**Exhibit 10.18**

**Execution Version**

 

**SECOND LIEN TERM LOAN AGREEMENT**

 

** **

**DATED AS OF**

 

**JANUARY 31, 2008**

 

** **

**AMONG**

 

** **

**LINN ENERGY, LLC,**

 

**AS BORROWER,**

 

** **

**BNP PARIBAS,**

 

**AS ADMINISTRATIVE AGENT,**

 

**RBC CAPITAL MARKETS,**

 

**AS SYNDICATION AGENT,**

 

**SOCIETEGENERALE, CALYON CORPORATE AND INVESTMENT BANK**

 

**AND THE ROYAL BANK OF SCOTLAND PLC,**

 

**ASCO-DOCUMENTATION AGENTS**

 

**AND**

 

**THE LENDERS PARTY HERETO**

 

** **

**JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS**

 

** **
| **BNP  PARIBAS** | ** ** | **RBC CAPITAL MARKETS** |
|------------------|------------|-------------------------|

** **

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**TABLE OF CONTENTS**

 
| ARTICLE I                                              |
|--------------------------------------------------------|
| DEFINITIONS AND ACCOUNTING MATTERS                     |
| Section 1.01                                           | Terms  Defined Above | 1 |
| Section 1.02                                           | Certain  Defined Terms | 1 |
| Section 1.03                                           | Types of  Loans and Tranches | 19 |
| Section 1.04                                           | Terms  Generally | 19 |
| Section 1.05                                           | Accounting  Terms and Determinations; GAAP | 20 |
|                                                   |   |   |
| ARTICLE II                                             |   |
| THE CREDITS                                            |   |
|                                                   |   |
| Section 2.01                                           | Term Loans | 20 |
| Section 2.02                                           | Loans and  Tranches | 20 |
| Section 2.03                                           | Requests for  the Loans | 21 |
| Section 2.04                                           | Interest  Elections | 22 |
| Section 2.05                                           | Funding of  Tranches | 23 |
| Section 2.06                                           | Termination | 24 |
| Section 2.07                                           | Total  Reserve Value | 24 |
| Section 2.08                                           | Intercreditor  Agreement | 24 |
|                                                   |   |   |
| ARTICLE III                                            |   |
| PAYMENTS OF  PRINCIPAL AND INTEREST; PREPAYMENTS; FEES |   |
|                                                   |   |
| Section 3.01                                           | Repayment of  Loans | 24 |
| Section 3.02                                           | Interest | 24 |
| Section 3.03                                           | Alternate  Rate of Interest | 25 |
| Section 3.04                                           | Optional  Prepayments | 26 |
| Section 3.05                                           | Mandatory  Prepayments | 26 |
| Section 3.06                                           | Fees | 27 |
|                                                   |   |   |
| ARTICLE IV                                             |   |
| PAYMENTS;  PRO RATA TREATMENT; SHARING OF SET-OFFS     |   |
|                                                   |   |
| Section 4.01                                           | Payments  Generally; Pro Rata Treatment; Sharing of Set-offs | 27 |
| Section 4.02                                           | Presumption  of Payment by the Borrower | 28 |
| Section 4.03                                           | Certain  Deductions by the Administrative Agent | 28 |
|                                                   |   |   |
| ARTICLE V                                              |   |
| INCREASED  COSTS; BREAK FUNDING PAYMENTS; TAXES        |   |
|                                                   |   |
| Section 5.01                                           | Increased  Costs | 28 |
| Section 5.02                                           | Break  Funding Payments | 29 |
| Section 5.03                                           | Taxes | 30 |
| Section 5.04                                           | Designation  of Different Lending Office; Replacement of Lenders | 31 |
|                                                   |   |   |
| ARTICLE VI                                             |   |
| CONDITIONS  PRECEDENT                                  |   |
|                                                   |   |
| Section 6.01                                           | Effective  Date | 32 |

 

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| Section 6.02                    | Additional  Conditions                                | 35     |
|---------------------------------|-------------------------------------------------------|--------|
|                            |                                                  |   |
| ARTICLE VII                     |                                                  |
| REPRESENTATIONS  AND WARRANTIES |                                                  |
|                            |                                                  |
| Section 7.01                    | Organization;  Powers                                 | 35     |
| Section 7.02                    | Authority;  Enforceability                            | 36     |
| Section 7.03                    | Approvals;  No Conflicts                              | 36     |
| Section 7.04                    | Financial  Position; No Material Adverse Change       | 36     |
| Section 7.05                    | Litigation                                            | 37     |
| Section 7.06                    | Environmental  Matters                                | 37     |
| Section 7.07                    | Compliance  with the Laws and Agreements; No Defaults | 38     |
| Section 7.08                    | Investment  Company Act                               | 38     |
| Section 7.09                    | Taxes                                                 | 39     |
| Section 7.10                    | ERISA                                                 | 39     |
| Section 7.11                    | Disclosure;  No Material Misstatements                | 40     |
| Section 7.12                    | Insurance                                             | 40     |
| Section 7.13                    | Restriction  on Liens                                 | 40     |
| Section 7.14                    | Subsidiaries                                          | 40     |
| Section 7.15                    | Location of  Business and Offices                     | 40     |
| Section 7.16                    | Properties;  Titles, Etc                              | 41     |
| Section 7.17                    | Maintenance  of Properties                            | 42     |
| Section 7.18                    | Gas  Imbalances, Prepayments                          | 42     |
| Section 7.19                    | Marketing of  Production                              | 42     |
| Section 7.20                    | Swap  Agreements                                      | 43     |
| Section 7.21                    | Use of Loans                                          | 43     |
| Section 7.22                    | Solvency                                              | 43     |
| Section 7.23                    | Acquisition                                           | 43     |
|                            |                                                  |   |
| ARTICLE VIII                    |                                                  |
| AFFIRMATIVE  COVENANTS          |                                                  |
|                            |                                                  |
| Section 8.01                    | Financial  Statements; Other Information              | 44     |
| Section 8.02                    | Notices of  Material Events                           | 47     |
| Section 8.03                    | Existence;  Conduct of Business                       | 48     |
| Section 8.04                    | Payment of  Obligations                               | 48     |
| Section 8.05                    | Performance  of Obligations under Loan Documents      | 48     |
| Section 8.06                    | Operation  and Maintenance of Properties              | 48     |
| Section 8.07                    | Insurance                                             | 49     |
| Section 8.08                    | Books and  Records; Inspection Rights                 | 49     |
| Section 8.09                    | Compliance  with Laws                                 | 49     |
| Section 8.10                    | Environmental  Matters                                | 49     |
| Section 8.11                    | Further  Assurances                                   | 50     |
| Section 8.12                    | Reserve  Reports                                      | 51     |
| Section 8.13                    | Title Information                                     | 52     |
| Section 8.14                    | Additional  Collateral; Additional Guarantors         | 53     |
| Section 8.15                    | ERISA  Compliance                                     | 54     |
| Section 8.16                    | Marketing  Activities                                 | 54     |
| Section 8.17                    | Swap  Agreements                                      | 54     |
|                                 |                                                       |        |  |

 

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| Section 8.18                 | Permanent  Securities                                              | 54     |
|------------------------------|--------------------------------------------------------------------|--------|
|                         |                                                               |   |
| ARTICLE IX                   |                                                               |
| NEGATIVE  COVENANTS          |                                                               |
|                         |                                                               |
| Section 9.01                 | Financial  Covenants                                               | 55     |
| Section 9.02                 | Debt                                                               | 55     |
| Section 9.03                 | Liens                                                              | 57     |
| Section 9.04                 | Dividends                                                          | 57     |
| Section 9.05                 | Investments,  Loans and Advances                                   | 58     |
| Section 9.06                 | Nature of  Business                                                | 59     |
| Section 9.07                 | Limitation  on Leases                                              | 59     |
| Section 9.08                 | Proceeds of  Notes                                                 | 59     |
| Section 9.09                 | ERISA  Compliance                                                  | 60     |
| Section 9.10                 | Sale or  Discount of Receivables                                   | 60     |
| Section 9.11                 | Mergers, Etc                                                       | 60     |
| Section 9.12                 | Sale of  Properties                                                | 60     |
| Section 9.13                 | Environmental  Matters                                             | 61     |
| Section 9.14                 | Transactions  with Affiliates                                      | 61     |
| Section 9.15                 | Subsidiaries                                                       | 61     |
| Section 9.16                 | Negative  Pledge Agreements; Dividend Restrictions                 | 61     |
| Section 9.17                 | Gas  Imbalances, Take-or-Pay or Other Prepayments                  | 62     |
| Section 9.18                 | Swap  Agreements                                                   | 62     |
| Section 9.19                 | Tax Status  as Partnership                                         | 63     |
| Section 9.20                 | Acquisition  Documents                                             | 63     |
| Section 9.21                 | Anti-Layering                                                      | 63     |
|                         |                                                               |   |
| ARTICLE X                    |                                                               |
| EVENTS OF  DEFAULT; REMEDIES |                                                               |
|                         |                                                               |
| Section  10.01               | Events of  Default                                                 | 63     |
| Section  10.02               | Remedies                                                           | 65     |
| Section  10.03               | Disposition  of Proceeds                                           | 66     |
|                         |                                                               |   |
| ARTICLE XI                   |                                                               |
| THE  ADMINISTRATIVE AGENT    |                                                               |
|                         |                                                               |
| Section  11.01               | Appointment;  Powers                                               | 66     |
| Section  11.02               | Duties and  Obligations of Administrative Agent                    | 66     |
| Section  11.03               | Action by  Agent                                                   | 67     |
| Section  11.04               | Reliance by  Agent                                                 | 68     |
| Section  11.05               | Subagents                                                          | 68     |
| Section  11.06               | Resignation  or Removal of Agents                                  | 68     |
| Section  11.07               | Agents and  Lenders                                                | 69     |
| Section  11.08               | No Reliance                                                        | 69     |
| Section  11.09               | Administrative  Agent May File Proofs of Claim                     | 70     |
| Section  11.10               | Authority of  Administrative Agent to Release Collateral and Liens | 70     |
| Section  11.11               | The  Arrangers and the Agents                                      | 70     |
|                              |                                                                    |        |  |

 

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| ARTICLE XII    |                                                        |
|----------------|-------------------------------------------------------------|
| MISCELLANEOUS  |                                                        |
|           |                                                        |
| Section  12.01 | Notices                                                     | 71 |
| Section  12.02 | Waivers;  Amendments                                        | 72 |
| Section  12.03 | Expenses,  Indemnity; Damage Waiver                         | 73 |
| Section  12.04 | Successors  and Assigns                                     | 75 |
| Section  12.05 | Survival;  Revival; Reinstatement                           | 78 |
| Section  12.06 | Counterparts;  Integration; Effectiveness                   | 79 |
| Section  12.07 | Severability                                                | 79 |
| Section  12.08 | Right of  Setoff                                            | 79 |
| Section  12.09 | GOVERNING  LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS | 79 |
| Section  12.10 | Headings                                                    | 81 |
| Section  12.11 | Confidentiality                                             | 81 |
| Section  12.12 | Interest  Rate Limitation                                   | 82 |
| Section  12.13 | EXCULPATION  PROVISIONS                                     | 83 |
| Section  12.14 | No Third  Party Beneficiaries                               | 83 |
| Section  12.15 | USA Patriot  Act Notice                                     | 83 |
| Section  12.16 | Senior  Revolving Credit Documents                          | 84 |

 

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**ANNEXES, EXHIBITS AND SCHEDULES**

** **
| Annex I        |   | Commitments                            |
|----------------|--------|----------------------------------------|
|           |   |                                   |
| Exhibit A |   | Form of Note                      |
| Exhibit B |   | Form of Compliance Certificate    |
| Exhibit C |   | Security Instruments                   |
| Exhibit D |   | Form of Assignment and Assumption |
| Exhibit E |   | Form of Borrowing Request         |
| Exhibit F |   | Form of Interest Election Request |
|           |   |                                   |
| Schedule 7.05  |   | Litigation                             |
| Schedule 7.14  |   | Subsidiaries and Partnerships          |
| Schedule 7.18  |   | Gas Imbalances                         |
| Schedule 7.19  |   | Marketing Contracts                    |
| Schedule 7.20  |   | Swap Agreements                        |

 

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**THIS SECONDLIEN TERM LOAN AGREEMENT** dated as of January 31, 2008, is among Linn Energy,LLC, a limited liability company duly formed and existing under the laws of theState of Delaware****(the “Borrower”);each of the Lenders from time to time party hereto; BNP PARIBAS****(in its individual capacity, “BNPParibas”), as administrative agent for the Lenders (in such capacity,together with its successors in such capacity, the “Administrative Agent”);RBC Capital Markets plc (in its individual capacity, “RBC”), assyndication agent for the Lenders (in such capacity, together with itssuccessor in such capacity, the “Syndication Agent”), and SocieteGenerale, Calyon Corporate and Investment Bank and The Royal Bank of Scotlandplc, as co-documentation agents (in such capacities, together with theirsuccessors in such capacity, the “Co-Documentation Agents”) for theLenders.

 

**R E C I T A L S**

 

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

 

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

 

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

 

**ARTICLE IDefinitions and Accounting Matters**

** **

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

 

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

 

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

 

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

 

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

 

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

 

----

 

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

 

“Affiliate” means, withrespect to a specified Person, another Person that directly, or indirectlythrough one or more intermediaries, Controls or is Controlled by or is undercommon Control with the Person specified.

 

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

 

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

 

“Alternate Base Rate”means, for any day, a rate per annum equal to the greater of (a) the PrimeRate in effect on such day and (b) the Federal Funds Effective Rate ineffect on such day plus 1⁄2 of 1%.  Anychange in the Alternate Base Rate due to a change in the Prime Rate or theFederal Funds Effective Rate shall be effective from and including the effectivedate of such change in the Prime Rate or the Federal Funds Effective Rate,respectively.

 

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

 
| **Period**                                                                  | ** ** | **Eurodollar** | ** ** | **ABR** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------|------------|---------|------------|
| Effective Date to and including the one  year anniversary of Effective Date |       | 5.0            | %          | 3.5     | %          |
| One day after anniversary of Effective Date  to Maturity Date               |       | 7.5            | %          | 6.0     | %          |

 

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

 

“Arrangers” means BNPParibas and RBC Capital Markets, in their capacities as joint lead arrangersand joint book runners hereunder.

 

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

 

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

 

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

 

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

 

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

 

(b)           the amount of any cash reserves established by the board ofdirectors of the Borrower to (i) provide for the proper conduct of thebusiness of the Borrower and each Subsidiary (including reserves for futurecapital expenditures including drilling and acquisitions and for anticipatedfuture credit needs of the Borrower and each Subsidiary), (ii) comply withapplicable law or any loan agreement, security agreement, mortgage, debtinstrument or other agreement or obligation to which the Borrower or anySubsidiary is a party or by which it is bound or its assets are subject or (iii) providefunds for distributions with respect to any one or more of the next four fiscalquarters;

 

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

 

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

 

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

 

“Business Day” means anyday that is not a Saturday, Sunday or other day on which commercial banks inNew York City or Houston, Texas are authorized or required by law to remainclosed; and if such day relates to a Tranche or continuation of, a payment orprepayment of principal of or interest on, or a conversion of or into, or theInterest Period for, a Eurodollar Tranche or a notice by the Borrower withrespect to any such Tranche or continuation, payment, prepayment, conversion orInterest Period, any day which is also a day on which dealings in dollardeposits are carried out in the London interbank market.

 

3

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

 

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

 

“Change in Control” meansthe occurrence of any of the following events: (a) any Person or group of Persons acting in concert as apartnership or other group (a “Group of Persons”), shall be the legal orbeneficial owner (within the meaning of Rule 13d-3 under the SecuritiesExchange Act of 1934, as amended) of more than 35% of the combined voting powerof the then total membership interests (including all securities which areconvertible into membership interests) of the Borrower, provided, that a “Groupof Persons” shall not include the underwriter in any firm underwritingundertaken in connection with any public offering of the Borrower, or (b) occupationof a majority of the seats (other than vacant seats) on the board of directors(or board of managers) of the Company by Persons who were neither (i) nominatedby the board of directors of the Borrower nor (ii) appointed by directorsa majority of whom were so nominated.

 

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

 

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

 

“Commitment” means, withrespect to each Lender, the commitment of such Lender to make its Loanhereunder on the Effective Date and “Commitments” means the aggregate amount ofthe Commitments of all Lenders.  Theamount of each Lender’s Commitment is set forth on Annex I.

 

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

 

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(but not loss)during such period of any Consolidated Subsidiary to the extent that thedeclaration or payment of dividends or similar distributions or transfers orloans by that Consolidated Subsidiary is not at the time permitted by operationof the terms of its charter or any agreement, instrument or GovernmentalRequirement applicable to such Consolidated Subsidiary or is otherwiserestricted or prohibited, in each case determined in accordance with GAAP; (c) anyextraordinary gains or losses during such period; (d) non-cash gains,losses or adjustments under FASB Statement No. 133 as a result of changesin the fair market value of derivatives; (e) any gains or lossesattributable to writeups or writedowns of assets, including ceiling testwritedowns; and (f) non-cash share-based payments under FASB Statement No. 123R;and provided further that if the Borrower or any Consolidated Subsidiary shallacquire or dispose of any Property during such period, then Consolidated NetIncome shall be calculated after giving *proforma*effect to such acquisition or disposition, as if such acquisitionor disposition had occurred on the first day of such period.

 

“Consolidated Subsidiaries”means each Subsidiary of the Borrower (whether now existing or hereaftercreated or acquired) the financial statements of which shall be (or should havebeen) consolidated with the financial statements of the Borrower in accordancewith GAAP.

 

“Control” means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management or policies of a Person, whether through the abilityto exercise voting power, by contract or otherwise.  For the purposes of this definition, andwithout limiting the generality of the foregoing, any Person that owns directlyor indirectly 10% or more of the Equity Interests having ordinary voting powerfor the election of the directors or other governing body of a Person will bedeemed to “control” such other Person.  “Controlling”and “Controlled” have meanings correlative thereto.

 

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

 

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actuallyreceived or utilized by such Person (other than obligations under firmtransportation or drilling contracts); (k) any Debt of a partnership forwhich such Person is liable either by agreement, by operation of law or by aGovernmental Requirement but only to the extent of such liability; (l) DisqualifiedCapital Stock; and (m) the undischarged balance of any production paymentcreated by such Person or for the creation of which such Person directly orindirectly received payment.  The Debt ofany Person shall include all obligations of such Person of the characterdescribed above to the extent such Person remains legally liable in respectthereof notwithstanding that any such obligation is not included as a liabilityof such Person under GAAP.

