setoff)
that such Lender, the Issuing Lender or their respective Affiliates may have. Each
Lender and the Issuing Lender agrees to notify the Company and the
Administrative Agent promptly after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of such
setoff and application.


 


11.09                 Interest.


 


(a)                                  It is the intention of the parties hereto to comply with
applicable usury laws, if any; accordingly, notwithstanding any provision to
the contrary in this Agreement, the Notes or in any of the other Loan Documents
securing the payment hereof or otherwise relating hereto, in no event shall
this Agreement, the Notes or such other Loan Documents require or permit the
payment, taking, reserving, receiving, collection, or charging of any sums
constituting interest under applicable laws which exceed the maximum amount
permitted by such laws. If any such excess interest is called for, contracted
for, charged, taken, reserved, or received in connection with the Loans
evidenced by the Notes or in any of the Loan Documents securing the payment
thereof or otherwise relating thereto, or in any communication by the
Administrative Agent, the Issuing Lender or the Lenders or any other Person to
the Company or any other Person, or in the event all or part of the principal
or interest thereof shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest
contracted for, charged, taken, reserved, or received on the amount of
principal actually outstanding from time to time under the Notes or any other
Loan Document shall exceed the maximum amount of interest permitted by
applicable usury laws, then in any such event it is agreed as follows: (i) the
provisions of this Section
11.09(a) shall govern
and control, (ii) neither any Company nor any other Person now or hereafter
liable for the payment of the Notes or any Obligation shall be obligated to pay
the amount of such interest to the extent such interest is in excess of the
maximum amount of interest 


 


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permitted by applicable usury laws,
(iii) any such excess which is or has been received notwithstanding this Section 11.09(a) shall be credited against the then unpaid principal balance
of the Notes or other Obligations, as applicable, or, if the Notes or other
Obligations, as applicable, have been or would be paid in full, refunded to the
Company, and (iv) the provisions of this Agreement, the Notes and the other
Loan Documents securing the payment thereof and otherwise relating thereto, and
any communication to the Company, shall immediately be deemed reformed and such
excess interest reduced, without the necessity of executing any other document,
to the maximum lawful rate allowed under applicable laws as now or hereafter
construed by courts having jurisdiction hereof or thereof. Without limiting the
foregoing, all calculations of the rate of the interest contracted for,
charged, collected, taken, reserved, or received in connection with the Notes,
this Agreement or any other Loan Document which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of the Loans or other
Obligations, as applicable, including all prior and subsequent renewals and
extensions, all interest at any time contracted for, charged, taken, collected,
reserved, or received. The terms of this Section 11.09(a)
shall be deemed to be incorporated in every document and communication relating
to the Notes, the Loans or any other Loan Document.


 


(b)                                 Texas Finance Code, Chapter 346 (formerly Tex. Rev. Civ.
Stat., Title 79, Chapter 15), which regulates certain revolving loan accounts
and revolving tri-party accounts, shall not apply to any revolving loan
accounts created under the Notes, this Agreement or the other Loan Documents or
maintained in connection therewith.


 


(c)                                  To the extent that the interest rate laws of the State of
Texas are applicable to the Loans or any other Obligations, the applicable
interest rate ceiling is the weekly ceiling (formerly the indicated rate
ceiling) determined in accordance with Tex. Rev. Civ. Stat., Title 79, Article
5069-1D.003, also codified at Texas Finance Code, Section 303.301 (formerly
Article 5069-1.01(a)(1)), and, to the extent that this Agreement, the Notes or
any other Loan Document is deemed an open end account as such term is defined
in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14), also codified at
Texas Finance Code Section 3.01.001(3) (formerly Article 5069-1.01(f)), the
payee retains the right to modify the interest rate in accordance with
applicable law.


 


11.10                 Indemnity
and Subrogation. In addition to all such rights of indemnity and
subrogation as any Guarantor may have under applicable law, the Company agrees
that in the event a payment shall be made by any Guarantor under a Guaranty in
respect of a Loan to the Company the Company shall indemnify such Guarantor for
the full amount of such payment and such Guarantor shall be subrogated to the
rights of the person to whom such payment shall have been made to the extent of
such payment subject to the provisions of the Guaranty executed by such
Guarantor. Notwithstanding any provision of this Agreement to the contrary, all
rights of any Guarantor under this Section 11.10
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the payment in full of the
Obligations, and no payments may be made in respect of such rights of
indemnity, contribution or subrogation until all the Obligations have been paid
in full and all Commitments have expired. No failure on the part of the Company
to make the payments required by this Section  11.10 (or any other payments
required under applicable law or otherwise) shall in any respect limit the
obligations and liability of any Guarantor with respect to any Guaranty, and
Guarantor shall remain liable for the full amount of the obligation of such
Guarantor under each such Guaranty in accordance therewith.


