EX-10.1



 







Exhibit 10.1




Execution Version




Second Amended and Restated Credit Agreement




Dated as of




August 1, 2006




among




Linn Energy, LLC,

as Borrower,




BNP Paribas,

as Administrative Agent,




Royal Bank of Canada,




as Syndication Agent,




Societe Generale,

Comerica Bank and

Citibank Texas, N.A.




as Co-Documentation Agents




and




The Lenders Party Hereto




Joint Lead Arrangers and Joint Book Runners




			
	 	 	 
	BNP Paribas
	 	RBC Capital Markets







 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	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 Borrowings	 	 	19	 
	Section 1.04
	 	Terms Generally	 	 	19	 
	Section 1.05
	 	Accounting Terms and Determinations; GAAP	 	 	20	 
	 
	 	 	 	 	 	 
	ARTICLE II

	THE CREDITS

	 
	 	 	 	 	 	 
	Section 2.01
	 	Commitments	 	 	20	 
	Section 2.02
	 	Loans and Borrowings	 	 	20	 
	Section 2.03
	 	Requests for Borrowings	 	 	22	 
	Section 2.04
	 	Interest Elections	 	 	23	 
	Section 2.05
	 	Funding of Borrowings	 	 	24	 
	Section 2.06
	 	Termination and Reduction of Aggregate Maximum Credit Amounts	 	 	24	 
	Section 2.07
	 	Borrowing Base	 	 	25	 
	Section 2.08
	 	Letters of Credit	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE III

	PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

	 
	 	 	 	 	 	 
	Section 3.01
	 	Repayment of Loans	 	 	32	 
	Section 3.02
	 	Interest	 	 	32	 
	Section 3.03
	 	Alternate Rate of Interest	 	 	33	 
	Section 3.04
	 	Prepayments	 	 	33	 
	Section 3.05
	 	Fees	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE IV

	PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.

	 
	 	 	 	 	 	 
	Section 4.01
	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	 	 	35	 
	Section 4.02
	 	Presumption of Payment by the Borrower	 	 	36	 
	Section 4.03
	 	Certain Deductions by the Administrative Agent	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE V

	INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

	 
	 	 	 	 	 	 
	Section 5.01
	 	Increased Costs	 	 	37	 
	Section 5.02
	 	Break Funding Payments	 	 	38	 
	Section 5.03
	 	Taxes	 	 	38	 
	Section 5.04
	 	Designation of Different Lending Office	 	 	39	 
	Section 5.05
	 	Illegality	 	 	40	 
	 
	 	 	 	 	 	 
	ARTICLE VI

	CONDITIONS PRECEDENT







Credit Agreement




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	 	 	 	 	Page	 
	Section 6.01
	 	Effective Date	 	 	40	 
	Section 6.02
	 	Each Credit Event	 	 	42	 
	Section 6.03
	 	Kaiser Francis	 	 	43	 
	Section 6.04
	 	Blacksand	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	REPRESENTATIONS AND WARRANTIES

	 
	 	 	 	 	 	 
	Section 7.01
	 	Organization; Powers	 	 	47	 
	Section 7.02
	 	Authority; Enforceability	 	 	47	 
	Section 7.03
	 	Approvals; No Conflicts	 	 	47	 
	Section 7.04
	 	Financial Position; No Material Adverse Change	 	 	47	 
	Section 7.05
	 	Litigation	 	 	48	 
	Section 7.06
	 	Environmental Matters	 	 	48	 
	Section 7.07
	 	Compliance with the Laws and Agreements; No Defaults	 	 	49	 
	Section 7.08
	 	Investment Company Act	 	 	50	 
	Section 7.09
	 	Taxes	 	 	50	 
	Section 7.10
	 	ERISA	 	 	50	 
	Section 7.11
	 	Disclosure; No Material Misstatements	 	 	51	 
	Section 7.12
	 	Insurance	 	 	51	 
	Section 7.13
	 	Restriction on Liens	 	 	51	 
	Section 7.14
	 	Subsidiaries	 	 	52	 
	Section 7.15
	 	Location of Business and Offices	 	 	52	 
	Section 7.16
	 	Properties; Titles, Etc	 	 	52	 
	Section 7.17
	 	Maintenance of Properties	 	 	53	 
	Section 7.18
	 	Gas Imbalances, Prepayments	 	 	53	 
	Section 7.19
	 	Marketing of Production	 	 	53	 
	Section 7.20
	 	Swap Agreements	 	 	54	 
	Section 7.21
	 	Use of Loans and Letters of Credit	 	 	54	 
	Section 7.22
	 	Solvency	 	 	54	 
	Section 7.23
	 	Specified Senior Indebtedness	 	 	54	 
	Section 7.24
	 	Acquisitions	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	AFFIRMATIVE COVENANTS