 

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

 

“DisqualifiedCapital Stock” means any Equity Interest that, by its terms (or by theterms of any security into which it is convertible or for which it isexchangeable) or upon the happening of any event, matures or is mandatorilyredeemable for any consideration other than other Equity Interests (which wouldnot constitute Disqualified Capital Stock), pursuant to a sinking fundobligation or otherwise, or is convertible or exchangeable for Debt orredeemable for any consideration other than other Equity Interests (which wouldnot constitute Disqualified Capital Stock) at the option of the holder thereof,in whole or in part, on or prior to the date that is one year after the earlierof (a) the Maturity Date and (b) the date on which there are no Loansor other obligations hereunder outstanding.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“EquityInterests” means shares of capital stock, partnership interests, membershipinterests in a limited liability company, beneficial interests in a trust orother equity ownership interests in a Person, and any warrants, options orother rights entitling the holder thereof to purchase or acquire any suchEquity Interest.

 

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

 

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

 

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

 

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amendmentas a termination under section 4041 of ERISA, (d) the institution ofproceedings to terminate a Plan by the PBGC, (e) receipt by the Borroweror any of its Subsidiaries or any ERISA Affiliate of a notice of withdrawalliability pursuant to Section 4202 of ERISA with respect to anyMultiemployer Plan or (f) any other event or condition which mightconstitute grounds under section 4042 of ERISA for the termination of, or theappointment of a trustee to administer, any Plan subject to Title IV of ERISA.

 

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

 

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

 

“ExceptedLiens” means:  (a) Liens forTaxes, assessments or other governmental charges or levies which are notdelinquent or which are being contested in good faith by appropriate action andfor which adequate reserves have been maintained in accordance with GAAP; (b) Liensin connection with workers’ compensation, unemployment insurance or othersocial security, old age pension or public liability obligations which are notdelinquent or which are being contested in good faith by appropriate action andfor which adequate reserves have been maintained in accordance with GAAP; (c) statutorylandlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s,mechanics’, suppliers’, workers’, materialmen’s, construction or other likeLiens arising by operation of law in the ordinary course of business orincident to the exploration, development, operation and maintenance of Oil andGas Properties each of which is in respect of obligations that are notdelinquent or which are being contested in good faith by appropriate action andfor which adequate reserves have been maintained in accordance with GAAP; (d) contractualLiens which arise in the ordinary course of business under operatingagreements, joint venture agreements, oil and gas partnership agreements, oiland gas leases, farm-out agreements, division orders, contracts for the sale,transportation or exchange of oil and natural gas, unitization and poolingdeclarations and agreements, area of mutual interest agreements, overridingroyalty agreements, marketing agreements, processing agreements, net profitsagreements, development agreements, gas balancing or deferred productionagreements, injection, repressuring and recycling agreements, salt water orother disposal agreements, seismic or other geophysical permits or agreements,and other agreements which are usual and customary in the oil and gas businessand are for claims which are not delinquent or which are being contested ingood faith by appropriate action and for which adequate reserves have beenmaintained in accordance with GAAP, provided that any such Lien referred to inthis clause does not materially impair the use of the Property covered by suchLien for the purposes for which such Property is held by the Borrower or any ofits Subsidiaries or materially impair the value of material Property subjectthereto; (e) Liens arising solely by virtue of any statutory or common lawprovision relating to banker’s liens, rights of set-off or similar rights andremedies and burdening only deposit accounts or other funds maintained with acreditor depository institution, provided that no such deposit account is adedicated cash collateral account or is subject to restrictions against accessby the depositor in excess of those set forth by regulations promulgated by theBoard and no such deposit account is intended by the Borrower or any of itsSubsidiaries to provide collateral to the depository institution; (f) easements,restrictions, servitudes, permits, conditions, covenants, exceptions orreservations in 

 

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anyProperty of the Borrower or any of its Subsidiaries for the purpose of roads,pipelines, transmission lines, transportation lines, distribution lines for theremoval of gas, oil, coal or other minerals or timber, and other like purposes,or for the joint or common use of real estate, rights of way, facilities andequipment, that do not secure any monetary obligations and which in theaggregate do not materially impair the use of such Property for the purposes ofwhich such Property is held by the Borrower or any of its Subsidiaries ormaterially impair the value of any material Property subject thereto; (g) Lienson cash or securities pledged to secure performance of tenders, surety andappeal bonds, government contracts, performance and return of money bonds,bids, trade contracts, leases, statutory obligations, regulatory obligationsand other obligations of a like nature incurred in the ordinary course ofbusiness; (h) judgment and attachment Liens not giving rise to an Event ofDefault, provided that any appropriate legal proceedings which may have beenduly initiated for the review of such judgment shall not have been finallyterminated or the period within which such proceeding may be initiated shallnot have expired and no action to enforce such Lien has been commenced; and (i) Liensarising from precautionary Uniform Commercial Code financing statement filingsentered into by the Borrower and the Subsidiaries covering Property under trueleases entered into in the ordinary course of business; provided, further thatLiens described in clauses (a) through (e) shall remain “ExceptedLiens” only for so long as no action to enforce such Lien has been commencedand no intention to subordinate the Lien granted in favor of the AdministrativeAgent and the Lenders is to be hereby implied or expressed by the permittedexistence of such Excepted Liens.

 

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

 

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

 

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

 

“FinancialStatements” means the financial statement or statements of the Borrower andits Consolidated Subsidiaries referred to in Section 7.04(a).

 

“ForeignLender” means any Lender that is organized under the laws of a jurisdictionother than that in which the Borrower is located.  For purposes of this definition, the UnitedStates of America, each State thereof and the District of Columbia shall bedeemed to constitute a single jurisdiction.

 

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

 

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

 

“GovernmentalAuthority” means the government of the United States of America, any othernation or any political subdivision thereof, whether state or local, and anyagency, authority, instrumentality, regulatory body, court, central bank orother entity exercising executive, legislative, judicial, taxing, regulatory oradministrative powers or functions of or pertaining to government over theBorrower or any of its Subsidiaries, any of their Properties, any Agent or anyLender.

 

“GovernmentalRequirement” means any law, statute, code, ordinance, order, determination,rule, regulation, judgment, decree, injunction, franchise, permit, certificate,license, authorization or other directive orrequirement, whether now or hereinafter in effect, including, withoutlimitation, Environmental Laws, energy regulations and occupational, safety andhealth standards or controls, of any Governmental Authority.

 

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

 

“GuarantyAgreement” means an agreement executed by the Guarantors in form andsubstance reasonably satisfactory to the Administrative Agent unconditionallyguarantying on a joint and several basis, payment of the Indebtedness, as thesame may be amended, modified or supplemented from time to time.

 

“HazardousMaterial” means any substance regulated or as to which liability mightarise under any applicable Environmental Law and including, withoutlimitation:  (a) any chemical,compound, material, product, byproduct, substance or waste defined as orincluded in the definition or meaning of “hazardous substance,” “hazardousmaterial,” “hazardous waste,” “solid waste,” “toxic waste,” “extremelyhazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or wordsof similar meaning or import found in any applicable Environmental Law; (b) petroleumhydrocarbons, petroleum products, petroleum substances, natural gas, oil, oiland 

 

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

 

“HighestLawful Rate” means, with respect to each Lender, the maximum nonusuriousinterest rate, if any, that at any time or from time to time may be contractedfor, taken, reserved, charged or received on the Notes or on other Indebtednessunder laws applicable to such Lender which are presently in effect or, to theextent allowed by law, under such applicable laws which may hereafter be in effectand which allow a higher maximum nonusurious interest rate than applicable lawsallow as of the date hereof.

 

“HydrocarbonInterests” means all rights, titles, interests and estates now or hereafteracquired in and to oil and gas leases, oil, gas and mineral leases, or otherliquid or gaseous hydrocarbon leases, mineral fee interests, overriding royaltyand royalty interests, net profit interests and production payment interests,including any reserved or residual interests of whatever nature.

 

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

 

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

 

“IndemnifiedTaxes” means Taxes other than Excluded Taxes.

 

“IntercreditorAgreement” means that certain Intercreditor Agreement dated as of theEffective Date entered into by and among BNP Paribas, as administrative agentfor the lenders pursuant to the Senior Revolving Credit Documents, theAdministrative Agent, and the Borrower, as the same may from time to time beamended, modified, supplemented or restated.

 

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

 

“InterestExpense” means, for any period, the sum (determined without duplication) ofthe aggregate gross interest expense of the Borrower and the ConsolidatedSubsidiaries for such period, including (a) to the extent included ininterest expense under GAAP:  (i) amortizationof debt discount, (ii) capitalized interest and (iii) the portion ofany payments or accruals under Capital Leases allocable to interest expense,plus the portion of any payments or accruals under Synthetic Leases allocableto interest expense whether or not the same constitutes interest expense underGAAP and (b) cash dividend payments by the Borrower in respect of anyDisqualified Capital Stock; but excluding non-cash gains, losses or adjustmentsunder FASB Statement No. 133 as a result of changes in the fair marketvalue of derivatives.

 

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“InterestPeriod” means with respect to any Eurodollar Tranche, the period commencingon the date of such Tranche and ending on the numerically corresponding day inthe calendar month that is one, two, three or six months thereafter, as the Borrowermay elect; provided, that (a) if any Interest Period would end on a dayother than a Business Day, such Interest Period shall be extended to the nextsucceeding Business Day unless such next succeeding Business Day would fall inthe next calendar month, in which case such Interest Period shall end on thenext preceding Business Day and (b) any Interest Period pertaining to aEurodollar Tranche that commences on the last Business Day of a calendar month(or on a day for which there is no numerically corresponding day in the lastcalendar month of such Interest Period) shall end on the last Business Day ofthe last calendar month of such Interest Period.  For purposes hereof, the date of a Trancheinitially shall be the date on which such Loans comprising such Tranche aremade and thereafter shall be the effective date of the most recent conversionor continuation of such Tranche.

 

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

 

“InvestmentBank” means one or more investment banks engaged by the Borrower andsatisfactory to the Arrangers to assist in issuing the Permanent Securities.

 

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

 

“LIBORate” means, with respect to any Eurodollar Borrowing for any InterestPeriod, the rate per annum determined on the basis of the rate for deposits indollars for a period equal to such Interest Period commencing on the first dayof such Interest Period appearing on the Reuters Screen LIBOR01 Page as of11:00 A.M., London time, two Business Days prior to the beginning of suchInterest Period.  In the event that suchrate does not appear on such page (or otherwise on such screen), the “LIBORate” shall be determined by reference to such other comparable publiclyavailable service for displaying eurodollar rates as may be selected by the 

 

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

 

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

 

“LoanDocuments” means this Agreement, the Notes, Security Instruments and theIntercreditor Agreement.

 

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

 

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

 

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

 

“MaterialAdverse Effect” means a material adverse change in, or material adverseeffect on (a) the business, operations, Property, condition (financial orotherwise) or prospects of the Borrower and the Guarantors taken as a whole, (b) theability of the Borrower, any of its Subsidiaries or any Guarantor to performany of its obligations under any Loan Document to which it is a party, (c) thevalidity or enforceability of any Loan Document or (d) the rights andremedies of or benefits available to the Administrative Agent, any other Agentor any Lender under any Loan Document.

 

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

 

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

 

“MaturityDate” means July 31, 2009.

 

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

 

“MortgagedProperty” means any Property owned by the Borrower or any Guarantor whichis subject to the Liens existing and to exist under the terms of the SecurityInstruments.

 

“MultiemployerPlan” means a multiemployer plan as defined in section 3(37) or 4001 (a)(3) ofERISA to which any Borrower or any Subsidiary or any ERISA Affiliate is makingor accruing an obligation to make contributions, or has within the six calendaryears preceding the date hereof, made or accrued an obligation to makecontributions.

 

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

 

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

 

“Oil and GasProperties” means (a) Hydrocarbon Interests; (b) the Propertiesnow or hereafter pooled or unitized with Hydrocarbon Interests; (c) allpresently existing or future unitization, pooling agreements and declarationsof pooled units and the units created thereby (including without limitation allunits created under orders, regulations and rules of any GovernmentalAuthority) which may affect all or any portion of the Hydrocarbon Interests; 

 

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(d) alloperating agreements, contracts and other agreements, including productionsharing contracts and agreements, which relate to any of the HydrocarbonInterests or the production, sale, purchase, exchange or processing ofHydrocarbons from or attributable to such Hydrocarbon Interests; (e) allHydrocarbons in and under and which may be produced and saved or attributableto the Hydrocarbon Interests, including all oil in tanks, and all rents,issues, profits, proceeds, products, revenues and other incomes from orattributable to the Hydrocarbon Interests; (f) all tenements,hereditaments, appurtenances and Properties in any manner appertaining,belonging, affixed or incidental to the Hydrocarbon Interests and (g) allProperties, rights, titles, interests and estates described or referred toabove, including any and all Property, real or personal, now owned orhereinafter acquired and situated upon, used, held for use or useful inconnection with the operating, working or development of any of suchHydrocarbon Interests or Property (excluding drilling rigs, automotiveequipment, rental equipment or other personal Property which may be on suchpremises for the purpose of drilling a well or for other similar temporaryuses) and including any and all oil wells, gas wells, injection wells or otherwells, buildings, structures, fuel separators, liquid extraction plants, plantcompressors, pumps, pumping units, field gathering systems, tanks and tankbatteries, fixtures, valves, fittings, machinery and parts, engines, boilers,meters, apparatus, equipment, appliances, tools, implements, cables, wires,towers, casing, tubing and rods, surface leases, rights-of-way, easements andservitudes together with all additions, substitutions, replacements, accessionsand attachments to any and all of the foregoing.

 

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

 

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

 

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

 

“PermanentSecurities” means senior subordinated unsecured notes, subordinatedunsecured notes orany Equity Interests of the Borrower which are issued after the Effective Datefor the purpose of refinancing all or a portion of the Loans outstanding underthis Agreement.

 

“Person”means any natural person, corporation, limited liability company, trust, jointventure, association, company, partnership, Governmental Authority or otherentity.

 

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

 

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

 

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

 

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

 

“ProvedDeveloped Producing Properties” means Oil and Gas Properties which arecategorized as “Proved Reserves” that are both “Developed” and “Producing”, assuch terms are defined in the Definitions for Oil and Gas Reserves aspromulgated by the Society of Petroleum Engineers (or any generally recognizedsuccessor) as in effect at the time in question.

 

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

 

“PV”means the net present value, discounted at 10% per annum, of the future netrevenues expected to accrue to the Borrower’s and its Subsidiaries’ collectiveinterests in Proved Reserves expected to be produced from their Oil and GasProperties during the remaining expected economic lives of such reserves.  Each calculation of such expected future netrevenues shall be made in accordance with the then existing standards of theSociety of Petroleum Engineers, provided that in any event (a) appropriatedeductions shall be made for severance and ad valorem taxes, and for operating,gathering, transportation and marketing costs required for the production andsale of such reserves, (b) appropriate adjustments shall be made forhedging operations, provided that Swap Agreements with non-investment gradecounterparties shall not be taken into account to the extent that such SwapAgreements improve the position of or otherwise benefit the Borrower or any ofits Subsidiaries, (c) the pricing assumptions used in determining netpresent value for any particular reserves shall be based upon the followingprice decks:  (i) for natural gas,the quotation for deliveries of natural gas for each such year from the NewYork Mercantile Exchange for Henry Hub, provided that with respect toquotations for calendar years after the fifth calendar year, the quotation forthe fifth calendar year shall be applied and (ii) for crude oil, thequotation for deliveries of West Texas Intermediate crude oil for each suchcalendar year from the New York Mercantile Exchange for Cushing, Oklahoma,provided that with respect to quotations for calendar years after the fifthcalendar year, the quotation for the fifth calendar year shall be applied, and (d) thecash-flows derived from the pricing assumptions set forth in clauses (b) and(c) above shall be further adjusted to account for the historical basisdifferentials for each month during the preceding 12-month period calculated bycomparing realized crude oil and natural gas prices to Cushing, Oklahoma andHenry Hub NYMEX prices for each month during such period.

 

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

 

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

 

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

 

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

 

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

 

“ReserveReport” means a report, in form and substance reasonably satisfactory tothe Administrative Agent, setting forth, as of each December 31stor June 30th (or any other specified “as of” date), the oil andgas reserves attributable to the Oil and Gas Properties of the Borrower and itsSubsidiaries, together with a projection of the rate of production and futurenet income, taxes, operating expenses and capital expenditures with respectthereto as of such date, based upon the economic assumptions consistent withthe Administrative Agent’s lending requirements at the time.

 

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

 

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

 

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

 

“SecurityInstruments” means the Guaranty Agreement, if any, mortgages, deeds oftrust and other agreements, instruments or certificates described or referredto in Exhibit C, and any and all other agreements, instruments, consentsor certificates now or hereafter executed and delivered by the Borrower or anyother Person (other than participation or similar agreements between any Lenderand any other lender or creditor with respect to any Indebtedness pursuant tothis Agreement) in connection with, or as security for the payment orperformance of the Indebtedness, the Notes or this Agreement, as suchagreements may be amended, modified, supplemented or restated from time totime.

 

“SeniorRevolving Credit Agreement” means that certain Third Amended and RestatedCredit Agreement dated as of August 31, 2007 among the Borrower, asborrower, BNP Paribas, as administrative agent and the other agents and lendersfrom time to time parties thereto, as 

 

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

 

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

 

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

 

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

 

“Subsidiary”means: (a) any Person of which at least a majority of the outstandingEquity Interests having by the terms thereof ordinary voting power to elect amajority of the board of directors, manager or other governing body of suchPerson (irrespective of whether or not at the time Equity Interests of anyother class or classes of such Person shall have or might have voting power byreason of the happening of any contingency) is at the time directly orindirectly owned or controlled by the Borrower or one or more of itsSubsidiaries or by the Borrower and one or more of its Subsidiaries and (b) anypartnership of which the Borrower or any of its Subsidiaries is a generalpartner.  Unless otherwise indicatedherein, each reference to the term “Subsidiary” means a Subsidiary ofthe Borrower.

 

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

 

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

 

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

 

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

 

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and(ii) accounts payable and other accrued liabilities (for the deferredpurchase price of Property or services) from time to time incurred in theordinary course of business which are not greater than sixty (60) days past thedate of invoice or delinquent or which are being contested in good faith byappropriate action and for which adequate reserves have been maintained inaccordance with GAAP.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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include such Person’ssuccessors and assigns (subject to the restrictions contained in the LoanDocuments), (d) the words “herein”, “hereof” and “hereunder”, and words ofsimilar import, shall be construed to refer to this Agreement in its entiretyand not to any particular provision hereof, (e) with respect to thedetermination of any time period, the word “from” means “from and including”and the word “to” means “to and including” and (f) any reference herein toArticles, Sections, Annexes, Exhibits and Schedules shall be construed to referto Articles and Sections of, and Annexes, Exhibits and Schedules to, thisAgreement.  No provision of thisAgreement or any other Loan Document shall be interpreted or construed againstany Person solely because such Person or its legal representative drafted suchprovision.