 


11.11                 Collateral Matters; Derivative Contracts;
Termination


 


(a)                                  The benefit of the Security Documents and of the provisions
of this Agreement relating to any collateral securing the Obligations shall
also extend to and be available to any Lender


 


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hereunder (or under the Existing Credit
Agreement) or any Affiliate of a Lender hereunder (or under the Existing Credit
Agreement) that is counterparty to any Derivative Contract (including the
Derivative Contracts listed on Schedule 6.21) with any Loan Party or any
of their Subsidiaries on a pro rata
basis in respect of any obligations of the Loan Parties and their Subsidiaries
which arise under any such Derivative Contract; provided that the
Borrower or the applicable counterparty must have provided Administrative Agent
written notice of the existence thereof (such notice to include, if required by
the Administrative Agent, a summary of the contract date, price, volumes and
other terms of such Derivative Contracts as Administrative Agent may reasonably
request) and such transaction must not otherwise be prohibited under this
Agreement at the time it was entered into, and provided further that if
such Lender or Affiliate ceases to be a Lender or an Affiliate of a Lender such
Derivative Contract obligations shall be secured pari passu
with the Obligations of the Loan Parties under this Agreement and the other
Loan Documents but only to the extent such Derivative Contract obligations
arise under Derivative Contracts (including the Derivative Contracts listed on Schedule
6.21) that are entered into at the time such counterparty was a Lender
hereunder (or under the Existing Credit Agreement) or an Affiliate of a Lender
hereunder (or under the Existing Credit Agreement), and (b) such counterparty
shall have no voting rights under any Loan Documents as a result of the
existence of obligations owed to it under any such Derivative Contract. For the
avoidance of doubt, a Person ceases to be a Lender hereunder if (i) pursuant to
an assignment, such Person ceases to have any Commitment, Loans or LC
Obligation hereunder or (ii) the Commitments of all of the Lenders hereunder
have been terminated and all principal, interest and other amounts outstanding
under this Agreement have been paid in full in cash (whether as a result of
repayment at maturity, prepayment in connection with the refinancing of this
Agreement or otherwise). .


 


No Lender or any of its
Affiliates or any other Person shall have any voting rights under any Loan
Documents as a result of the existence of obligations owed to it under any
Derivative Contract.


 


(b)                                 If the Obligations are paid and satisfied in full, including
all Obligations arising under Lender Derivative Contracts, all Commitments of
the Lenders have terminated and are no longer in effect, no Letters of Credit
remain outstanding, and no Lender Derivative Contracts remain outstanding, the
Administrative Agent and the Lenders shall execute and deliver or cause to be
executed and delivered such instruments of satisfaction and reassignment as may
be appropriate in order to release all liens and security interests created by
the Security Instruments; provided, however, that in lieu of terminating and
repaying any such Obligations arising under any Lender Derivative Contracts
with any Lender Derivative Provider, the Company may provide substitute credit
support under a standard form ISDA Credit Support Annex or other credit support
documents acceptable to such Lender Derivative Provider, to cover its then
current exposure under such Lender Derivative Contract and such Lender
Derivative Provider shall have provided written notice to the Administrative
Agent to the effect that such substitute credit support has been provided to it
and that such Lender Derivative Provider no longer claims any right, title or
interest in any collateral security arising under the Loan Documents to secure
any obligations and indebtedness of Company or any of its Subsidiaries arising
under or related to such Lender Derivative Contract, whether then existing or
thereafter arising.


 


11.12                 Renewal and Continuation of Existing
Indebtedness


 


(a)                                  All liens and security interests under the Security Documents
are in renewal, refinancing and extension of the Liens created under the
Existing Credit Agreement and “Security Documents” executed in connection
therewith.