	 
	 	 	 	 	 	 
	Section 8.01
	 	Financial Statements; Ratings Change; Other Information	 	 	55	 
	Section 8.02
	 	Notices of Material Events	 	 	57	 
	Section 8.03
	 	Existence; Conduct of Business	 	 	58	 
	Section 8.04
	 	Payment of Obligations	 	 	58	 
	Section 8.05
	 	Performance of Obligations under Loan Documents	 	 	58	 
	Section 8.06
	 	Operation and Maintenance of Properties	 	 	58	 
	Section 8.07
	 	Insurance	 	 	59	 
	Section 8.08
	 	Books and Records; Inspection Rights	 	 	59	 
	Section 8.09
	 	Compliance with Laws	 	 	59	 
	Section 8.10
	 	Environmental Matters	 	 	59	 
	Section 8.11
	 	Further Assurances	 	 	60	 
	Section 8.12
	 	Reserve Reports	 	 	61	 
	Section 8.13
	 	Title Information	 	 	62	 
	Section 8.14
	 	Additional Collateral; Additional Guarantors	 	 	63	 





Credit Agreement





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	 	 	 	 	Page	 
	Section 8.15
	 	ERISA Compliance	 	 	64	 
	Section 8.16
	 	Marketing Activities	 	 	64	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	NEGATIVE COVENANTS

	 
	 	 	 	 	 	 
	Section 9.01
	 	Financial Covenants	 	 	65	 
	Section 9.02
	 	Debt	 	 	65	 
	Section 9.03
	 	Liens	 	 	66	 
	Section 9.04
	 	Dividends, Distributions and Redemptions	 	 	67	 
	Section 9.05
	 	Investments, Loans and Advances	 	 	67	 
	Section 9.06
	 	Nature of Business	 	 	69	 
	Section 9.07
	 	Limitation on Leases	 	 	69	 
	Section 9.08
	 	Proceeds of Notes	 	 	69	 
	Section 9.09
	 	ERISA Compliance	 	 	69	 
	Section 9.10
	 	Sale or Discount of Receivables	 	 	70	 
	Section 9.11
	 	Mergers, Etc.	 	 	70	 
	Section 9.12
	 	Sale of Properties	 	 	70	 
	Section 9.13
	 	Environmental Matters	 	 	71	 
	Section 9.14
	 	Transactions with Affiliates	 	 	71	 
	Section 9.15
	 	Subsidiaries	 	 	71	 
	Section 9.16
	 	Negative Pledge Agreements; Dividend Restrictions	 	 	71	 
	Section 9.17
	 	Gas Imbalances, Take-or-Pay or Other Prepayments	 	 	72	 
	Section 9.18
	 	Swap Agreements	 	 	72	 
	Section 9.19
	 	Tax Status as Partnership; Operating Agreements	 	 	72	 
	 
	 	 	 	 	 	 
	ARTICLE X

	EVENTS OF DEFAULT; REMEDIES

	 
	 	 	 	 	 	 
	Section 10.01
	 	Events of Default	 	 	72	 
	Section 10.02
	 	Remedies	 	 	74	 
	Section 10.03
	 	Disposition of Proceeds	 	 	75	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	THE ADMINISTRATIVE AGENT

	 
	 	 	 	 	 	 
	Section 11.01
	 	Appointment; Powers	 	 	76	 
	Section 11.02
	 	Duties and Obligations of Administrative Agent	 	 	76	 
	Section 11.03
	 	Action by Agent	 	 	76	 
	Section 11.04
	 	Reliance by Agent	 	 	77	 
	Section 11.05
	 	Subagents	 	 	77	 
	Section 11.06
	 	Resignation or Removal of Agents	 	 	78	 
	Section 11.07
	 	Agents and Lenders	 	 	78	 
	Section 11.08
	 	No Reliance	 	 	78	 
	Section 11.09
	 	Administrative Agent May File Proofs of Claim	 	 	79	 
	Section 11.10
	 	Authority of Administrative Agent to Release Collateral and Liens	 	 	79	 
	Section 11.11
	 	The Arrangers and the Agents	 	 	80	 
	 
	 	 	 	 	 	 
	ARTICLE XII

	MISCELLANEOUS

	 
	 	 	 	 	 	 