 

Section 1.05                                AccountingTerms and Determinations; GAAP.  Unless otherwise specified herein, all termsof an accounting or financial nature shall be construed in accordance withGAAP, as in effect from time to time; provided that, if the Borrowernotifies the Administrative Agent that the Borrower requests an amendment toany provision hereof to eliminate the effect of any change occurring after thedate hereof in GAAP or in the application thereof on the operation of suchprovision (or if the Administrative Agent notifies the Borrower that theMajority Lenders request an amendment to any provision hereof for suchpurpose), regardless of whether any such notice is given before or after suchchange in GAAP or in the application thereof, then such provision shall beinterpreted on the basis of GAAP as in effect and applied immediately beforesuch change shall have become effective until such notice shall have been withdrawn or such provision  amended in accordance herewith.

 

**ARTICLE IIThe Credits**

** **

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

 

Section 2.02                                Loans andTranches.

 

(a)                                  Loans; SeveralObligations.  Each Loanshall be made as part of a Tranche consisting of Loans by each Lender ratablyin accordance with its respective Commitment. The failure of any Lender to fund its Loan shall not relieve any otherLender of its obligations hereunder; provided that the Commitments are severaland no Lender shall be responsible for any other Lender’s failure to fund itsLoan as required.

 

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

 

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

 

(d)                                 Notes.  If a Lender shall make a written request tothe Administrative Agent and the Borrower to have its Loan evidenced by apromissory note, then the Borrower shall executed and deliver a singlepromissory note of the Borrower in substantially the form of Exhibit Apayable to the order of such Lender in a principal amount equal to such Lender’sCommitment and otherwise duly completed. The date, amount, Type, interest rate and, if applicable, InterestPeriod of each Tranche consisting of a portion of the Loan made by each Lender,and all payments made on account of the principal thereof, may be recorded bysuch Lender on its books for its Note, and, prior to any transfer, may beendorsed by such Lender on a schedule attached to such Note or any continuationthereof or on any separate record maintained by such Lender.  Failure to make any such notation or toattach a schedule shall not affect any Lender’s or the Borrower’s rights orobligations in respect of its Loan or affect the validity of such transfer byany Lender of its Note.

 

Section 2.03                                Requests forthe Loans.  To requesta Loan, the Borrower shall notify the Administrative Agent of such request bytelephone (a) in the case of a Eurodollar Tranche, not later than 11:00 a.m.,Houston time, three Business Days before the Effective Date or (b) in thecase of an ABR Tranche, not later than 12:00 noon, Houston time, on theEffective Date.  Each such telephonicBorrowing Request shall be irrevocable and shall be confirmed promptly by handdelivery or telecopy to the Administrative Agent of a written Borrowing Requestand signed by the Borrower.  Each suchtelephonic and written Borrowing Request shall specify the followinginformation in compliance with Section 2.02:

 

(i)                                     the aggregateamount of the requested Loans;

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 2.04                                InterestElections.

 

(a)                                  Conversion andContinuance.  EachTranche initially shall be of the Type specified in the applicable Borrowing Requestand, in the case of a Eurodollar Tranche, shall have an initial Interest Periodas specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Tranche to adifferent Type or to continue such Tranche and, in the case of a EurodollarTranche, may elect Interest Periods therefor, all as provided in this Section 2.04.  The Borrower may elect different options withrespect to different portions of the affected Tranche, in which case each suchportion shall be allocated ratably among the Lenders holding the Loanscomprising such Tranche, and the Loans comprising each such portion shall beconsidered a separate Tranche.

 

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

 

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

 

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

 

(ii)                                  the effectivedate of the election made pursuant to such Interest Election Request, whichshall be a Business Day;

 

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

 

(iv)                              if theresulting Tranche is a Eurodollar Tranche, the Interest Period to be applicablethereto after giving effect to such election, which shall be a periodcontemplated by the definition of the term “Interest Period”.

 

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

 

(e)                                  Notice toLenders by the Administrative Agent.  Promptly following receipt of an InterestElection Request, the Administrative Agent shall advise each Lender of thedetails thereof and of such Lender’s portion of each resulting Tranche.

 

(f)                                    Effect ofFailure to Deliver Timely Interest Election Request and Events of Default onInterest Election.  If the Borrowerfails to deliver a timely Interest Election Request with respect to aEurodollar Tranche prior to the end of the Interest Period applicable thereto,then, unless such Tranche is repaid as provided herein, at the end of suchInterest Period such Tranche shall be continued as a Eurodollar Tranche havingan Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Defaulthas occurred and is continuing:  (i) nooutstanding Tranche may be converted to or continued as a Eurodollar Tranche(and any Interest Election Request that requests the conversion of any Trancheto, or continuation of any Tranche as, a Eurodollar Tranche shall beineffective) and (ii) unless repaid, each Eurodollar Tranche shall beconverted to an ABR Tranche at the end of the Interest Period applicablethereto.

 

Section 2.05                                Funding ofTranches.

 

(a)                                  Funding byLenders.  Each Lender shall make itsLoan on the Effective Date by wire transfer of immediately available funds by1:00 p.m., Houston time, to the account of the Administrative Agent mostrecently designated by it for such purpose by notice to the Lenders.  The Administrative Agent will make such Loansavailable to the Borrower by promptly crediting the amounts so received, inlike funds, to an account of the Borrower and designated by the Borrower insuch Borrowing Request.  Nothing hereinshall be deemed to obligate any Lender to obtain the funds for its Loan in anyparticular place or manner or to constitute a representation by any Lender thatit has obtained or will obtain the funds for its Loan in any particular placeor manner.

 

(b)                                 Presumption ofFunding by the Lenders. Unless the Administrative Agent shall have received notice from a Lenderprior to the Effective Date that such Lender will not make available to theAdministrative Agent such Lender’s Loan, the Administrative Agent may assumethat such Lender has made its Loan available on such date in accordance with Section 2.05(a) andmay, in reliance upon such assumption, make available to the Borrower acorresponding amount.  In such event, ifa Lender has not in fact made its Loan available to the Administrative Agent,then the applicable Lender and the Borrower severally agree to pay to theAdministrative Agent forthwith on demand such corresponding amount withinterest thereon, for each day from and including the date such amount is madeavailable to the Borrower to but excluding the date of payment to theAdministrative Agent, at (i) in the case of such Lender, the greater ofthe Federal Funds Effective Rate and a rate determined by the AdministrativeAgent in accordance with banking industry rules on interbank compensationor (ii) in the case of the Borrower, the interest rate applicable to ABRTranches.  If such Lender pays suchamount to the Administrative Agent, then such amount shall constitute suchLender’s Loan.

 

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

 

Section 2.07                                Total ReserveValue.  Subject to interim adjustmentunder Section 8.13(c) and Section 9.12(d), the initial TotalReserve Value shall be $4,600,000,000.00. The Borrower shall deliver to the Administrative Agent a certificate, inform reasonably satisfactory to the Administrative Agent, no later than March 15thand September 15th of each year, commencing March 15,2008, reflecting the Total Reserve Value as of the immediately preceding December 31stor June 30th. In addition, the Borrower may, by notifying theAdministrative Agent thereof, and the Administrative Agent may, at thedirection of the Majority Lenders, by notifying the Borrower thereof, eachelect to require the Total Reserve Value be determined one additional time on aspecified “as of” date between such regular determinations (which shall be thefirst day of a calendar month following the date of such notice), in whichevent the Borrower shall deliver to the Administrative Agent a certificate, inform reasonably satisfactory to the Administrative Agent, no later than threemonths after such specified date reflecting the Total Reserve Value as of suchspecified date.  The Borrower shallcalculate the Total Reserve Value based upon the applicable definitions of thisAgreement, and provide with each such certificate the Reserve Report and otherinformation used by the Borrower in calculating the Total Reserve Value.

 

Uponreceipt of such certificate, the Administrative Agent shall promptly reviewsuch certificate and, within five (5) Business Days, confirm to theBorrower and the Lenders that (i) the calculations used to determine theTotal Reserve Value were based upon the pricing and other requirements setforth in the definition of Total Reserve Value and (ii) no mathematical orother errors or omissions have been made in such calculation.  If discrepancies or errors under (i) or (ii) areascertained to exist, the Administrative Agent and the Borrower shall cooperateto promptly calculate the proper amount of the Total Reserve Value.  Otherwise, upon confirmation of such amountas the Total Reserve Value, such amount will be the Total Reserve Value untilnext adjusted or redetermined in accordance with the terms of this Agreement.

 

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

 

**ARTICLE IIIPayments of Principal and Interest; Prepayments; Fees**

** **

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

 

Section 3.02                                Interest.

 

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

 

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(b)                                 EurodollarTranches.  The portionof the Loans comprising each Eurodollar Tranche shall bear interest at the LIBORate for the Interest Period in effect for such Tranche plus the ApplicableMargin, but in no event to exceed the Highest Lawful Rate.

 

(c)                                  Post-DefaultRate.  Notwithstanding the foregoing,if an Event of Default has occurred and is continuing, or if any principal ofor interest on any Loan or any fee or other amount payable by the Borrower orany Guarantor hereunder or under any other Loan Document is not paid when due,whether at stated maturity, upon acceleration or otherwise, then all Loansoutstanding, in the case of an Event of Default, and such overdue amount, inthe case of a failure to pay amounts when due, shall bear interest, after aswell as before judgment, at a rate per annum equal to two percent (2%) plus therate applicable to ABR Tranches as provided in Section 3.02(a), but in noevent to exceed the Highest Lawful Rate.

 

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

 

(e)                                  Interest RateComputations.  Allinterest hereunder shall be computed on the basis of a year of 360 days, unlesssuch computation would exceed the Highest Lawful Rate, in which case interestshall be computed on the basis of a year of 365 days (or 366 days in a leapyear), except that interest computed by reference to the Alternate Base Rateshall be computed on the basis of a year of 365 days (or 366 days in a leapyear), and in each case shall be payable for the actual number of days elapsed(including the first day but excluding the last day).  The applicable Alternate Base Rate or LIBORate shall be determined by the Administrative Agent, and such determinationshall be conclusive absent manifest error, and be binding upon the partieshereto.

 

Section 3.03                                Alternate Rateof Interest.  If prior tothe commencement of any Interest Period for a Eurodollar Tranche:

 

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

 

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

 

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thenthe Administrative Agent shall give notice thereof to the Borrower and theLenders by telephone or telecopy as promptly as practicable thereafter and,until the Administrative Agent notifies the Borrower and the Lenders that thecircumstances giving rise to such notice no longer exist, (i) any InterestElection Request that requests the conversion of any Tranche to, orcontinuation of any Tranche as, a Eurodollar Tranche shall be ineffective, and (ii) ifany Borrowing Request requests a Eurodollar Tranche, such Tranche shall be madeas an ABR Tranche.

 

Section 3.04                                Optional Prepayments.

 

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

 

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

 

Section 3.05                                MandatoryPrepayments

 

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

 

(i)                                     100% of the NetCash Proceeds of any Debt incurrence of the Borrower or any of its Subsidiariespursuant to Section 9.02(i) or 9.02(j) (but only, in the case of9.02(j), to the extent such Debt exceeds $10,000,000 in the aggregate), or ofthe sale or issuance of any Equity Interests of the Borrower.  Such prepayment shall be made no later thanthe next Business Day after the receipt of such proceeds.

 

(ii)                                  100% of the NetCash Proceeds of any Casualty Event related to the Borrower or any of itsSubsidiaries. Such prepayment shall be made no later than the next Business Dayafter the receipt of such proceeds.

 

(iii)                               100% of the NetCash Proceeds of any Asset Sale.  Suchprepayment shall be made no later than the next Business Day after the receiptof such proceeds.

 

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

 

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

 

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

 

**ARTICLE IVPayments; Pro Rata Treatment; Sharing of Set-offs**

** **

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

 

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

 

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

 

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

 

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amount of principal of andaccrued interest on their respective Loans; provided that (i) if any suchparticipations are purchased and all or any portion of the payment giving risethereto is recovered, such participations shall be rescinded and the purchaseprice restored to the extent of such recovery, without interest, and (ii) theprovisions of this Section 4.01(c) shall not be construed to apply toany payment made by the Borrower pursuant to and in accordance with the expressterms of this Agreement or any payment obtained by a Lender as considerationfor the assignment of or sale of a participation in its Loan to any assignee orparticipant, other than to the Borrower or any Subsidiary or Affiliate thereof(as to which the provisions of this Section 4.01(c) shallapply).  The Borrower consents to theforegoing and agrees, to the extent it may effectively do so under applicablelaw, that any Lender acquiring a participation pursuant to the foregoingarrangements may exercise against the Borrower rights of set-off andcounterclaim with respect to such participation as fully as if such Lender werea direct creditor of the Borrower in the amount of such participation.

 

Section 4.02                                Presumption ofPayment by the Borrower. Unless the Administrative Agent shall have received notice from theBorrower prior to the date on which any payment is due to the AdministrativeAgent for the account of the Lenders that the Borrower will not make suchpayment, the Administrative Agent may assume that the Borrower has made suchpayment on such date in accordance herewith and may, in reliance upon suchassumption, distribute to the Lenders the amount due.  In such event, if the Borrower has not infact made such payment, then each of the Lenders severally agrees to repay tothe Administrative Agent forthwith on demand the amount so distributed to suchLender with interest thereon, for each day from and including the date suchamount is distributed to it to but excluding the date of payment to theAdministrative Agent, at the greater of the Federal Funds Effective Rate and arate determined by the Administrative Agent in accordance with banking industryrules on interbank compensation.

 

Section 4.03                                CertainDeductions by the Administrative Agent.  If any Lender shall fail to make any paymentrequired to be made by it pursuant to Section 2.05(a), Section 4.01(c) orSection 4.02 then the Administrative Agent may, in its discretion(notwithstanding any contrary provision hereof), apply any amounts thereafterreceived by the Administrative Agent for the account of such Lender to satisfysuch Lender’s obligations under such Sections until all such unsatisfiedobligations are fully paid.

 

**ARTICLE VIncreased Costs; Break Funding Payments; Taxes**

** **

Section 5.01                                Increased Costs.

 

(a)                                  EurodollarChanges in Law.  If anyChange in Law shall:

 

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

 

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(ii)                                  impose on anyLender or the London interbank market any other condition affecting thisAgreement or any Eurodollar Tranche consisting of any portion of the Loan ofsuch Lender;

 

andthe result of any of the foregoing shall be to increase the cost to such Lenderof making or maintaining any Eurodollar Tranche (or of maintaining itsobligation to make any such Loan) or to reduce the amount of any sum receivedor receivable by such Lender (whether of principal, interest or otherwise),then the Borrower will pay to such Lender such additional amount or amounts aswill compensate such Lender for such additional costs incurred or reductionsuffered.

 

(b)                                 CapitalRequirements.  If anyLender determines that any Change in Law regarding capital requirements has orwould have the effect of reducing the rate of return on such Lender’s capitalor on the capital of such Lender’s holding company, if any, as a consequence ofthis Agreement or the Loan made by such Lender, to a level below that whichsuch Lender or the or such Lender’s holding company could have achieved but forsuch Change in Law (taking into consideration such Lender’s policies and thepolicies of such Lender’s holding company with respect to capital adequacy),then from time to time the Borrower will pay to such Lender such additionalamount or amounts as will compensate such Lender or such Lender’s holdingcompany for any such reduction suffered.

 

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

 

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

 

Section 5.02                                Break FundingPayments.  In theevent of (a) the payment of any principal of any Eurodollar Tranche otherthan on the last day of an Interest Period applicable thereto (including as aresult of an Event of Default), (b) the conversion of any EurodollarTranche into an ABR Tranche other than on the last day of the Interest Periodapplicable thereto or (c) the failure to borrow, convert, continue orprepay any Eurodollar Tranche on the date specified in any notice deliveredpursuant hereto, then, in any such event, the Borrower shall compensate eachLender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Tranche, suchloss, cost or expense to any Lender shall be deemed to include an amountdetermined by such Lender to be the excess, if any, of (i) the amount ofinterest which would 

 

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

 

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

 

Section 5.03                                Taxes.

 

(a)                                  Payments Freeof Taxes.  Any and allpayments by or on account of any obligation of the Borrower or any Guarantorunder any Loan Document shall be made free and clear of and without deductionfor any Indemnified Taxes or Other Taxes; provided that if the Borrower or anyGuarantor shall be required to deduct any Indemnified Taxes or Other Taxes fromsuch payments, then (i) the sum payable shall be increased as necessary sothat after making all required deductions (including deductions applicable toadditional sums payable under this Section 5.03(a)), the AdministrativeAgent or Lender (as the case may be) receives an amount equal to the sum itwould have received had no such deductions been made, (ii) the Borrower orsuch Guarantor shall make such deductions and (iii) the Borrower or such Guarantorshall pay the full amount deducted to the relevant Governmental Authority inaccordance with applicable law.

 

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

 

(c)                                  Indemnificationby the Borrower.  TheBorrower shall indemnify the Administrative Agent and each Lender, within 10days after written demand therefor, for the full amount of any IndemnifiedTaxes or Other Taxes paid by the Administrative Agent or such Lender on or withrespect to any payment by or on account of any obligation of the Borrowerhereunder (including Indemnified Taxes or Other Taxes imposed or asserted on orattributable to amounts payable under this Section 5.03) and anypenalties, interest and reasonable expenses arising therefrom or with respectthereto, whether or not such Indemnified Taxes or Other Taxes were correctly orlegally imposed or asserted by the relevant Governmental Authority.  A certificate of the Administrative Agent ora Lender as to the basis of such Indemnified Taxes and Other Taxes and theamount of such payment or liability under this Section 5.03 shall bedelivered to the Borrower and shall be conclusive absent manifest error.

 

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

 

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reporting such payment orother evidence of such payment reasonably satisfactory to the AdministrativeAgent.

 

(e)                                  Foreign Lenders.  Any Foreign Lender that is entitled to anexemption from or reduction of withholding tax under the law of thejurisdiction in which the Borrower is located, or any treaty to which suchjurisdiction is a party, with respect to payments under this Agreement or anyother Loan Document shall deliver to the Borrower (with a copy to theAdministrative Agent), at the time or times prescribed by applicable law, suchproperly completed and executed documentation prescribed by applicable law orreasonably requested by the Borrower as will permit such payments to be madewithout withholding or at a reduced rate.

 

Section 5.04                                Designation ofDifferent Lending Office; Replacement of Lenders.