 


(b)                                 The Company shall pay to each Lender under the Existing
Credit Agreement within thirty (30) days of receipt of written request of such
Lender (which request shall set forth, in reasonable detail, the basis for
requesting such amounts) such amount or amounts as shall be due pursuant to Section
3.04 of the Existing Credit Agreement which are attributed to prepayment of
LIBOR Loans


 


84

















 


under the Existing Credit Agreement
being prepaid from the proceeds of the initial funding of Loans hereunder.


 


(c)                                  The Lenders waive any notice of prepayment required pursuant
to Section 2.04 of the Existing Credit Agreement in respect of the
prepayment of Loans on the Effective Date hereunder.


 


11.13                 USA
Patriot Act Notice. Each Lender hereby notifies the Loan Parties 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 such Loan Party, which information
includes the name and address of such Loan Party and other information that
will allow such Lender to identify the Loan Party, insofar as it is needed to
comply with the Act, in accordance with the Act. Each Loan Party hereby
represents and warrants to Administrative Agent and each Lender that such Loan
Party is not a country, individual or entity named on the “Specifically
Designated National and Blocked Persons” list issued by the Office
of Foreign Asset Control of the Department of the Treasury of the United States
of America.


 


11.14                 Automatic
Debits of Fees. With respect to any commitment fee, arrangement fee, letter
of credit fee or other fee, or any other cost or expense due and payable to the
Administrative Agent under the Loan Documents (including attorneys fees and
expenses that are payable pursuant to this Agreement or the other Loan
Documents), the Company hereby irrevocably authorizes the Administrative Agent,
after giving reasonable prior notice to the Company, to debit any deposit
account of the Company with the Administrative Agent in an amount such that the
aggregate amount debited from all such deposit accounts does not exceed such
fee or other cost or expense. If there are insufficient funds in such deposit
accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in the Administrative Agent’s
sole discretion) and such amount not debited shall be deemed to be unpaid. No
such debit under this Section shall be deemed a set-off.


 


11.15                 Counterparts.
This Agreement may be executed in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.


 


11.16                 Severability.
The illegality or unenforceability of any provision of this Agreement or any
instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.


 


11.17                 No
Third Parties Benefited. This Agreement is made and entered into for the
sole protection and legal benefit of the Company, the other Loan Parties, the
Lenders, the Administrative Agent, the Indemnitees, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.


 


11.18                 Governing Law, Jurisdiction and Waiver of
Jury Trial.


 


(a)                                  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW; AND
THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.


 


(b)                                 EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT


 


85

















 


OR ANY OTHER LOAN DOCUMENT BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
ITS ADDRESS SET FORTH FOR NOTICES PURSUANT TO SECTION 11.02. SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.


 


(c)                                  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF TEXAS OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH LOAN PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING 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 ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH LOAN PARTY WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, AND CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
LEGAL ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS FOR NOTICES SET FORTH
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.


 


(d)                                 WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


11.19                 NO
ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER
WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.


 


THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 


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86

















 


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


 


	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  BREITBURN OPERATING L.P.,

  
	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By: BreitBurn Operating GP, LLC its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Randall H. Breitenbach

  
	
   

  	
  Title: Co-Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARENT:

  
	
   

  	
   

  
	
   

  	
  BREITBURN ENERGY PARTNERS, L.P.,

  
	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By: BreitBurn GP, LLC its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Randall H. Breitenbach

  
	
   

  	
  Title: Co-Chief Executive Officer

  



 


 


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  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Administrative Agent, Issuing

  Lender and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Richard A. Gould

  
	
   

  	
   

  	
  Senior Vice President

  
					



 


 


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  LENDERS:

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  BMO CAPITAL MARKETS FINANCING, INC.

  
	
   

  	
  (f/k/a Harris Nesbitt Financing, Inc.)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  CITIBANK, N.A.

  
	
   

  	
  (f/k/a Citibank Texas, N.A.)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  THE BANK OF NOVA SCOTIA, HOUSTON

  BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  BANK OF SCOTLAND PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  BARCLAYS BANK PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  BNP PARIBAS

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  FORTIS CAPITAL CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  THE ROYAL BANK OF SCOTLAND PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  UNION BANK OF CALIFORNIA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  BANK OF TEXAS, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  LEHMAN BROTHERS COMMERCIAL BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  ROYAL BANK OF CANADA

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  TORONTO DOMINION (TEXAS) LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


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Amended and Restated Credit Agreement – BreitBurn Operating L.P.