	Section 12.01
	 	Notices	 	 	80	 





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	 	 	 	 	Page	 
	Section 12.02
	 	Waivers; Amendments	 	 	81	 
	Section 12.03
	 	Expenses, Indemnity; Damage Waiver	 	 	82	 
	Section 12.04
	 	Successors and Assigns	 	 	84	 
	Section 12.05
	 	Survival; Revival; Reinstatement	 	 	87	 
	Section 12.06
	 	Counterparts; Integration; Effectiveness	 	 	87	 
	Section 12.07
	 	Severability	 	 	88	 
	Section 12.08
	 	Right of Setoff	 	 	88	 
	Section 12.09
	 	GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS	 	 	88	 
	Section 12.10
	 	Headings	 	 	89	 
	Section 12.11
	 	Confidentiality	 	 	89	 
	Section 12.12
	 	Interest Rate Limitation	 	 	90	 
	Section 12.13
	 	EXCULPATION PROVISIONS	 	 	91	 
	Section 12.14
	 	Collateral Matters; Swap Agreements	 	 	91	 
	Section 12.15
	 	No Third Party Beneficiaries	 	 	91	 
	Section 12.16
	 	USA Patriot Act Notice	 	 	92	 






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ANNEXES, EXHIBITS AND SCHEDULES




	 	 	 
	Annex I
	 	List of Maximum Credit Amounts
	 
	 	 
	Exhibit A
	 	Form of Note
	Exhibit B
	 	Form of Compliance Certificate
	Exhibit C-1
	 	Security Instruments
	Exhibit C-2
	 	Kaiser Francis Security Instruments
	Exhibit C-3
	 	Blacksand Security Instruments
	Exhibit D
	 	Form of Assignment and Assumption
	 
	 	 
	Schedule 7.05
	 	Litigation
	Schedule 7.11
	 	Material Agreements
	Schedule 7.14
	 	Subsidiaries and Partnerships
	Schedule 7.18
	 	Gas Imbalances
	Schedule 7.19
	 	Marketing Contracts
	Schedule 7.20
	 	Swap Agreements






Credit Agreement




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     THIS CREDIT AGREEMENT dated as of August 1, 2006, is among Linn Energy, LLC, a limited
liability company duly formed and existing under the laws of the State of Delaware (the
“Borrower”); each of the Lenders from time to time party hereto; BNP PARIBAS (in its
individual capacity, “BNP Paribas”), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Administrative Agent”); Royal
Bank of Canada (in its individual capacity, “RBC”), as syndication agent for the Lenders
(in such capacity, together with its successor in such capacity, the “Syndication Agent”),
and Societe Generale, Comerica Bank and Citibank Texas, N.A. as co-documentation agents (in such
capacities, together with their successors in such capacity, the “Co-Documentation Agents”)
for the Lenders.



R E C I T A L S




     A. The Borrower, the Administrative Agent and other financial institutions named and defined
therein as lenders and agents entered into that certain Credit Agreement dated as of April 13,
2005, as amended by the First Amendment, dated May 3, 2005, the Second Amendment dated August 12,
2005, the Third Amendment dated October 27, 2005 and the Fourth Amendment dated December 19, 2005.



     B. The Borrower and the Administrative Agent amended and restated such Credit Agreement and
are parties, with other financial institutions named and defined therein as lenders and agents to
that certain Amended and Restated Credit Agreement dated as of April 7, 2006 and as amended by the
First Amendment, dated May 5, 2006, pursuant to which such lenders provided certain loans to and
extensions of credit on behalf of the Borrower (as heretofore amended, modified or supplemented,
the “Existing Credit Agreement”).



     B. The Borrower has requested the Lenders, and the Lenders have agreed, to amend and restate
the Existing Credit Agreement, subject to the terms and conditions of this Agreement.



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



ARTICLE I

Definitions and Accounting Matters



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



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




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



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



     “Affected Loans” has the meaning assigned such term in Section 5.05.



Credit Agreement





 









 








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



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



     “Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum
Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06.



     “Agreement” means this Second Amended and Restated Credit 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 greatest of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.



     “Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar
Loan, as the case may be, the rate per annum set forth in the Borrowing Base Utilization Grid below
based upon the Borrowing Base Utilization Percentage then in effect:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Eurodollar Loans	 	Eurodollar Loans	 	 
	 	 	after repayment of	 	while Second Lien	 	 
	Borrowing Base Utilization	 	Second Lien Bridge	 	Bridge Loan is	 	 
	 Percentage	 	Loan	 	outstanding	 	ABR Loans
	less than 33%
	 	 	1.000	%	 	 	1.250	%	 	 	0.000	%
	greater than or equal to
33%, but less than 66%
	 	 	1.250	%	 	 	1.500	%	 	 	0.000	%
	greater than or equal to
66%, but less than 85%
	 	 	1.500	%	 	 	1.750	%	 	 	0.125	%
	greater than or equal to 85%
	 	 	1.750	%	 	 	2.000	%	 	 	0.250	%






     Each change in the Applicable Margin shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective date of the next
such change, provided, however, that if at any time the Borrower fails to deliver a Reserve
Report pursuant to Section 8.12(a), then the “Applicable Margin” means the rate per annum set
forth on the grid when the Borrowing Base Utilization Percentage is at its highest level.