 

(a)                                  Designation ofDifferent Lending Office. If any Lender requests compensation under Section 5.01,or if the Borrower is required to pay any additional amount to any Lenderor any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shalluse reasonable efforts to designate a different lending office for funding orbooking its Loan hereunder or to assign its rights and obligations hereunder toanother of its offices, branches or affiliates, if, in the judgment of suchLender, such designation or assignment (i) would eliminate or reduceamounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future and (ii) wouldnot subject such Lender to any unreimbursed cost or expense and would nototherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expensesincurred by any Lender in connection with any such designation or assignment.

 

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

 

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assignment resulting from aclaim for compensation under Section 5.01 or payments required to be madepursuant to Section 5.03, such assignment will result in a reduction insuch compensation or payments.  A Lendershall not be required to make any such assignment and delegation if, priorthereto, as a result of a waiver by such Lender or otherwise, the circumstancesentitling the Borrower to require such assignment and delegation cease toapply.

 

**ARTICLE VIConditions Precedent**

** **

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

 

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

 

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

 

(c)                                  TheAdministrative Agent shall have received certificates of the appropriate Stateagencies with respect to the existence, qualification and good standing of theBorrower and each Guarantor.

 

(d)                                 TheAdministrative Agent shall have received a closing certificate which shall bein form and substance reasonably satisfactory to the Administrative Agent, dulyand properly executed by a Responsible Officer and dated as of the EffectiveDate.

 

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

 

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(f)                                    The Borrowershall have received a copy of an amendment or waiver from the requisite lendersunder the Senior Revolving Credit Agreement authorizing this Agreement and thetransactions contemplated hereby.

 

(g)                                 TheAdministrative Agent shall have received from each party thereto duly executedcounterparts (in such number as may be requested by the Administrative Agent)of the Security Instruments, including the Guaranty Agreement and the otherSecurity Instruments described on Exhibit C.  In connection with the execution and deliveryof the Security Instruments, the Administrative Agent shall be reasonablysatisfied that:

 

(i)                                     the SecurityInstruments create second priority, perfected Liens (subject only to Liensexisting under the Senior Revolving Credit Documents and Excepted Liensidentified in clauses (a) to (d) and (f) of the definitionthereof, but subject to the provisos at the end of such definition) on so muchof the total value of the Oil and Gas Properties (x) evaluated in the mostrecently delivered Reserve Report and (y) included in the AcquisitionProperties as is necessary to satisfy Section 8.14(a).

 

(ii)                                  theadministrative agent under the Senior Revolving Credit Agreement has receivedcertificates, together with undated, blank stock powers for each suchcertificate, representing all of the issued and outstanding Equity Interests ofeach of the Guarantors.

 

(iii)                               it has a Lienon all Property constituting security for the Senior Revolving CreditAgreement.

 

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

 

(i)                                     TheAdministrative Agent shall have received a certificate of insurance coverage ofthe Borrower evidencing that the Borrower is carrying insurance in accordancewith Section 7.12.

 

(j)                                     TheAdministrative Agent shall have received a certificate of a Responsible Officercertifying that the Borrower has received all consents and approvals requiredby Section 7.03.

 

(k)                                  TheAdministrative Agent shall have received the financial statements referred toin Section 7.04(a).

 

(l)                                     TheAdministrative Agent shall have received appropriate UCC search certificatesreflecting no prior Liens, other than Liens in favor of the administrativeagent under the Senior Revolving Credit Agreement, encumbering the Propertiesof the Borrower, and its 

 

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Subsidiaries for each of thefollowing jurisdictions:  Pennsylvania,West Virginia, California, Oklahoma, Texas, Louisiana, Illinois, Delaware andany other jurisdiction requested by the Administrative Agent; other than thosebeing assigned or released on or prior to the Effective Date or Liens permittedby Section 9.03.

 

(m)                               TheAdministrative Agent or its counsel shall have received (i) a certificateof a Responsible Officer of the Borrower certifying:  (A) that the Borrower is concurrentlyconsummating the Acquisition in accordance with the terms of the AcquisitionDocuments (with all of the material conditions precedent thereto having beensatisfied in all material respects by the parties thereto) and acquiringsubstantially all of the Acquisition Properties contemplated by the AcquisitionDocuments; (B) as to the final purchase price for the AcquisitionProperties after giving effect to all adjustments as of the closing datecontemplated by the Acquisition Documents and specifying, by category, theamount of such adjustment; (C) that attached thereto is a true andcomplete list of the Acquisition Properties which have been excluded from theAcquisition pursuant to the terms of the Acquisition Documents, specifying withrespect thereto the basis of exclusion as (1) title defect, (2) preferentialpurchase right, (3) environmental or (4) casualty loss; (D) thatattached thereto is a true and complete list of all Acquisition Properties forwhich any seller has elected to cure a title defect, (E) that attachedthereto is a true and complete list of all Acquisition Properties for which anyseller has elected to remediate an adverse environmental condition, there wasno known breach of the seller’s title or environmental representations in theAcquisition Documents that would have a material adverse effect on theAcquisition Properties, taken as a whole, and (F) that attached thereto isa true and complete list of all Acquisition Properties which are currentlypending final decision by a third party regarding purchase of such property inaccordance with any preferential right; (ii) a true and complete executedcopy of each of the Acquisition Documents; (iii) original counterparts orcopies, certified as true and complete, of the assignments, deeds and leasesfor all of the Acquisition Properties; and (iv) such other relateddocuments and information as the Administrative Agent shall have reasonablyrequested.

 

(n)                                 TheAdministrative Agent shall have received evidence satisfactory to it that allLiens associated with the Acquisition Properties have been released orterminated contemporaneously with the Acquisition and that arrangementssatisfactory to the Administrative Agent have been made for recording andfiling of such releases.

 

(o)                                 TheAdministrative Agent shall be reasonably satisfied with the environmentalcondition of the Acquisition Properties of the Borrower and its Subsidiaries.

 

(p)                                 TheAdministrative Agent shall have received title information as theAdministrative Agent may reasonably require satisfactory to the AdministrativeAgent such that the requirements of Section 8.13(a) are satisfiedafter giving effect to the inclusion of the Acquisition Properties.

 

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

 

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(r)                                    TheAdministrative Agent shall have received such other documents as theAdministrative Agent or special counsel to the Administrative Agent mayreasonably request.

 

TheAdministrative Agent shall notify the Borrower and the Lenders of the EffectiveDate, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, theobligations of each Lender to make its Loan hereunder shall not becomeeffective unless each of the foregoing conditions is satisfied (or waivedpursuant to Section 12.02) at or prior to 1:00 p.m., Houston time, onFebruary 15, 2008 (and, in the event such conditions are not so satisfiedor waived, the Commitments shall terminate at such time).

 

Section 6.02                                AdditionalConditions.  Theobligation of each Lender to fund its Loan is subject to the satisfaction ofthe following additional conditions:

 

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

 

(b)                                 At the time ofand immediately after giving effect to such Loans, no Material Adverse Effectshall have occurred.

 

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

 

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

 

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

 

**ARTICLE VIIRepresentations and Warranties**

** **

TheBorrower represents and warrants to the Lenders that:

 

Section 7.01                                Organization;Powers.  Each of the Borrower and itsSubsidiaries is duly organized, validly existing and in good standing under thelaws of the jurisdiction of its organization, has all requisite power andauthority, and has all material governmental licenses, authorizations, consentsand approvals necessary, to own its assets and to carry on its business as nowconducted, and is qualified to do business in, and is in good standing in, orhas applied to qualify to do business in, every jurisdiction where suchqualification is required, except where

 

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

 

Section 7.02           Authority;Enforceability.  TheTransactions are within the Borrower’s and each Guarantor’s corporate powersand have been duly authorized by all necessary corporate and, if required,member action (including, without limitation, any action required to be takenby any class of directors of the Borrower or any other Person, whetherinterested or disinterested, in order to ensure the due authorization of theTransactions).  When executed anddelivered, each Loan Document and Acquisition Document to which the Borrowerand any Guarantor is a party will have been duly executed and delivered by theBorrower and such Guarantor and will constitute a legal, valid and bindingobligation of the Borrower and such Guarantor, as applicable, enforceable inaccordance with its terms, subject to applicable bankruptcy, insolvency,reorganization, moratorium or other laws affecting creditors’ rights generallyand subject to general principles of equity, regardless of whether consideredin a proceeding in equity or at law.

 

Section 7.03           Approvals; NoConflicts.  TheTransactions (a) do not require any consent or approval of, registrationor filing with, or any other action by, any Governmental Authority or any otherthird Person (including the members or any class of directors of the Borroweror any other Person, whether interested or disinterested), nor is any suchconsent, approval, registration, filing or other action necessary for thevalidity or enforceability of any Loan Document or the consummation of thetransactions contemplated thereby, except (i) such as have been obtainedor made and are in full force and effect, (ii) as may not be filed orobtained until after the consummation of the Acquisition and (iii) for thefiling and recording of Security Instruments to perfect the Liens createdhereby and by the Security Instruments, (b) will not violate anyapplicable law or regulation or the charter, by-laws or other organizationaldocuments of the Borrower or any of its Subsidiaries or any order of anyGovernmental Authority, (c) will not violate or result in a default underany indenture, agreement or other instrument binding upon the Borrower or anyof its Subsidiaries or their Properties, or give rise to a right thereunder torequire any payment to be made by the Borrower or such Subsidiary and (d) willnot result in the creation or imposition of any Lien on any Property of theBorrower or any of its Subsidiaries (other than the Liens created by the LoanDocuments).

 

Section 7.04           FinancialPosition; No Material Adverse Change.

 

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

 

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

 

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(ii) the business ofthe Borrower and its Subsidiaries has been conducted only in the ordinarycourse consistent with past business practices.

 

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

 

Section 7.05           Litigation.  Except as set forth on Schedule 7.05, thereare no actions, suits, investigations or proceedings by or before anyarbitrator or Governmental Authority pending against or, to the knowledge ofthe Borrower, threatened against or affecting the Borrower or any of itsSubsidiaries or involving the Acquisition (a) as to which there is areasonable possibility of an adverse determination that, if adverselydetermined, could reasonably be expected, individually or in the aggregate, toresult in a Material Adverse Effect or (b) that involve any Loan Documentor (c) that could impair the consummation of the Acquisition on the timeand in the manner contemplated by the Acquisition Documents.

 

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

 

(a)           the Borrowerand its Subsidiaries and each of their respective Properties and operations thereonare, and within all applicable statute of limitation periods have been, incompliance with all applicable Environmental Laws;

 

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

 

(c)           there are noclaims, demands, suits, orders, inquiries, or proceedings concerning anyviolation of, or any liability (including as a potentially responsible party)under, any applicable Environmental Laws that is pending or threatened againstthe Borrower or its Subsidiaries or any of their respective Properties or as aresult of any operations at the Properties;

 

(d)           none of theProperties contain or have contained any: (i) underground storage tanks; (ii) asbestos containingmaterials in a friable condition or otherwise requiring abatement underEnvironmental Laws; or (iii) landfills or dumps; (iv) hazardous wastemanagement units as defined pursuant to RCRA or any comparable state law; or (v) siteson or nominated for the National Priority List promulgated pursuant to CERCLAor any similar state remedial priority list promulgated or published pursuantto any comparable state law;

 

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

 

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remediations, abatements,removals, or monitorings of Hazardous Materials required under applicableEnvironmental Laws at such Properties and none of such Properties are adverselyaffected by any Release or threatened Release of a Hazardous Materialoriginating or emanating from any other real property,

 

(f)            neither theBorrower nor its Subsidiaries has received any written notice asserting analleged liability or obligation under any applicable Environmental Laws withrespect to the investigation, remediation, abatement, removal, or monitoring ofany Hazardous Materials at, under, or Released or threatened to be Releasedfrom any real properties offsite the Borrower’s or its Subsidiaries’ Propertiesand there are no conditions or circumstances that would reasonably be expectedto result in the receipt of such written notice.

 

(g)           there has beenno exposure of any Person or property to any Hazardous Materials as a result ofor in connection with the operations and businesses of any of the Borrower’s orits Subsidiaries’ Properties that would reasonably be expected to form thebasis for a material claim for damages or compensation and there are noconditions or circumstances that would reasonably be expected to result in thereceipt of notice regarding such exposure; and

 

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

 

Section 7.07           Compliance withthe Laws and Agreements; No Defaults.

 

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

 

(b)           Neither theBorrower nor any of its Subsidiaries is in default nor has any event orcircumstance occurred which, but for the expiration of any applicable graceperiod or the giving of notice, or both, would constitute a default or wouldrequire the Borrower or any of its Subsidiaries to Redeem or make any offer toRedeem all or any portion of any Debt outstanding under any indenture, note,credit agreement or instrument pursuant to which any Material Indebtedness isoutstanding or by which the Borrower or any of its Subsidiaries or any of theirProperties is bound.

 

(c)           No Default hasoccurred and is continuing.

 

Section 7.08           InvestmentCompany Act.  Neither theBorrower nor any of its Subsidiaries is an “investment company” or a company “controlled”by an “investment 

 

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company,” within the meaningof, or subject to regulation under, the Investment Company Act of 1940, asamended.

 

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

 

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

 

(a)           the Borrower,its Subsidiaries and each ERISA Affiliate have complied in all materialrespects with ERISA and, where applicable, the Code regarding each Plan, ifany.

 

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

 

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

 

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

 

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

 

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

 

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

 

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Section 7.11           Disclosure; NoMaterial Misstatements.  Noneof the reports, financial statements, certificates or other informationfurnished by or on behalf of the Borrower or any of its Subsidiaries to theAdministrative Agent, any other Agent or any Lender or any of their Affiliatesin connection with the negotiation of this Agreement or any other Loan Documentor delivered hereunder or under any other Loan Document (as modified orsupplemented by other information so furnished) contains any materialmisstatement of fact or omits to state any material fact necessary to make thestatements therein, in the light of the circumstances under which they weremade, not misleading; provided that, with respect to projected financialinformation, the Borrower represents only that such information was prepared ingood faith based upon assumptions believed to be reasonable at the time.  There is no fact peculiar to the Borrower orany of its Subsidiaries that could reasonably be expected to have a MaterialAdverse Effect or in the future is reasonably likely to have a Material AdverseEffect and which has not been set forth in this Agreement or the Loan Documentsor the other documents, certificates and statements furnished to theAdministrative Agent, any other Agent or the Lenders by or on behalf of theBorrower or any of its Subsidiaries prior to, or on, the date hereof inconnection with the transactions contemplated hereby.  There are no statements or conclusions in anyReserve Report which are based upon or include misleading information or failto take into account material information regarding the matters reportedtherein, it being understood that projections concerning volumes attributableto the Oil and Gas Properties and production and cost estimates contained ineach Reserve Report are necessarily based upon professional opinions, estimatesand projections and that the Borrower and the Subsidiaries do not warrant thatsuch opinions, estimates and projections will ultimately prove to have beenaccurate.

 

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

 

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

 

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

 

Section 7.15           Location ofBusiness and Offices.  TheBorrower’s jurisdiction of organization is Delaware; the name of the Borroweras listed in the public records of its 

 

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

 

Section 7.16          Properties;Titles, Etc.

 

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

 

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

 

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

 

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

 

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

 

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databases, geological data,geophysical data, engineering data, seismic data, maps, interpretations andother technical information used in their businesses as presently conducted,subject to the limitations contained in the agreements governing the use of thesame, which limitations are customary for companies engaged in the business ofthe exploration and production of Hydrocarbons, with such exceptions as couldnot reasonably be expected to have a Material Adverse Effect.

 

(f)            For purposes ofdetermining any Default or Event of Default, each of the representations andwarranties in this Section 7.16 shall be deemed to have been made withoutqualification by this Section 7.16(f). Subject to the preceding sentence, each of the representations andwarranties in this Section 7.16 as to the Acquisition Properties is to theknowledge of the Borrower and its Subsidiaries.

 

Section 7.17           Maintenance ofProperties.  Except forsuch acts or failures to act as could not be reasonably expected to have aMaterial Adverse Effect, the Oil and Gas Properties (and Properties unitizedtherewith) have been maintained, operated and developed in a good andworkmanlike manner and in conformity with all Government Requirements and inconformity with the provisions of all leases, subleases or other contracts comprisinga part of the Hydrocarbon Interests and other contracts and agreements forminga part of the Oil and Gas Properties. Specifically in connection with the foregoing, except as could notreasonably be expected to have a Material Adverse Effect, (a) no Oil andGas Property is subject to having allowable production reduced below the fulland regular allowable (including the maximum permissible tolerance) because ofany overproduction (whether or not the same was permissible at the time) and (b) noneof the wells comprising a part of the Oil and Gas Properties (or Propertiesunitized therewith) is deviated from the vertical more than the maximumpermitted by Government Requirements, and such wells are, in fact, bottomedunder and are producing from, and the well bores are wholly within, the Oil andGas Properties (or in the case of wells located on Properties unitizedtherewith, such unitized Properties). All pipelines, wells, gas processing plants, platforms and othermaterial improvements, fixtures and equipment owned in whole or in part by theBorrower or any of its Subsidiaries that are necessary to conduct normaloperations are being maintained in a state adequate to conduct normaloperations, and with respect to such of the foregoing which are operated by theBorrower or any of its Subsidiaries, in a manner consistent with the Borrower’sor its Subsidiaries’ past practices (other than those the failure of which tomaintain in accordance with this Section 7.17 could not reasonably beexpect to have a Material Adverse Effect).

 

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

 

Section 7.19           Marketing ofProduction.  Except forcontracts listed and in effect on the date hereof on Schedule 7.19, andthereafter either disclosed in writing to the Administrative Agent or includedin the most recently delivered Reserve Report (with respect to all of whichcontracts the Borrower represents that it or its Subsidiaries are receiving aprice for all 

 

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

 

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

 

Section 7.21           Use of Loans.  The proceeds of the Loans shall be used tofinance the Acquisition and to pay related fees and expenses.  The Borrower and its Subsidiaries are notengaged principally, or as one of its or their important activities, in thebusiness of extending credit for the purpose, whether immediate, incidental orultimate, of buying or carrying margin stock (within the meaning of RegulationT, U or X of the Board).  No part of theproceeds of any Loan will be used for any purpose which violates the provisionsof Regulations T, U or X of the Board.

 

Section 7.22           Solvency.  After giving effect to the transactionscontemplated hereby, (a) the aggregate assets (after giving effect toamounts that could reasonably be received by reason of indemnity, offset, insuranceor any similar arrangement), at a fair valuation, of the Borrower and theGuarantors, taken as a whole, will exceed the aggregate Debt of the Borrowerand the Guarantors on a consolidated basis, as the Debt becomes absolute andmatures, (b) each of the Borrower and the Guarantors will not haveincurred or intended to incur, and will not believe that it will incur, Debtbeyond its ability to pay such Debt (after taking into account the timing andamounts of cash to be received by each of the Borrower and the Guarantors andthe amounts to be payable on or in respect of its liabilities, and givingeffect to amounts that could reasonably be received by reason of indemnity,offset, insurance or any similar arrangement) as such Debt becomes absolute andmatures and (c) each of the Borrower and the Guarantors will not have (andwill have no reason to believe that it will have thereafter) unreasonably smallcapital for the conduct of its business.