Credit Agreement





2









 








     “Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount as such
percentage is set forth on Annex I.



     “Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and (b) any
other Person whose long term senior unsecured debt rating is A/A2 by S&P or Moody’s (or their
equivalent) or higher.



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



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



     “Availability Period” means the period from and including the Effective Date to but
excluding the Termination Date.



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



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



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



     “Blacksand Acquisition” means the acquisition of 100% of the Equity Interests of
certain Wholly-Owned Subsidiaries of Blacksand Energy, LLC, which include certain oil, gas and
mineral Properties pursuant to the terms and conditions of the Blacksand Acquisition Documents.



     “Blacksand Acquisition Documents” means (a) the Purchase and Sale Agreement between
Blacksand Energy, LLC, as Seller, and Borrower, as Buyer, dated July 19, 2006, and (b) all bills of
sale, assignments, agreements, instruments and documents executed and delivered in connection
therewith, as amended.



     “Blacksand Acquisition Properties” means the Oil and Gas Properties and other
properties owned by Blacksand Energy, LLC through its Wholly-Owned Subsidiaries acquired by the
Borrower or any Guarantor pursuant to the Blacksand Acquisition Documents.



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



Credit Agreement




3









 








     “Borrowing” means Loans of the same Type, made, converted or continued on the same
date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.



     “Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Section
6.03, Section 6.04, Section 8.13(c), Section 9.02(e) or Section 9.12(d).



     “Borrowing Base Deficiency” occurs if at any time the total Revolving Credit Exposures
exceeds the Borrowing Base then in effect.



     “Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed
as a percentage, the numerator of which is the sum of the Revolving Credit Exposures of the Lenders
on such day, and the denominator of which is the Borrowing Base in effect on such day.



     “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03.



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



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



     “Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or similar proceeding of,
any Property of the Borrower or any of its Subsidiaries having a fair market value in excess of
$100,000 in the aggregate for any calendar year.



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



     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any



Credit Agreement




4









 







Lender or any Issuing Bank (or, for purposes of Section 5.01(b), by any lending
office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.




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



     “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as
such commitment may be (a) modified from time to time pursuant to Section 2.06 and (b) modified
from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b). The
amount representing each Lender’s Commitment shall at any time be the lesser of such Lender’s
Maximum Credit Amount and such Lender’s Applicable Percentage of the then effective Borrowing Base.



     “Commitment Fee Rate” means, for any day, the rate per annum set forth in the grid
below based upon the Borrowing Base Utilization Percentage then in effect



	 	 	 	 	 
	Borrowing Base Utilization	 	 
	 Percentage	 	Commitment Fee Rate
	less than 33%
	 	 	0.375	%
	greater than or equal to 33%
	 	 	0.300	%






     Each change in the Commitment Fee Rate shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the effective date of
the next such change, provided, however, that if at any time the Borrower fails to deliver a
Reserve Report pursuant to Section 8.12(a), then the “Commitment Fee Rate” means the rate per annum
set forth on the grid when the Borrowing Base Utilization Percentage is at its lower level.



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



Credit Agreement




5









 







applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in
each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired
in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any
extraordinary gains or losses during such period; (e) non-cash gains, losses or adjustments under
FASB Statement No. 133 as a result of changes in the fair market value of derivatives; (f) any
gains or losses attributable to writeups or writedowns of assets, including ceiling test
writedowns; (g) the one-time bonuses paid by the Borrower to employees in connection with its
initial public offering and (h) non-cash share-based payments under FASB Statement No. 123R; and
provided further that if the Borrower or any Consolidated Subsidiary shall acquire or dispose of
any Property during such period, then Consolidated Net Income shall be calculated after giving pro
forma effect to such acquisition or disposition, as if such acquisition or disposition had occurred
on the first day of such period.




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



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



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



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6









 







character described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability of such Person
under GAAP.




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



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



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



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



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



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



     “Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).