 

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

** **

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**ARTICLEVIIIAffirmative Covenants**

** **

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

 

Section 8.01           FinancialStatements; Other Information.  The Borrower will furnish to the AdministrativeAgent and each Lender:

 

(a)           AnnualFinancial Statements.  As soon asavailable, but in any event not later than 90 days after the end of each fiscalyear, Borrower’s audited consolidated balance sheet and related statements ofoperations, members’ equity and cash flows as of the end of and for such year,setting forth in each case in comparative form the figures for the previousfiscal year, all reported on by KPMG, LLP or independent public accountants ofrecognized national standing and reasonably acceptable to the AdministrativeAgent (without a “going concern” or like qualification or exception and withoutany qualification or exception as to the scope of such audit) to the effectthat such consolidated financial statements present fairly in all materialrespects the financial condition and results of operations of the Borrower andits Consolidated Subsidiaries on a consolidated basis in accordance with GAAPconsistently applied.

 

(b)           QuarterlyFinancial Statements.  As soon asavailable, but in any event not later than 45 days after the end of each of thefirst three fiscal quarters of each fiscal year of the Borrower, itsconsolidated balance sheet and related statements of operations, members’equity and cash flows as of the end of and for such quarter and the thenelapsed portion of the fiscal year, setting forth in each case in comparativeform the figures for the corresponding period or periods of (or, in the case ofthe balance sheet, as of the end of) the previous fiscal year, all certified bya Financial Officer as presenting fairly in all material respects the financialcondition and results of operations of the Borrower and its ConsolidatedSubsidiaries on a consolidated basis in accordance with GAAP consistentlyapplied, subject to normal year-end audit adjustments and the absence offootnotes.

 

(c)           Certificate ofFinancial Officer — Compliance.  Concurrently with any delivery of financialstatements under Section 8.01(a) or Section 8.01(b), acertificate of a Financial Officer in substantially the form of Exhibit Bhereto (i) certifying as to whether a Default has occurred and, if aDefault has occurred, specifying the details thereof and any action taken orproposed to be taken with respect thereto, (ii) setting forth reasonablydetailed calculations demonstrating compliance with Section 9.01 and (iii) statingwhether any change in GAAP or in the application thereof has occurred since theEffective Date and, if any such change has occurred, specifying the effect ofsuch change on the financial statements accompanying such certificate.

 

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

 

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agreements relating theretonot listed on Schedule 7.20, any margin required or supplied under any creditsupport document, and the counterparty to each such agreement.  To the extent the Borrower or a Subsidiarychanges the material terms of a Swap Agreement listed in the foregoingschedule, terminates any such Swap Agreement or enters into a new SwapAgreement which has the effect of creating an off-setting position, theBorrower will give the Lenders prompt written notice of such event if, withrespect to any commodity-price Swap Agreement, the product of (i) thenotional volumes of such commodity-price Swap Agreement times (ii) theexcess of (A) the strike or fixed rate payor price over (B) the “pricedeck” used in calculating the Total Reserve Value for the relevant commodities,exceeds in the aggregate during such period $50,000,000.

 

(e)           Certificate ofInsurer – Insurance Coverage.  Concurrently with any delivery of financialstatements under Section 8.01(a), a certificate of insurance coverage fromeach insurer with respect to the insurance required by Section 8.07, inform and substance satisfactory to the Administrative Agent, and, if requestedby the Administrative Agent or any Lender, all copies of the applicablepolicies.

 

(f)            OtherAccounting Reports.  Promptlyupon receipt thereof, a copy of each other report or letter submitted to theBorrower or any of its Subsidiaries by independent accountants in connectionwith any annual, interim or special audit made by them of the books of theBorrower or any such Subsidiary, and a copy of any response by the Borrower orany such Subsidiary to such letter or report.

 

(g)           SEC and OtherFilings; Reports to shareholders.  Promptly after the same become publiclyavailable, copies of all periodic and other reports, proxy statements and othermaterials filed by the Borrower or any Subsidiary with the SEC, or with anynational securities exchange, or distributed by the Borrower to itsshareholders generally, as the case may be;**provided, however, that the Borrower shall be deemed to have furnishedthe information required by this Section 8.01(g) if it shall havetimely made the same available on “EDGAR” and/or on its home page on theworldwide web (at the date of this Agreement located athttp://www.linnenergy.com); provided further, however, that if any Lender isunable to access EDGAR or the Borrower’s home page on the worldwide web,the Borrower agrees to provide such Lender with paper copies of the informationrequired to be furnished pursuant to this Section 8.01(g) promptlyfollowing notice from the Administrative Agent that such Lender has requestedsame.  Information required to bedelivered pursuant to this Section 8.01(g) shall be deemed to havebeen delivered on the date on which the Borrower provides notice to theAdministrative Agent that such information has been posted on “EDGAR” or theBorrower’s website or another website identified in such notice and accessibleby the Administrative Agent without charge (and the Borrower hereby agrees toprovide such notice)**.

 

(h)           Notices UnderMaterial Instruments.  Promptlyafter the furnishing thereof, copies of any financial statement, report ornotice furnished to or by any Person pursuant to the terms of any preferredstock designation, indenture, loan or credit or other similar agreement, otherthan this Agreement and not otherwise required to be furnished to the Lenderspursuant to any other provision of this Section 8.01.

 

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(i)            Lists ofPurchasers. Concurrently with the delivery of any Reserve Report to theAdministrative Agent pursuant to Section 8.12, a list of Personspurchasing Hydrocarbons from the Borrower and its Subsidiaries reasonablyexpected to account for at least 80% of the revenues resulting from the sale ofHydrocarbons produced from the Mortgaged Properties in the quarter followingthe “as of” date of such Reserve Report.

 

(j)            Notice of Salesof Oil and Gas Properties.  Inthe event the Borrower or any of its Subsidiaries intends to sell, transfer,assign or otherwise dispose of any Oil or Gas Properties included in the mostrecently delivered Reserve Report (or any Equity Interests in any Subsidiaryowning interests in such Oil and Gas Properties) during any period between twosuccessive dates on which the Total Reserve Value is determined in accordancewith Section 2.07 having a fair market value, individually or in theaggregate, in excess of $10,000,000, prior written notice of such disposition,the price thereof, the anticipated date of closing, and any other detailsthereof reasonably requested by the Administrative Agent or any Lender.

 

(k)           Notice ofCasualty Events.  Promptwritten notice, and in any event within three Business Days, of the occurrenceof any Casualty Event or the commencement of any action or proceeding thatcould reasonably be expected to result in a Casualty Event.

 

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

 

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

 

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

 

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

 

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(p)           AcquisitionNotices.  In the event that after theEffective Date:  (i) the Borrower isrequired or elects to purchase any of the Acquisition Properties which had beenexcluded from, or return any of the Acquisition Properties which had beenincluded in, the Acquisition Properties in accordance with the terms of theAcquisition Documents, (ii) the Borrower is required to honor anypreferential purchase right in respect of any Acquisition Property which hasnot been waived, (iii) any matter being disputed in accordance with theterms of the Acquisition Documents is resolved and (iv) the Borrowerreceives the draft and final statements setting forth the final calculation ofthe Adjusted Purchase Price (as defined therein) and showing the calculation ofeach adjustment, delivered to the Borrower pursuant to Section 14.1 of theAcquisition Documents, then, in each such case, the Borrower shall promptlygive the Administrative Agent notice in reasonable detail of such circumstancesand such copies of such documents, as applicable.

 

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

 

(r)            Other RequestedInformation.  Promptlyfollowing any request therefor, such other information regarding theoperations, business affairs and financial condition of the Borrower or any ofits Subsidiaries (including, without limitation, any Plan and any reports orother information required to be filed under ERISA), or compliance with theterms of this Agreement or any other Loan Document, as the Administrative Agentor any Lender may reasonably request.

 

Section 8.02           Notices ofMaterial Events.  TheBorrower will furnish to the Administrative Agent and each Lender, promptlyafter the Borrower obtains knowledge thereof, written notice of the following:

 

(a)           the occurrenceof any Default;

 

(b)           the filing orcommencement of, or the threat in writing of, any action, suit, investigation,arbitration or proceeding by or before any arbitrator or Governmental Authorityagainst or affecting the Borrower or any Subsidiary thereof, or any materialadverse development in any action, suit, proceeding, investigation orarbitration (whether or not previously disclosed to the Lenders), that, ineither case, if adversely determined, could reasonably be expected to result inliability in excess of $10,000,000;

 

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

 

(d)           any otherdevelopment that results in, or could reasonably be expected to result in, aMaterial Adverse Effect.

 

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Eachnotice delivered under this Section 8.02 shall be accompanied by astatement of a Responsible Officer setting forth the details of the event ordevelopment requiring such notice and any action taken or proposed to be takenwith respect thereto.

 

Section 8.03           Existence;Conduct of Business.  TheBorrower will, and will cause each of its Subsidiaries to, do or cause to bedone all things necessary to preserve, renew and keep in full force and effectits legal existence and the rights, licenses, permits, privileges andfranchises material to the conduct of its business and maintain, if necessary,its qualification to do business in each other jurisdiction in which any of itsOil and Gas Properties is located or the ownership of its Properties requiressuch qualification, except where the failure to so qualify could not reasonablybe expected to have a Material Adverse Effect; provided that the foregoingshall not prohibit any merger, consolidation, liquidation or dissolution permittedunder Section 9.12.

 

Section 8.04           Payment ofObligations.  TheBorrower will, and will cause each of its Subsidiaries to, pay its obligations,including Tax liabilities of the Borrower and all of its Subsidiaries beforethe same shall become delinquent or in default, except where (a) thevalidity or amount thereof is being contested in good faith by appropriateproceedings, (b) the Borrower or such Subsidiary has set aside on itsbooks adequate reserves with respect thereto in accordance with GAAP and (c) thefailure to make payment pending such contest could not reasonably be expectedto result in a Material Adverse Effect or result in the seizure or levy of anymaterial Property of the Borrower or any of its Subsidiaries.

 

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

 

Section 8.06           Operation andMaintenance of Properties.  TheBorrower will, and will cause each of its Subsidiaries to:

 

(a)           operate its Oiland Gas Properties and other material Properties or cause such Oil and GasProperties and other material Properties to be operated in a careful andefficient manner in accordance with the practices of the industry and incompliance with all applicable contracts and agreements and in compliance withall Governmental Requirements, including, without limitation, applicableproration requirements and Environmental Laws, and all applicable laws, rules andregulations of every other Governmental Authority from time to time constitutedto regulate the development and operation of its Oil and Gas Properties and theproduction and sale of Hydrocarbons and other minerals therefrom, except, ineach case, where the failure to comply could not reasonably be expected to havea Material Adverse Effect.

 

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

 

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(c)           promptly payand discharge, or make reasonable and customary efforts to cause to be paid anddischarged, all delay rentals, royalties, expenses and indebtedness accruingunder the leases or other agreements affecting or pertaining to its materialOil and Gas Properties and will do all other things necessary to keepunimpaired their material rights with respect thereto and prevent anyforfeiture thereof or material default thereunder.

 

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

 

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

 

Section 8.07           Insurance.  The Borrower will, and will cause each of itsSubsidiaries to, maintain, with financially sound and reputable insurancecompanies, insurance in such amounts and against such risks as are customarilymaintained by companies engaged in the same or similar businesses operating inthe same or similar locations.  The losspayable clauses or provisions in said insurance policy or policies insuring anyof the collateral for the Loans shall be endorsed in favor of and made payableto the Administrative Agent as its interests may appear and such policies shallname the Administrative Agent and the Lenders as “additional insureds” andprovide that the insurer will give at least 30 days prior notice of anycancellation to the Administrative Agent.

 

Section 8.08           Books andRecords; Inspection Rights.  The Borrower will, and will cause each of itsSubsidiaries to, keep proper books of record and account in which full, trueand correct entries are made of all dealings and transactions in relation toits business and activities.  TheBorrower will, and will cause each of its Subsidiaries to, permit anyrepresentatives designated by the Administrative Agent or any Lender, uponreasonable prior notice, to visit and inspect its Properties, to examine andmake extracts from its books and records, and to discuss its affairs, financesand condition with its officers and independent accountants, all at suchreasonable times and as often as reasonably requested.

 

Section 8.09           Compliance withLaws.  The Borrower will, and willcause each of its Subsidiaries to, comply with all laws, rules, regulations andorders of any Governmental Authority applicable to them or their Property,except where the failure to do so, individually or in the aggregate, could notreasonably be expected to result in a Material Adverse Effect.

 

Section 8.10           EnvironmentalMatters.

 

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

 

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on, under, about or from anyof the Borrower’s or its Subsidiaries’ Properties or any other Property to theextent caused by the Borrower’s or any of its Subsidiaries’ operations exceptin compliance with applicable Environmental Laws, the disposal or release ofwhich could reasonably be expected to have a Material Adverse Effect; (iii) timelyobtain or file, and shall cause each Subsidiary to timely obtain or file, allnotices, permits, licenses, exemptions, approvals, registrations or otherauthorizations, if any, required under applicable Environmental Laws to beobtained or filed in connection with the operation or use of the Borrower’s orits Subsidiaries’ Properties, which failure to obtain or file could reasonablybe expected to have a Material Adverse Effect; (iv) promptly commence anddiligently prosecute to completion, and shall cause each Subsidiary to promptlycommence and diligently prosecute to completion, any assessment, evaluation,investigation, monitoring, containment, cleanup, removal, repair, restoration,remediation or other remedial obligations (collectively, the “Remedial Work”)in the event any Remedial Work is required or reasonably necessary underapplicable Environmental Laws because of or in connection with the actual orsuspected past, present or future disposal or other release of any oil, oil andgas waste, hazardous substance or solid waste on, under, about or from any ofthe Borrower’s or its Subsidiaries’ Properties, which failure to commence anddiligently prosecute to completion could reasonably be expected to have aMaterial Adverse Effect; and (v) establish and implement, and shall causeeach Subsidiary to establish and implement, such reasonable policies ofenvironmental audit and compliance as may be reasonably necessary tocontinuously determine and assure that the Borrower’s and its Subsidiaries’obligations under this Section 8.10(a) are timely and fullysatisfied, which failure to establish and implement could reasonably beexpected to have a Material Adverse Effect.

 

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

 

(c)           The Borrowerwill, and will cause each Subsidiary to, provide environmental audits and testsin accordance with American Society of Testing Materials standards upon requestby the Administrative Agent and the Lenders and no more than once per year inthe absence of any Event of Default (or as otherwise reasonably required to beobtained by the Administrative Agent or the Lenders by any GovernmentalAuthority), in connection with any future acquisitions of material Oil and GasProperties or other material Properties.

 

Section 8.11           FurtherAssurances.

 

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

 

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the Indebtedness, or tocorrect any omissions in this Agreement or the Security Instruments, or tostate more fully the obligations secured therein, or to perfect, protect orpreserve any Liens created pursuant to this Agreement or any of the Security Instrumentsor the priority thereof, or to make any recordings, file any notices or obtainany consents, all as may be reasonably necessary or appropriate, in the solediscretion of the Administrative Agent, in connection therewith.

 

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

 

Section 8.12          Reserve Reports.

 

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

 

(b)           With the delivery ofeach Reserve Report, the Borrower shall provide to the Administrative Agent andthe Lenders a certificate from a Responsible Officer certifying that in allmaterial respects: (i) the information provided by the Borrower inconnection with the preparation of such Reserve Report and any otherinformation delivered in connection therewith by the Borrower is true andcorrect, and any projections based upon such information have been prepared ingood faith based upon assumptions believed by the Borrower to be reasonable,subject to uncertainties inherent in all projections, (ii) the Borrower orits Subsidiaries owns good and defensible title to the Oil and Gas Propertiesevaluated in such Reserve Report and such Properties are free of all Liensexcept for Liens permitted by Section 9.03, (iii) except as set forthon an exhibit to the certificate, on a net basis there are no gas imbalances,take or pay or other prepayments in excess of the volume specified in Section 7.18with respect to their Oil and Gas Properties evaluated in such Reserve Reportthat would require the Borrower or any of its Subsidiaries to deliverHydrocarbons either generally or produced from such Oil and Gas Properties atsome future time without then or thereafter receiving full payment therefor, (iv) noneof their Oil and Gas Properties have been sold since the date of the lastReserve Report except as set forth on an exhibit to the certificate, whichcertificate shall list all of its Oil and Gas Properties sold and in suchdetail as reasonably required by the Administrative Agent, (v) attached tothe certificate is a list of all marketing agreements entered into subsequentto the later 

 

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

 

Section 8.13           Title Information.

 

(a)           On or before thedelivery to the Administrative Agent and the Lenders of each Reserve Reportrequired by Section 8.12(a), to the extent requested by the AdministrativeAgent, the Borrower will deliver title information in form and substancereasonably acceptable to the Administrative Agent covering enough of the Oiland Gas Properties evaluated by such Reserve Report that were not included inthe immediately preceding Reserve Report, so that the Administrative Agentshall have received together with title information previously delivered to theAdministrative Agent, reasonably satisfactory title information on such portionof the Oil and Gas Properties evaluated by such Reserve Report, not to exceed80% of the total value thereof, as may be reasonably requested by theAdministrative Agent.

 

(b)           If the Borrower has provided titleinformation for additional Properties under Section 8.13(a), the Borrowershall, within 60 days of notice from the Administrative Agent that titledefects or exceptions exist with respect to such additional Properties, either (i) cureany such title defects or exceptions (including defects or exceptions as topriority) which are not permitted by Section 9.03 raised by suchinformation, (ii) substitute acceptable Mortgaged Properties with no titledefects or exceptions except for Excepted Liens (other than Excepted Liensdescribed in clauses (e), (g) and (h) of such definition) having anequivalent value or (iii) deliver title information in form and substancereasonably acceptable to the Administrative Agent so that the AdministrativeAgent shall have received, together with title information previously deliveredto the Administrative Agent, reasonably satisfactory title information on suchportion of the Oil and Gas Properties evaluated by such Reserve Report, not toexceed 80% of the total value thereof, as may be reasonably requested by theAdministrative Agent.

 

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

 

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Section 8.14           AdditionalCollateral; Additional Guarantors.

 

(a)           In connection with the delivery ofeach Reserve Report, the Borrower shall review the Reserve Report and the listof current Mortgaged Properties (as described in Section 8.12(b)(vi)) toascertain whether the Mortgaged Properties represent at least 80% of the totalvalue of the Oil and Gas Properties evaluated in the most recently completedReserve Report after giving effect to exploration and production activities,acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 80%of such total value, then the Borrower shall, and shall cause its Subsidiariesto, grant, within sixty (60) days of the delivery of the certificatecontemplated by Section 8.12(b), to the Administrative Agent or itsdesignee as security for the Indebtedness a Lien interest (subject to a Lienunder the Senior Revolving Credit Documents and provided the Excepted Liens ofthe type described in clauses (a) to (d) and (f) of thedefinition thereof may exist, but subject to the provisos at the end of suchdefinition) on additional Oil and Gas Properties not already subject to a Lienof the Security Instruments such that after giving effect thereto, theMortgaged Properties will represent at least 80% of such total value.  All such Liens will be created and perfectedby and in accordance with the provisions of deeds of trust, security agreementsand financing statements or other Security Instruments, all in form andsubstance reasonably satisfactory to the Administrative Agent or its designeeand in sufficient executed (and acknowledged where necessary or appropriate)counterparts for recording purposes.  Inorder to comply with the foregoing, if any Subsidiary places a Lien on its Oiland Gas Properties and such Subsidiary is not a Guarantor, then it shall becomea Guarantor and comply with Section 8.14(b).

 

(b)           If (i) the Borrower determinesthat any Subsidiary is a Material Domestic Subsidiary or (ii) any DomesticSubsidiary incurs or guarantees any Debt other than the Indebtedness, and ineither case, such Subsidiary is not already a Guarantor, then the Borrowershall promptly cause such Subsidiary to guarantee the Indebtedness pursuant tothe Guaranty Agreement.  In connectionwith any such guaranty, the Borrower shall, or shall cause such Subsidiary to, (A) executeand deliver a supplement to the Guaranty Agreement executed by such Subsidiary,(B) pledge all of the Equity Interests of such Subsidiary (including,without limitation, delivery of original stock certificates evidencing theEquity Interests of such Subsidiary, together with an appropriate undated stockpowers for each certificate duly executed in blank by the registered ownerthereof to the Administrative Agent or if the Senior Revolving Credit Agreementis then in effect, to the administrative agent thereunder) and (C) executeand deliver such other additional closing documents, certificates and legalopinions as shall reasonably be requested by the Administrative Agent or itsdesignee.

 

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

 

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

 

Section 8.15           ERISA Compliance.  The Borrower will promptly furnish, and willcause its Subsidiaries and any ERISA Affiliate to promptly furnish, to theAdministrative Agent (a) immediately upon becoming aware of the occurrenceof any ERISA Event, a written notice signed by the President or the principalFinancial Officer of the Borrower, its Subsidiaries or the ERISA Affiliate, asthe case may be, specifying the nature thereof, what action the Borrower, itsSubsidiaries or the ERISA Affiliate is taking or proposes to take with respectthereto, and, if then known, any action taken or proposed by the InternalRevenue Service, the Department of Labor or the PBGC with respect thereto, and (b) immediatelyupon receipt thereof, copies of any notice of the PBGC’s intention to terminateor to have a trustee appointed to administer any Plan.

 

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

 

Section 8.17           Swap Agreements.  Within 30 days of theEffective Date, the Borrower shall enter into Swap Agreements withrespect to the Acquisition Properties for volumes and prices satisfactory tothe Administrative Agent and the Borrower shall neither assign, terminate orunwind any such Swap Agreements nor sell any Swap Agreements if the effect ofsuch action (when taken together with any other Swap Agreements executedcontemporaneously with the taking of such action) would have the effect ofcanceling its positions under such Swap Agreements required hereby.

 

Section 8.18           Permanent Securities.  The Borrower shall use commerciallyreasonable efforts to prepare a registration statement or a Rule 144Aoffering memorandum relating to the Permanent Securities, and provide to theArrangers a complete initial draft of such document (including the financialstatements to be included therein) in each case, no later than 13 months afterthe Effective Date, provided that the Borrower shall not be required to issueor sell Permanent Securities pursuant to such registration statement oroffering memorandum.  The Borrower shallengage and provide evidence of such engagement to the Administrative Agent, andat all times retain an Investment Bank (or promptly engage another InvestmentBank if either 

 

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party disengages from suchrelationship) for the purpose of assisting the Borrower using commerciallyreasonable efforts to issue, sell or place the Permanent Securities, the NetCash Proceeds of which shall equal or exceed the outstanding principal balanceof the Loans, interest thereon and all fees and expenses required to be paidunder this Agreement and be available to repay this Agreement on or before theMaturity Date.

 

**ARTICLEIXNegative Covenants**

** **

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

 

Section 9.01           FinancialCovenants.

 

(a)           Ratio of EBITDAto Interest Expense.  TheBorrower will not, as of the last day of any fiscal quarter, commencing withthe fiscal quarter ending March 31, 2008, permit its ratio of EBITDA forthe period of four fiscal quarters then ended to Interest Expense for suchperiod to be less than 2.5 to 1.0.  Forpurposes of this Section 9.01(a), the calculation of EBITDA and InterestExpense shall be as follows: (x) for the fiscal quarter ending March 31,2008, EBITDA and Interest Expense for the two quarter period ending on suchdate, each multiplied by two, (y) for the fiscal quarter ending June 30,2008, EBITDA and Interest Expense for the three quarter period ending on suchdate, each multiplied by 4/3 and (z) for each fiscal quarter ending on orafter September 30, 2008, EBITDA and Interest Expense for the period offour fiscal quarters then ending.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)           Debt consisting of the DominionProduction Payment or any unsecured guarantee by the Borrower or any Guarantorin respect thereto.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           Liens securing the payment of anyIndebtedness.

 

(b)           Excepted Liens.

 

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

 

(d)           The Dominion Production Payment.

 

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

 

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

 

(g)           Liens on Property not constitutingcollateral for the Indebtedness and not otherwise permitted by the foregoingclauses of this Section 9.03; provided that the aggregate principal orface amount of all Debt secured under this Section 9.03(g) shall notexceed $10,000,000 at any time.

 

(h)           Extensions, renewals or replacementsof any of the Liens permitted in clauses (a) through (g) so long as (i) theprincipal amount of the Debt or obligation secured thereby is no greater thanthe principal amount of such Debt or obligation at the time such Lien waspermitted hereunder except for increases in an amount equal to a reasonablepremium or other reasonable amount paid, and fees and expenses reasonablyincurred, in connection with such extension, renewal, refinancing, orreplacement and in an amount equal to any existing commitments unutilizedthereunder, (ii) any such extension, renewal or replacement Lien islimited to the property originally encumbered thereby, and (iii) anyrenewal or extension of the Debt or obligations secured or benefited thereby ispermitted by Section 9.02.

 

Section 9.04           Dividends.  The Borrower will not, and will not permitany of its Subsidiaries to, declare or make, or agree to pay or make, directlyor indirectly, any Restricted Payment, return any capital to its stockholdersor make any distribution of their Property to their respective Equity Interestholders, except (i)  the Borrower may declare and pay dividends ordistributions with respect to its Equity Interests payable solely in additionalshares of its Equity Interests (other than Disqualified Capital Stock), (ii) Subsidiariesmay declare and pay dividends 

 

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

 

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

 

(a)           Investmentsreflected in the Financial Statements.

 

(b)           accountsreceivable arising in the ordinary course of business.

 

(c)           directobligations of the United States or any agency thereof, or obligationsguaranteed by the United States or any agency thereof, in each case maturingwithin one year from the date of creation thereof.

 

(d)           commercialpaper maturing within one year from the date of creation thereof rated A2 or P2by S&P or Moody’s.

 

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

 

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

 

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

 

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

 

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processing and relatedactivities, including transportation, treatment and storage, (ii) theinterest in such venture is acquired in the ordinary course of business and onfair and reasonable terms and (iii) such venture interests acquired andcapital contributions made (valued as of the date such interest was acquired orthe contribution made) do not exceed, in the aggregate at any time outstandingan amount equal to $10,000,000.

 

(i)            subject to the limits in Section 9.06,Investments, including the Acquisition, in direct ownership interests inadditional Oil and Gas Properties and gas gathering systems related thereto orrelated to farm-out, farm-in, joint operating, joint venture or area of mutualinterest agreements, gathering systems, pipelines or other similar arrangementswhich are usual and customary in the oil and gas exploration and productionbusiness located within the geographic boundaries of the United States ofAmerica.

 

(j)            loans or advances to employees,officers or directors in the ordinary course of business of the Borrower or anyof its Subsidiaries, in each case only as permitted by applicable law,including Section 402 of the Sarbanes Oxley Act of 2002, but in any eventnot to exceed $1,000,000 in the aggregate at any time.

 

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

 

(l)            Any guarantee permitted under Section 9.02.

 

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

 

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

 

Section 9.08           Proceeds of Notes.  The Borrower will not permit the proceeds ofthe Notes to be used for any purpose other than those permitted by Section 7.21.  Neither the Borrower nor any Person acting onbehalf of the Borrower has taken or will take any action which might cause anyof the Loan Documents to violate Regulations T, U or X or any other regulationof the Board or to violate Section 7 of the Securities Exchange Act of1934 or any rule 

 

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

 

Section 9.09           ERISACompliance.  Except aswould not reasonably be expected, individually or in the aggregate, to have aMaterial Adverse Effect, the Borrower and its Subsidiaries will not at anytime:

 

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

 

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

 

(c)           acquire, orpermit any ERISA Affiliate to acquire, an interest in any Person that causessuch Person to become an ERISA Affiliate with respect to the Borrower or any ofits Subsidiaries or with respect to any ERISA Affiliate of the Borrower or anyof its Subsidiaries if such Person sponsors, maintains or contributes to, or atany time in the six-year period preceding such acquisition has sponsored,maintained, or contributed to, (i) any Multiemployer Plan, or (ii) anyother Plan that is subject to Title IV of ERISA under which the actuarialpresent value of the benefit liabilities under such Plan exceeds the currentvalue of the assets (computed on a plan termination basis in accordance withTitle IV of ERISA) of such Plan allocable to such benefit liabilities.

 

Section 9.10           Sale orDiscount of Receivables. Except for receivables obtained by the Borrower or any of itsSubsidiaries out of the ordinary course of business or the settlement of jointinterest billing accounts in the ordinary course of business or discountsgranted to settle collection of accounts receivable or the sale of defaultedaccounts arising in the ordinary course of business in connection with thecompromise or collection thereof and not in connection with any financingtransaction, neither the Borrower nor any of its Subsidiaries will discount orsell (with or without recourse) any of its notes receivable or accountsreceivable.

 

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

 

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

 

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and assignments inconnection with such farmouts; (c) the sale or transfer of equipment thatis no longer necessary for the business of the Borrower or such Subsidiary oris replaced by equipment of at least comparable value and use; (d) othersales or dispositions (including Casualty Events) of Oil and Gas Properties orany interest therein or Subsidiaries owning Oil and Gas Properties; providedthat (i) 100% of the consideration received in respect of such other saleor disposition shall be cash, (ii) the consideration received in respectof such other sale or disposition shall be equal to or greater than the fairmarket value of the Oil and Gas Property, interest therein or Subsidiarysubject of such other sale or disposition (as reasonably determined by theboard of directors of the Borrower and, if requested by the AdministrativeAgent, the Borrower shall deliver a certificate of a Responsible Officer of theBorrower certifying to that effect), (iii) if such other sale ordisposition of Oil and Gas Property or Subsidiary owning Oil and Gas Propertiesincluded in the most recently delivered Reserve Report during any periodbetween two successive dates on which the Total Reserve Value is determined inaccordance with Section 2.07 has a fair market value (as determined by theAdministrative Agent), individually or in the aggregate, in excess of$25,000,000, the Total Reserve Value shall be reduced, effective immediatelyupon such sale or disposition, by an amount equal to the Total Reserve Value ofsuch Property as calculated pursuant to the most recently delivered ReserveReport and (iv) if any such other sale or disposition is of a Subsidiaryowning Oil and Gas Properties, such other sale or disposition shall include allthe Equity Interests of such Subsidiary; and (e) sales and otherdispositions of Properties not regulated by Section 9.12(a) to (d) havinga fair market value not to exceed $10,000,000 during any 12-month period.

 

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

 

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

 

Section 9.15           Subsidiaries.  The Borrower shall have no Subsidiaries otherthan Wholly-Owned Subsidiaries.  TheBorrower shall not, and shall not permit its Subsidiaries to, create or acquireany additional Subsidiary unless the Borrower gives written notice to theAdministrative Agent of such creation or acquisition and complies with Section 8.14(b).  The Borrower shall not, and shall not permitany of its Subsidiaries to, sell, assign or otherwise dispose of any EquityInterests in any of its Subsidiaries. The Borrower shall have no Foreign Subsidiaries.

 

Section 9.16           Negative Pledge Agreements;Dividend Restrictions.  Neither theBorrower nor any of its Subsidiaries will create, incur, assume or suffer toexist any contract, 

 

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agreement or understanding(other than this Agreement, the Security Instruments and the Senior RevolvingCredit Documents) that in any way prohibits or restricts the granting,conveying, creation or imposition of any Lien on any of its Property in favorof the Administrative Agent and the Lenders or restricts any Subsidiary frompaying dividends or making distributions to the Borrower or any Guarantor, orwhich requires the consent of or notice to other Persons in connectiontherewith; provided, however, that the preceding  restrictions will not apply to encumbrancesor restrictions arising under or by reason of (1) the Dominion ProductionPayment but only on the Oil and Gas Property subject thereto, (2) anyleases (other than leases of Oil and Gas Properties) or licenses or similarcontracts as they affect any Property or Lien subject to such lease or license,(3) any restriction with respect to a Subsidiary imposed pursuant to anagreement entered into for the direct or indirect sale or disposition of all orsubstantially all the equity or Property of such Subsidiary (or the Propertythat is subject to such restriction) pending the closing of such sale ordisposition, (4) customary provisions with respect to the distribution ofProperty in joint venture agreements or (5) Capital Leases permitted underSection 9.02(g), but then only on the Property subject of such CapitalLeases.

 

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

 

Section 9.18           Swap Agreements.  Neither the Borrower nor any of itsSubsidiaries will enter into any Swap Agreements with any Person other than (a) SwapAgreements in respect of commodities (i) with an Approved Counterparty, (ii) thenotional volumes for which (when aggregated with other commodity SwapAgreements then in effect other than basis differential swaps on volumesalready hedged pursuant to other Swap Agreements) do not exceed, as of the datesuch Swap Agreement is executed, 85% of the reasonably anticipated projectedproduction from Proved Reserves for each month during the period during whichsuch Swap Agreement is in effect for each of crude oil and natural gas,calculated separately, for the remainder of the calendar year plus the next twofull calendar years succeeding the execution of such Swap Agreement and 70% ofthe reasonably anticipated projected production from Proved Reserves for each monthduring the period during which such Swap Agreement is in effect for each ofcrude oil and natural gas, calculated separately, for each month thereafter,and (iii) the notional volumes for which do not exceed the current netmonthly production (regardless of projected production levels) at the time suchSwap Agreement is executed, calculated separately for each of crude oil andnatural gas, provided, that the foregoing shall not prevent the Borrower fromentering into forward agreements in respect of commodity Swap Agreements inrespect of future projected volumes from Oil and Gas Properties subject to theDominion Production Payment, so long as the notional volumes under such forwardagreements do not exceed the reasonably anticipated net monthly production forall calculation periods under such forward agreements, calculated separatelyfor each of crude oil and natural gas, and (b) Swap Agreements in respectof interest rates with an Approved Counterparty, which effectively convertinterest rates from floating to fixed, the notional amounts of which (whenaggregated with all other Swap Agreements of the Borrower and its Subsidiariesthen in effect effectively converting interest 

 

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

 

Section 9.19           Tax Status asPartnership.  TheBorrower shall not alter its status as a partnership for purposes of UnitedStates Federal Income taxes.

 

Section 9.20           AcquisitionDocuments.  TheBorrower will not, and will not permit any of its Subsidiaries to, amend,modify or supplement any of the Acquisition Documents if the effect thereofcould reasonably be expected to have a Material Adverse Effect (and providedthat the Borrower promptly furnishes to the Administrative Agent a copy of suchamendment, modification or supplement).

 

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

 

**ARTICLEXEvents of Default; Remedies**

** **

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

 

(a)           the Borrowershall fail to pay any principal of any Loan when and as the same shall becomedue and payable, whether at the due date thereof or at a date fixed forprepayment thereof or otherwise.

 

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

 

(c)           anyrepresentation or warranty made or deemed made by or on behalf of the Borroweror any of its Subsidiaries in or in connection with any Loan Document or anyamendment or modification of any Loan Document or waiver under such LoanDocument, or in any report, certificate, financial statement or other documentfurnished pursuant to or in connection with any Loan Document or any amendmentor modification thereof or waiver thereunder, shall prove to have beenincorrect when made or deemed made.

 

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

 

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(e)           the Borrower or any of itsSubsidiaries shall fail to observe or perform any covenant, condition oragreement contained in this Agreement (other than those specified in Section 10.01(a),Section 10.01(b) or Section 10.01(d)) or any other LoanDocument, and such failure shall continue unremedied for a period of 30 daysafter the earlier to occur of (i) notice thereof from the AdministrativeAgent to the Borrower (which notice will be given at the request of any Lender)or (ii) a Responsible Officer of the Borrower or any of its Subsidiariesotherwise becoming aware of such default.

 

(f)            the Borrower or any of itsSubsidiaries shall fail to make any payment (whether of principal or interestand regardless of amount) in respect of any Material Indebtedness, when and asthe same shall become due and payable (after giving effect to any applicablenotice and cure period).

 

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

 

(h)           any event or condition occurs (aftergiving effect to any notice or cure period) that results in the SeniorRevolving Credit Notes becoming due prior to their scheduled maturity orrequires the Borrower or any of its Subsidiaries to make an offer in respectthereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

(o)           a Change inControl shall occur.

 

Section 10.02         Remedies.

 

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

 

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(b)           In the case of the occurrence of anEvent of Default, the Administrative Agent and the Lenders will have all otherrights and remedies available at law and equity.

 

(c)           All proceeds realized from theliquidation or other disposition of collateral or otherwise received aftermaturity of the Notes, whether by acceleration or otherwise, shall beapplied:  *first*, to reimbursement of expenses and indemnities providedfor in this Agreement and the Security Instruments; *second*, to accrued interest on the Notes; *third*, to fees; *fourth*, pro rata to principal outstanding on the Notes; *fifth*, to any other Indebtedness; and anyexcess shall be paid to the Borrower or as otherwise required by anyGovernmental Requirement.

 

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

 

**ARTICLEXIThe Administrative Agent**

** **

Section 11.01         Appointment; Powers.  Each of the Lenders hereby irrevocablyappoints the Administrative Agent as its agent and authorizes theAdministrative Agent to take such actions on its behalf and to exercise suchpowers as are delegated to the Administrative Agent by the terms hereof and theother Loan Documents, together with such actions and powers as are reasonablyincidental thereto.

 

Section 11.02         Duties and Obligations ofAdministrative Agent.  TheAdministrative Agent shall have no duties or obligations except those expresslyset forth in the Loan Documents.  Withoutlimiting the generality of the foregoing, (a) the Administrative Agentshall not be subject to any fiduciary or other implied duties, regardless ofwhether a Default has occurred and is continuing (the use of the term “agent”herein and in the other Loan Documents with reference to the AdministrativeAgent is not intended to connote any fiduciary or other implied (or express)obligations arising under agency doctrine of any applicable law; rather, suchterm is used merely as a matter of market custom, and is intended to create orreflect only an administrative relationship between independent contractingparties), (b) the Administrative Agent shall have no duty to take anydiscretionary action or exercise any discretionary powers, except as providedin Section 11.03, and (c) except as expressly set forth herein, theAdministrative Agent shall have no duty to disclose, and shall not be liablefor the failure to disclose, any information relating to the Borrower or any ofits Subsidiaries that is 

 

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communicated to or obtainedby the bank serving as Administrative Agent or any of its Affiliates in anycapacity.  The Administrative Agent shallbe deemed not to have knowledge of any Default unless and until written noticethereof is given to the Administrative Agent by the Borrower or a Lender, andshall not be responsible for or have any duty to ascertain or inquire into (i) anystatement, warranty or representation made in or in connection with thisAgreement or any other Loan Document, (ii) the contents of anycertificate, report or other document delivered hereunder or under any otherLoan Document or in connection herewith or therewith, (iii) theperformance or observance of any of the covenants, agreements or other terms orconditions set forth herein or in any other Loan Document, (iv) thevalidity, enforceability, effectiveness or genuineness of this Agreement, anyother Loan Document or any other agreement, instrument or document, (v) thesatisfaction of any condition set forth in ARTICLE VI or elsewhere herein,other than to confirm receipt of items expressly required to be delivered tothe Administrative Agent, (vi) the existence, value, perfection orpriority of any collateral security or the financial or other condition of theBorrower and its Subsidiaries or any other obligor or guarantor, or (vii) anyfailure by the Borrower or any other Person (other than itself) to perform anyof its obligations hereunder or under any other Loan Document or theperformance or observance of any covenants, agreements or other terms orconditions set forth herein or therein. For purposes of determining compliance with the conditions specified inARTICLE VI, each Lender shall be deemed to have consented to, approved oraccepted or to be satisfied with, each document or other matter requiredthereunder to be consented to or approved by or acceptable or satisfactory to aLender unless the Administrative Agent shall have received written notice fromsuch Lender prior to the proposed closing date specifying its objectionthereto.

 

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

 

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Documentation Agents shallhave no obligation to perform any act in respect thereof.  No Agent shall be liable for any action takenor not taken by it with the consent or at the request of the Majority Lendersor the Lenders (or such other number or percentage of the Lenders as shall benecessary under the circumstances as provided in Section 12.02), andotherwise the Administrative Agent shall not be liable for any action taken ornot taken by it hereunder or under any other Loan Document or under any otherdocument or instrument referred to or provided for herein or therein or in connectionherewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its owngross negligence or willful misconduct.

 

Section 11.04         Reliance by Agent.  Each Agent shall be entitled to rely upon,and shall not incur any liability for relying upon, any notice, request,certificate, consent, statement, instrument, document or other writing believedby it to be genuine and to have been signed or sent by the proper Person.  Each Agent also may rely upon any statementmade to it orally or by telephone and believed by it to be made by the properPerson, and shall not incur any liability for relying thereon and each of theBorrower and the Lenders hereby waives the right to dispute such Agent’s recordof such statement, except in the case of gross negligence or willful misconductby such Agent.  Each Agent may consultwith legal counsel (who may be counsel for the Borrower), independentaccountants and other experts selected by it, and shall not be liable for anyaction taken or not taken by it in accordance with the advice of any suchcounsel, accountants or experts.  TheAgents may deem and treat the payee of any Note as the holder thereof for allpurposes hereof unless and until a written notice of the assignment or transferthereof permitted hereunder shall have been filed with the AdministrativeAgent.

 

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

 

Section 11.06         Resignation or Removal of Agents.  Subject to the appointment and acceptance ofa successor Agent as provided in this Section 11.06, any Agent may resignat any time by notifying the Lenders and the Borrower, and any Agent may beremoved at any time with or without cause by the Majority Lenders.  Upon any such resignation or removal, theMajority Lenders shall have the right, in consultation with the Borrower, toappoint a successor.  If no successorshall have been so appointed by the Majority Lenders and shall have acceptedsuch appointment within 30 days after the retiring Agent gives notice of itsresignation or removal of the retiring Agent, then the retiring Agent may, onbehalf of the Lenders, appoint a successor Agent.  Upon the acceptance of its appointment asAgent hereunder by a successor, such successor shall succeed to and becomevested with all the rights, powers, privileges and duties of the retiringAgent, and the retiring Agent shall be discharged from its duties andobligations hereunder.  The fees payableby the Borrower to a successor Agent shall be the same as those payable to itspredecessor unless otherwise agreed between the Borrower and suchsuccessor.  After the Agent’s resignationhereunder, the provisions of this ARTICLE XI and 

 

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Section 12.03 shallcontinue in effect for the benefit of such retiring Agent, its sub-agents andtheir respective Related Parties in respect of any actions taken or omitted tobe taken by any of them while it was acting as Agent.

 

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

 

Section 11.08         No Reliance.

 

(a)           Each Lenderacknowledges that it has, independently and without reliance upon theAdministrative Agent, any other Agent or any other Lender and based on suchdocuments and information as it has deemed appropriate, made its own creditanalysis and decision to enter into this Agreement and each other Loan Documentto which it is a party.  Each Lender alsoacknowledges that it will, independently and without reliance upon theAdministrative Agent, any other Agent or any other Lender and based on suchdocuments and information as it shall from time to time deem appropriate,continue to make its own decisions in taking or not taking action under orbased upon this Agreement, any other Loan Document, any related agreement orany document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to theperformance or observance by the Borrower or any of its Subsidiaries of thisAgreement, the Loan Documents or any other document referred to or provided forherein or to inspect the Properties or books of the Borrower or itsSubsidiaries.  Except for notices,reports and other documents and information expressly required to be furnishedto the Lenders by the Administrative Agent hereunder, no Agent and no Arrangershall have any duty or responsibility to provide any Lender with any credit orother information concerning the affairs, financial condition or business ofthe Borrower (or any of its Affiliates) which may come into the possession ofsuch Agent or any of its Affiliates.  Inthis regard, each Lender acknowledges that Vinson & Elkins L.L.P. isacting in this transaction as special counsel to the administrative agent andarranger of the Senior Revolving Credit Agreement only in respect of the SeniorRevolving Credit Agreement, except to the extent otherwise expressly stated inany legal opinion or any Loan Document. Each other party hereto will consult with its own legal counsel to theextent that it deems necessary in connection with the Loan Documents and thematters contemplated therein.

 

(b)           The Lendersacknowledge that the Administrative Agent and the Arrangers are acting solelyin administrative capacities with respect to the structuring and syndication ofthis facility and have no duties, responsibilities or liabilities under thisAgreement and the other Loan Documents other than their administrative duties,responsibilities and liabilities specifically as set forth in the LoanDocuments and in their capacity as Lenders hereunder.  In structuring, arranging or syndicating thisfacility, each Lender acknowledges that the Administrative Agent and/orArrangers may be agents or lenders under these Notes, the Senior RevolvingCredit Notes, other loans or other securities and waives any existing or futureconflicts of interest associated with the their role in such other debtinstruments.  If in its administration ofthis facility or any other debt instrument, the Administrative Agent determines(or is given written notice by any Lender) that a conflict exists, then itshall eliminate such 

 

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conflict within 90 days orresign pursuant to Section 11.06 and shall have no liability for actiontaken or not taken, other than actions taken or not taken which representAdministrative Agent’s gross negligence or willful misconduct, while suchconflict existed.

 

Section 11.09         Administrative Agent May FileProofs of Claim.  In case of thependency of any receivership, insolvency, liquidation, bankruptcy,reorganization, arrangement, adjustment, composition or other judicialproceeding relative to the Borrower or any of its Subsidiaries, theAdministrative Agent (irrespective of whether the principal of any Loan shallthen be due and payable as herein expressed or by declaration or otherwise andirrespective of whether the Administrative Agent shall have made any demand onthe Borrower) shall be entitled and empowered, by intervention in suchproceeding or otherwise:

 

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

 

(b)           to collect and receive any monies orother property payable or deliverable on any such claims and to distribute thesame;

 

andany custodian, receiver, assignee, trustee, liquidator, sequestrator or othersimilar official in any such judicial proceeding is hereby authorized by eachLender to make such payments to the Administrative Agent and, in the event thatthe Administrative Agent shall consent to the making of such payments directlyto the Lenders, to pay to the Administrative Agent any amount due for thereasonable compensation, expenses, disbursements and advances of theAdministrative Agent and its agents and counsel, and any other amounts due theAdministrative Agent under Section 12.03.

 

Nothingcontained herein shall be deemed to authorize the Administrative Agent toauthorize or consent to or accept or adopt on behalf of any Lender any plan ofreorganization, arrangement, adjustment or composition affecting theIndebtedness or the rights of any Lender or to authorize the AdministrativeAgent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 11.10         Authority ofAdministrative Agent to Release Collateral and Liens.  Each Lender hereby authorizes theAdministrative Agent to release any collateral that is permitted to be sold orreleased pursuant to the terms of the Loan Documents.  Each Lender hereby authorizes theAdministrative Agent to execute and deliver to the Borrower, at the Borrower’ssole cost and expense, any and all releases of Liens, termination statements,assignments or other documents reasonably requested by the Borrower inconnection with any sale or other disposition of Property to the extent suchsale or other disposition is permitted by the terms of Section 9.12 or isotherwise authorized by the terms of the Loan Documents.

 

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

 

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Agreement and the other LoanDocuments other than their duties, responsibilities and liabilities in theirindividual capacity as Lenders hereunder to the extent they are a party to thisAgreement as a Lender.

 

**ARTICLEXIIMiscellaneous**

** **

Section 12.01                          Notices.

 

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

 

(i)                                     if to theBorrower, to it at

 

LinnEnergy, LLC

600Travis Street, Suite 5100

Houston,TX 77002

 

Attention:Kolja Rockov

Telephone:281-840-4169

Fax:281-840-4189

E-Mail:kr@linnenergy.com

 

with acopy to:

 

LinnEnergy, LLC

600Travis Street, Suite 5100

Houston,TX 77002

 

Attention:  Charlene A. Ripley

Telephone:281-840-4119

Fax:  281-840-4180

E-mail:cripley@linnenergy.com

 

(ii)                                  if to theAdministrative Agent, to it at

 

525Washington Blvd., 8th floor

Jersey City,New Jersey 07310

Attention:Dina Wilson, Loan Assistant

Telecopy:  201-850-4020

 

with acopy to the Administrative Agent at:

 

1200Smith Street, Suite 3100

Houston,Texas  77002

Attention:  Betsy Jocher

 

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Telecopy:713-659-6915

 

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

 

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

 

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

 

Section 12.02         Waivers;Amendments.

 

(a)           No failure onthe part of the Administrative Agent, any other Agent or any Lender to exerciseand no delay in exercising, and no course of dealing with respect to, anyright, power or privilege, or any abandonment or discontinuance of steps toenforce such right, power or privilege, under any of the Loan Documents shalloperate as a waiver thereof, nor shall any single or partial exercise of anyright, power or privilege under any of the Loan Documents preclude any other orfurther exercise thereof or the exercise of any other right, power orprivilege.  The rights and remedies ofthe Administrative Agent, any other Agent and the Lenders hereunder and underthe other Loan Documents are cumulative and are not exclusive of any rights orremedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Documentor consent to any departure by the Borrower therefrom shall in any event beeffective unless the same shall be permitted by Section 12.02(b), and thensuch waiver or consent shall be effective only in the specific instance and forthe purpose for which given.  Withoutlimiting the generality of the foregoing, the making of a Loan shall not beconstrued as a waiver of any Default, regardless of whether the AdministrativeAgent, any other Agent or any Lender may have had notice or knowledge of suchDefault at the time.

 

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

 

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principal amount of anyLoan, or any interest thereon, or any fees payable hereunder, or any otherIndebtedness hereunder or under any other Loan Document, or reduce the amountof, waive or excuse any such payment, or postpone or extend the Maturity Datewithout the written consent of each Lender affected thereby, (v) change Section 4.01(b) orSection 4.01(c) in a manner that would alter the pro rata sharing ofpayments required thereby, without the written consent of each Lender, (vi) waiveor amend Section 6.01, Section 8.14 or Section 10.02(c) changethe definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “MaterialDomestic Subsidiary” or “Subsidiary”, without the written consent of each Lender,(vii) release any Guarantor (except as set forth in the GuarantyAgreement), release all or substantially all of the collateral (other than asprovided in Section 11.09), or reduce the percentage set forth in Section 8.14(a) toless than 80%, without the written consent of each Lender, or (viii) changeany of the provisions of this Section 12.02(b) or the definition of “MajorityLenders” or any other provision hereof specifying the number or percentage ofLenders required to waive, amend or modify any rights hereunder or under anyother Loan Documents or make any determination or grant any consent hereunderor any other Loan Documents, without the written consent of each Lender;provided further that no such agreement shall amend, modify or otherwise affectthe rights or duties of the Administrative Agent or any other Agent hereunderor under any other Loan Document without the prior written consent of theAdministrative Agent or such other Agent, as the case may be.  Notwithstanding the foregoing, any supplementto Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to theAdministrative Agent a supplemental schedule clearly marked as such and, uponreceipt, the Administrative Agent will promptly deliver a copy thereof to theLenders.

 

Section 12.03         Expenses,Indemnity; Damage Waiver.

 

(a)           The Borrowershall pay (i) all reasonable out-of-pocket expenses incurred by theAdministrative Agent and its Affiliates, including, without limitation, thereasonable fees, charges and disbursements of counsel and other outsideconsultants for the Administrative Agent, the reasonable travel, photocopy,mailing, courier, telephone and other similar expenses, and, in connection withthe syndication of the credit facilities provided for herein, the preparation,negotiation, execution, delivery and administration (both before and after theexecution hereof and including advice of counsel to the Administrative Agent asto the rights and duties of the Administrative Agent and the Lenders withrespect thereto) of this Agreement and the other Loan Documents and anyamendments, modifications or waivers of or consents related to the provisionshereof or thereof (whether or not the transactions contemplated hereby orthereby shall be consummated), (ii) all out-of-pocket costs, expenses,Taxes, assessments and other charges incurred by any Agent or any Lender inconnection with any filing, registration, recording or perfection of anysecurity interest contemplated by this Agreement or any Security Instrument orany other document referred to therein, (iii) all out-of-pocket expensesincurred by any Agent or any Lender, including the fees, charges anddisbursements of any counsel for any Agent or any Lender, in connection withthe enforcement or protection of its rights in connection with this Agreementor any other Loan Document, including its rights under this Section 12.03,or in connection with the Loans made, including, without limitation, all suchout-of-pocket expenses incurred during any workout, restructuring ornegotiations in respect of such Loans.

 

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(b)           THE BORROWER SHALL INDEMNIFY EACHAGENT, THE ARRANGERS AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THEFOREGOING 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 ANDDISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTEDAGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THEEXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THANEXPENSES IN CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT ANDTHE OTHER LOAN DOCUMENTS DATED OF EVEN DATE HEREWITH, WHICH EXPENSES SHALL ONLYBE PAID BY THE BORROWER TO THE EXTENT PROVIDED IN SECTION 12.03(A)) OR ANYAGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THEPARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVEOBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONSCONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THEBORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS OF ANY LOANDOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANYINACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OFTHE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANYINSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANYLOAN OR THE USE OF THE PROCEEDS THEREFROM, (v) ANY OTHER ASPECT OF THELOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER ANDITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTIONTHAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TOTHE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THEBORROWER OR ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUTLIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE,USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL ANDGAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THEBREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANYENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, (x) THEPAST OWNERSHIP BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF ANY OF THEIRPROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL ANDFULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THEPRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENEDRELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OFOIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OFTHE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES ORANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM 

 

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ANY PROPERTY OWNED OROPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTALLIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITHTHE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION,INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ONCONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE ISA PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEENOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTERWHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR ANOMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCTIDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THEINDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONEOR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANYINDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENTJURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THEGROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

 

(c)           To the extentthat the Borrower fails to pay any amount required to be paid by it to anyAgent or the Arrangers under Section 12.03(a) or (b), each Lenderseverally agrees to pay to such Agent or the Arrangers, as the case may be,such Lender’s ratable share (determined as of the time that the applicableunreimbursed 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 assertedagainst such Agent or the Arrangers in its capacity as such.

 

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

 

(e)           All amounts dueunder this Section 12.03 shall be payable within ten (10) BusinessDays of written demand therefor.

 

Section 12.04         Successors andAssigns.

 

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

 

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Section 12.04.  Nothing in this Agreement, expressed orimplied, shall be construed to confer upon any Person (other than the partieshereto, their respective successors and assigns permitted hereby, Participants(to the extent provided in Section 12.04(c)) and, to the extent expresslycontemplated hereby, the Related Parties of each of the Administrative Agentand the Lenders) any legal or equitable right, remedy or claim under or byreason of this Agreement.

 

(b)           (i) Subjectto the conditions set forth in Section 12.04(b)(ii), any Lender may assignto one or more assignees all or a portion of its rights and obligations underthis Agreement (including all or a portion of its Commitment and the Loans atthe time owing to it) with the prior written consent (such consent not to beunreasonably withheld) of:

 

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

 

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

 

(ii)           Assignmentsshall be subject to the following additional conditions:

 

(A)          except in thecase of an assignment to a Lender or an Affiliate of a Lender or an assignmentof the entire remaining amount of the assigning Lender’s Commitment or Loans,the amount of the Commitment or Loans of the assigning Lender subject to eachsuch assignment (determined as of the date the Assignment and Assumption withrespect to such assignment is delivered to the Administrative Agent) shall notbe less than $5,000,000 unless each of the Borrower and the AdministrativeAgent otherwise consent, provided that no such consent of the Borrower shall berequired if an Event of Default has occurred and is continuing;

 

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

 

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

 

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

 

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

 

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case of an Assignment andAssumption covering all of the assigning Lender’s rights and obligations underthis Agreement, such Lender shall cease to be a party hereto but shall continueto be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03and Section 12.03).  Any assignmentor transfer by a Lender of rights or obligations under this Agreement that doesnot comply with this Section 12.04 shall be treated for purposes of thisAgreement as a sale by such Lender of a participation in such rights andobligations in accordance with Section 12.04(c).

 

(iv)          The Administrative Agent, acting forthis purpose as an agent of the Borrower, shall maintain at one of its officesa copy of each Assignment and Assumption delivered to it and a register for therecordation of the names and addresses of the Lenders, and the Commitment of,and principal amount of the Loans, each Lender pursuant to the terms hereoffrom time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, theAdministrative Agent and the Lenders may treat each Person whose name isrecorded in the Register pursuant to the terms hereof as a Lender hereunder forall purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available forinspection by the Borrower and any Lender, at any reasonable time and from timeto time upon reasonable prior notice.  Inconnection with any changes to the Register, if necessary, the AdministrativeAgent will reflect the revisions on Annex I and forward a copy of such revisedAnnex I to the Borrower and each Lender.

 

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

 

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

 

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

 

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

 

(d)           Any Lender may at any time pledge orassign a security interest in all or any portion of its rights under thisAgreement to secure obligations of such Lender, including any pledge orassignment to secure obligations to a Federal Reserve Bank, and this Section 12.04(d) shallnot apply to any such pledge or assignment of a security interest; providedthat no such pledge or assignment of a security interest shall release a Lenderfrom any of its obligations hereunder or substitute any such pledgee orassignee for such Lender as a party hereto.

 

Section 12.05         Survival;Revival; Reinstatement.

 

(a)           All covenants,agreements, representations and warranties made by the Borrower herein and inthe certificates or other instruments delivered in connection with or pursuantto this Agreement or any other Loan Document shall be considered to have beenrelied upon by the other parties hereto and shall survive the execution anddelivery of this Agreement and the making of any Loans, regardless of anyinvestigation made by any such other party or on its behalf and notwithstandingthat the Administrative Agent, any other Agent or any Lender may have hadnotice or knowledge of any Default or incorrect representation or warranty atthe time any credit is extended hereunder, and shall continue in full force andeffect as long as the principal of or any accrued interest on any Loan or anyfee or any other amount payable under this Agreement is outstanding andunpaid.  The provisions of Section 5.01,Section 5.02, Section 5.03, Section 12.03, Section 12.11and ARTICLE XI shall survive and remain in full force and effect regardless ofthe consummation of the transactions contemplated hereby, the repayment of theLoans or the termination of this Agreement, any other Loan Document or anyprovision hereof or thereof.

 

(b)           To the extentthat any payments on the Indebtedness or proceeds of any collateral aresubsequently invalidated, declared to be fraudulent or preferential, set asideor required to be repaid to a trustee, debtor in possession, receiver or otherPerson under any bankruptcy law, common law or equitable cause, then to suchextent, the Indebtedness so satisfied shall be revived and continue as if suchpayment or proceeds had not been received and the Administrative Agent’s andthe Lenders’ Liens, security interests, rights, powers and remedies under thisAgreement and each Loan Document shall continue in full force and effect.  In such event, each Loan Document shall beautomatically reinstated and the Borrower shall take such action as may bereasonably requested by the Administrative Agent and the Lenders to effect suchreinstatement.

 

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Section 12.06         Counterparts;Integration; Effectiveness.

 

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

 

(b)           This Agreement,the other Loan Documents and any separate letter agreements with respect tofees payable to the Administrative Agent constitute the entire contract amongthe parties relating to the subject matter hereof and thereof and supersede anyand all previous agreements and understandings, oral or written, relating tothe subject matter hereof and thereof.  **THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENTTHE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BECONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.  THERE ARE NOUNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.**

 

(c)           Except asprovided in Section 6.01, this Agreement shall become effective when itshall have been executed by the Administrative Agent and when the AdministrativeAgent shall have received counterparts hereof which, when taken together, bearthe signatures of each of the other parties hereto, and thereafter shall bebinding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns. Delivery of an executed counterpart of a signature page of thisAgreement by telecopy shall be effective as delivery of a manually executedcounterpart of this Agreement.

 

Section 12.07         Severability.  Any provision of this Agreement or any otherLoan Document held to be invalid, illegal or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of suchinvalidity, illegality or unenforceability without affecting the validity,legality and enforceability of the remaining provisions hereof or thereof; andthe invalidity of a particular provision in a particular jurisdiction shall notinvalidate such provision in any other jurisdiction.

 

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

 

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

 

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

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITHRESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OFTEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS,HOUSTON DIVISION, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTYHEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OFITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAIDCOURTS.  EACH PARTY HEREBY IRREVOCABLYWAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THELAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOWOR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCHRESPECTIVE JURISDICTIONS.  THISSUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROMOBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVINGJURISDICTION.

 

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

 

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

 

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

 

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

 

Section 12.11         Confidentiality.  Each of the Agents and the Lenders agrees tomaintain the confidentiality of the Information (as defined below), except thatInformation may be disclosed (a) to its and its Affiliates’ directors,officers, employees and agents, including accountants, legal counsel and otheradvisors (it being understood that the Persons to whom such disclosure is madewill be informed of the confidential nature of such Information and instructedto keep such Information confidential), (b) to the extent requested by anyregulatory authority or self-regulatory body, (c) to the extent requiredby applicable laws or regulations or by any subpoena or similar legal process, (d) toany other party to this Agreement or any other Loan Document, (e) inconnection with the exercise of any remedies hereunder or under any other LoanDocument or any suit, action or proceeding relating to this Agreement or anyother Loan Document or the enforcement of rights hereunder or thereunder, (f) subjectto an agreement containing provisions substantially the same as those of this Section 12.11,to (i) any assignee of or Participant in, or any prospective assignee ofor Participant in, any of its rights or obligations under this Agreement or (ii) anyactual or prospective counterparty (or its advisors) to any Swap Agreementrelating to the Borrower and their obligations, (g) with the consent ofthe Borrower, (h) to the extent such Information (i) becomes publiclyavailable other than as a result of a breach of this Section 12.11 or (ii) becomesavailable to the Administrative Agent or any Lender on a nonconfidential basisfrom a source other than the Borrower, or (i) to theNational Association of Insurance Commissioners or any similar organization orany nationally recognized rating agency that requires access to informationabout a Lender’s investment portfolio in connection with ratings issued withrespect to such Lender.  For thepurposes of this Section 12.11, “Information” means all informationreceived from the Borrower or any of its Subsidiaries relating to the Borroweror any of its Subsidiaries and their businesses, other than any suchinformation that is available to the Administrative Agent or any Lender on anonconfidential basis prior to disclosure by the Borrower or any of itsSubsidiaries; provided that, in the case of information received from theBorrower or any of its Subsidiaries after the date hereof, such information isclearly identified at the time of delivery as confidential.  Any Person required to maintain theconfidentiality of Information as provided in this Section 12.11 shall beconsidered to have complied with its obligation to do so if such Person hasexercised the same degree of care to maintain the confidentiality of suchInformation as such Person would accord to its own confidential information.

 

EachLender acknowledges that information furnished to it pursuant to this Agreementor the other Loan Documents may include material non-public informationconcerning the Borrower and its Affiliates and their related parties or theirrespective securities, and confirms 

 

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

 

All information, including requests forwaivers and amendments, furnished by the Borrower or the Administrative Agentpursuant to, or in the course of administering, this Agreement or the otherLoan Documents will be syndicate-level information, which may contain materialnon-public information about the Borrower and its Affiliates and their relatedparties or their respective securities. Accordingly, each Lender represents to the Borrower and theAdministrative Agent that it has identified in its Administrative Questionnairea credit contact who may receive information that may contain materialnon-public information in accordance with its compliance procedures andapplicable law, including federal and state securities laws.

 

Section 12.12         Interest Rate Limitation.  It is the intention of the parties heretothat each Lender shall conform strictly to usury laws applicable to it.  Accordingly, if the transactions contemplatedhereby would be usurious as to any Lender under laws applicable to it (includingthe laws of the United States of America and the State of Texas or any otherjurisdiction whose laws may be mandatorily applicable to such Lendernotwithstanding the other provisions of this Agreement), then, in that event,notwithstanding anything to the contrary in any of the Loan Documents or anyagreement entered into in connection with or as security for the Notes, it isagreed as follows:  (i) theaggregate of all consideration which constitutes interest under law applicableto any Lender that is contracted for, taken, reserved, charged or received bysuch Lender under any of the Loan Documents or agreements or otherwise inconnection with the Notes shall under no circumstances exceed the maximumamount allowed by such applicable law, and any excess shall be canceledautomatically and if theretofore paid shall be credited by such Lender on theprincipal amount of the Indebtedness (or, to the extent that the principalamount of the Indebtedness shall have been or would thereby be paid in full,refunded by such Lender to the Borrower); and (ii) in the event that thematurity of the Notes is accelerated by reason of an election of the holderthereof resulting from any Event of Default under this Agreement or otherwise,or in the event of any required or permitted prepayment, then suchconsideration that constitutes interest under law applicable to any Lender maynever include more than the maximum amount allowed by such applicable law, andexcess interest, if any, provided for in this Agreement or otherwise shall becanceled automatically by such Lender as of the date of such acceleration orprepayment and, if theretofore paid, shall be credited by such Lender on theprincipal amount of the Indebtedness (or, to the extent that the principalamount of the Indebtedness shall have been or would thereby be paid in full,refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use,forbearance or detention of sums due hereunder shall, to the extent permittedby law applicable to such Lender, be amortized, prorated, allocated and spreadthroughout the stated term of the Loans evidenced by the Notes until payment infull so that the rate or amount of interest on account of any Loans hereunderdoes not exceed the maximum amount allowed by such applicable law.  If at any time and from time to time (i) theamount of interest payable to any Lender on any date shall be computed at theHighest Lawful Rate applicable to such Lender pursuant to this Section 12.12and (ii) in respect of any subsequent interest computation period theamount of interest otherwise payable to such Lender would be less than theamount of interest payable to such Lender computed at the Highest Lawful Rateapplicable to such Lender, then the amount of interest 

 

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payable to such Lender inrespect of such subsequent interest computation period shall continue to becomputed at the Highest Lawful Rate applicable to such Lender until the totalamount of interest payable to such Lender shall equal the total amount ofinterest which would have been payable to such Lender if the total amount ofinterest had been computed without giving effect to this Section 12.12.  To the extent that Chapter 303 of the TexasFinance Code is relevant for the purpose of determining the Highest Lawful Rateapplicable to a Lender, such Lender elects to determine the applicable rateceiling under such Chapter by the weekly ceiling from time to time in effect.  Chapter 346 of the Texas Finance Code doesnot apply to the Borrower’s obligations hereunder.

 

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

 

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

 

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

 

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

 

[SIGNATURES BEGIN NEXT PAGE]

 

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Theparties hereto have caused this Agreement to be duly executed as of the day andyear first above written.

 
| **BORROWER**: | **LINN ENERGY, LLC** |
|---------------|----------------------|
|          |                 |
|          |                 |
|          |                 | By: | /s/ Kolja  Rockov |
|          |                 |   | Kolja Rockov |
|          |                 |   | Executive Vice President and Chief  Financial Officer |

 

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|   | **BNP PARIBAS**, as Administrative Agent and a  Lender |
|--------|--------------------------------------------------------|
|   | ** **                                             |
|   |                                                   |
|   | By:                                                    | /s/ Douglas  R. Liftman |
|   | Name:                                                  | Douglas R. Liftman |
|   | Title:                                                 | Managing Director |
|   |                                                   |   |
|   |                                                   |   |
|   | By:                                                    | /s/ Betsy  Jocher |
|   | Name:                                                  | Betsy Jocher |
|   | Title:                                                 | Director |

 

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|   | **RBC CAPITAL MARKETS,**as Syndication  Agent and a Lender |
|--------|------------------------------------------------------------|
|   |                                                       |   |
|   | By:                                                        | /s/ Don J.  McKinnerney |
|   | Name:                                                      | Don J. McKinnerney |
|   | Title:                                                     | Authorized Signatory |

 

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|   | **SOCIETE GENERALE,**as a Co-Documentation  Agent and a Lender |
|--------|----------------------------------------------------------------|
|   | ** **                                                     |
|   |                                                           |   |
|   | By:                                                            | /s/ Elena  Robciuc |
|   | Name:                                                          | Elena Robciuc |
|   | Title:                                                         | Director |

 

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|   | **COMERICA BANK,**as a Lender |
|--------|-------------------------------|
|   | ** **                    |   |
|   |                          |   |
|   | By:                           | /s/ Huma  Manal |
|   | Name:                         | Huma Manal |
|   | Title:                        | Vice President |

 

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|   | **FORTIS CAPITAL  CORP.,**as a Lender |
|--------|---------------------------------------|
|   | ** **                            |   |
|   |                                  |   |
|   | By:                                   | /s/ David  Montgomery |
|   | Name:                                 | David Montgomery |
|   | Title:                                | Director |
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | /s/ Deirdre  Sanbom |
|   | Name:                                 | Deirdre Sanbom |
|   | Title:                                | Director |

 

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|   | **BMO CAPITAL MARKETS FINANCING,  INC.,** as a Lender |
|--------|-------------------------------------------------------|
|   |                                                  |   |
|   |                                                  |   |
|   | By:                                                   | /s/ James  V. Ducote |
|   | Name:                                                 | James V. Ducote |
|   | Title:                                                | Director |

 

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|   | **CREDIT SUISSE, CAYMAN ISLANDS  BRANCH**, as a  Lender |
|--------|---------------------------------------------------------|
|   |                                                    |   |
|   |                                                    |   |
|   | By:                                                     | /s/ Vanessa  Gomez |
|   | Name:                                                   | Vanessa Gomez |   |
|   | Title:                                                  | Director |   |
|   |                                                    |   |
|   |                                                    |   |
|   | By:                                                     | /s/  Morenikeji Ajayi |
|   | Name:                                                   | Morenikeji Ajayi |   |
|   | Title:                                                  | Associate |   |
|        |                                                         |  |  |  |

 

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|   | **GUARANTY BANK, FSB**, as a Lender |                      |
|--------|-------------------------------------|---------------------------|
|   |                                |                      |
|   |                                |                      |
|   | By:                                 | /s/ W.  David McCarver IV |
|   | Name:                               | W. David McCarver IV      |   |
|   | Title:                              | Vice President            |   |

 

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|   | **LEHMAN BROTHERS COMMERCIAL  BANK**, as a Lender |                 |
|--------|---------------------------------------------------|----------------------|
|   |                                              |                 |
|   |                                              |                 |
|   | By:                                               | /s/ Brian  McNany    |
|   | Name:                                             | Brian McNany         |   |
|   | Title:                                            | Authorized Signatory |   |

 

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|   | **THE ROYAL BANK OF SCOTLAND plc** as a  Co-Documentation Agent and a Lender |                        |
|--------|------------------------------------------------------------------------------|-----------------------------|
|   |                                                                         |                        |
|   |                                                                         |                        |
|   | By:                                                                          | /s/ Mark  Lumpkin, Jr. |
|   | Name:                                                                        | Mark Lumpkin, Jr.      |   |
|   | Title:                                                                       | Vice President              |   |

 

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|   | **UNIONBANCAL EQUITIES, INC.**, as a Lender |                  |
|--------|---------------------------------------------|-----------------------|
|   |                                        |                  |
|   |                                        |                  |
|   | By:                                         | /s/ Henry  Park       |
|   | Name:                                       | Henry Park            |   |
|   | Title:                                      | Senior Vice President |   |
|   |                                        |                  |
|   |                                        |                  |
|   | By:                                         | /s/ Thomas  Thompson  |
|   | Name:                                       | Thomas Thompson       |   |
|   | Title:                                      | Senior Vice President |   |
|        |                                             |                       |  |  |

 

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|   | **CIT CAPITAL USA INC.**, as a Lender |               |
|--------|---------------------------------------|--------------------|
|   |                                  |               |
|   |                                  |               |
|   | By:                                   | /s/ Larry  Derrett |
|   | Name:                                 | Larry Derrett      |   |
|   | Title:                                | Managing Director  |   |

 

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|   | **CALYON CORPORATE AND INVESTMENT  BANK**, as Co-Documentation Agent  and a Lender |                     |
|--------|------------------------------------------------------------------------------------|--------------------------|
|   |                                                                               |                     |
|   |                                                                               |                     |
|   | By:                                                                                | /s/  Page Dillehunt |
|   | Name:                                                                              | Page Dillehunt      |   |
|   | Title:                                                                             | Managing Director        |   |
|   |                                                                               |                     |
|   |                                                                               |                     |
|   | By:                                                                                | /s/ Sharada  Manne       |
|   | Name:                                                                              | Sharada Manne            |   |
|   | Title:                                                                             | Vice President           |   |
|        |                                                                                    |                          |  |  |

 

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|   | **THE BANK OF NOVA SCOTIA**, as a Lender |             |
|--------|------------------------------------------|------------------|
|   |                                     |             |
|   |                                     |             |
|   | By:                                      | /s/ David  Mills |
|   | Name:                                    | David Mills      |   |
|   | Title:                                   | Director         |   |

 

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|   | **DEUTSCHE BANK AG CAYMAN ISLANDS  BRANCH**, as a  Lender |                |
|--------|-----------------------------------------------------------|---------------------|
|   |                                                      |                |
|   |                                                      |                |
|   | By:                                                       | /s/ Susan  LeFevre  |
|   | Name:                                                     | Susan LeFevre       |   |
|   | Title:                                                    | Director            |   |
|   |                                                      |                |
|   |                                                      |                |
|   | By:                                                       | /s/ Erin  Morrissey |
|   | Name:                                                     | Erin Morrissey      |   |
|   | Title:                                                    | Vice President      |   |
|        |                                                           |                     |  |  |

 

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|   | **USB CAPITAL RESOURCES, INC.**, as a Lender |              |
|--------|----------------------------------------------|-------------------|
|   |                                         |              |
|   |                                         |              |
|   | By:                                          | /s/ Brian  Harrer |
|   | Name:                                        | Brian Harrer      |   |
|   | Title:                                       | Vice President    |   |

 

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|   | **SUNTRUST BANK**, as a Lender |             |
|--------|--------------------------------|------------------|
|   |                           |             |
|   |                           |             |
|   | By:                            | /s/ Peter  Panos |
|   | Name:                          | Peter Panos      |   |
|   | Title:                         | Vice President   |   |

 

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