     “Environmental Laws” means any and all Governmental Requirements pertaining in any way
to health, safety the environment or the preservation or reclamation of natural resources, in
effect in any and all jurisdictions in which the Borrower or any of its Subsidiaries is conducting
or at any time has conducted business, or where any Property of the Borrower or any of its
Subsidiaries is located, including without limitation, the Oil Pollution Act of 1990
(“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements. The term “oil” shall
have the meaning specified in OPA, the terms “hazardous substance” and “release”
(or “threatened release”) have the meanings specified in CERCLA, the terms “solid
waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and
the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the
Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the
event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the effective date of such


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7









 






amendment and (b) to the extent the laws of the state or other jurisdiction in which
any Property of the Borrower or any of its Subsidiaries is located establish a meaning for
“oil,” “hazardous substance,” “release,” “solid waste,”
“disposal” or “oil and gas waste” which is broader than that specified in either
OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.




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



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



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



     “ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA and
the regulations issued thereunder, (b) the withdrawal of the Borrower or any of its Subsidiaries or
any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as
defined in section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under section 4041 of ERISA, (d) the institution
of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of withdrawal liability
pursuant to Section 4202 of ERISA or (f) any other event or condition which might constitute
grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.



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



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



     “Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
(b) Liens in connection with workers’ compensation, unemployment insurance or other social
security, old age pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’,
carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s,
construction or other like Liens arising by operation of law in the ordinary course of business or
incident to the exploration, development, operation and maintenance of Oil and Gas Properties each
of which is in respect of obligations that are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained in accordance with
GAAP; (d) contractual Liens which arise in the ordinary course of business under operating
agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and
natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements, marketing



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8









 







agreements, processing agreements, net profits agreements, development agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements, and other agreements
which are usual and customary in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in
this clause does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any of its Subsidiaries or materially
impair the value of such Property subject thereto; (e) Liens arising solely by virtue of any
statutory or common law provision relating to banker’s liens, rights of set-off or similar rights
and remedies and burdening only deposit accounts or other funds maintained with a creditor
depository institution, provided that no such deposit account is a dedicated cash collateral
account or is subject to restrictions against access by the depositor in excess of those set forth
by regulations promulgated by the Board and no such deposit account is intended by the Borrower or
any of its Subsidiaries to provide collateral to the depository institution; (f) easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of the Borrower or any of its Subsidiaries for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, that do not secure any monetary obligations and which in
the aggregate do not materially impair the use of such Property for the purposes of which such
Property is held by the Borrower or any of its Subsidiaries or materially impair the value of such
Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders,
surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other obligations of a like
nature incurred in the ordinary course of business and (h) judgment and attachment Liens not giving
rise to an Event of Default, provided that any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no action to enforce such
Lien has been commenced; provided, further that Liens described in clauses (a) through (e) shall
remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and
no intention to subordinate the first priority Lien granted in favor of the Administrative Agent
and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted
Liens.




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



     “Existing Credit Agreement” has the meaning assigned to such term in the recitals.



Credit Agreement




9









 








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



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



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



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



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



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



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



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



     “Guarantors” means (a) Linn Energy Holdings, LLC, (b) Linn Operating, Inc., (c) Mid
Atlantic Well Services Inc., (d) Penn West Pipeline, LLC, (e) Linn Energy Western Holdings, LLC,
(f) Linn Energy Mid-Continent Holdings, LLC, (g) Linn Western Operating, Inc., (h) Linn Western
Processing, LLC and, after the Blacksand Acquisition, the entities currently known as (i) Blacksand
Acquisition, LLC, (j) Blacksand GP, LLC, (k) Blacksand Brea, LLC, (l) Blacksand Partners, LP and
(m) each other Material Domestic Subsidiary or other Domestic Subsidiary that guarantees the
Indebtedness pursuant to Section 8.14(b).



     “Guaranty Agreement” means an agreement executed by the Guarantors in form and
substance reasonably satisfactory to the Administrative Agent unconditionally guarantying on a
joint



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10









 







and several basis, payment of the Indebtedness, as the same may be amended, modified or
supplemented from time to time.




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



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



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



     “Indebtedness” means any and all amounts owing or to be owing by the Borrower, any of
its Subsidiaries or any Guarantor (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a)
to the Administrative Agent, any Issuing Bank or any Lender under any Loan Document; (b) to any
Lender or any Affiliate of a Lender under any Swap Agreements among such Person and the Borrower or
any Subsidiary or assigned to such Person while such Person (or in the case of its Affiliate, the
Lender affiliated therewith) is a Lender hereunder and (c) all renewals, extensions and/or
rearrangements of any of the above.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Intercreditor Agreement” means in respect of the Second Lien Bridge Loan Agreement,
the terms of subordination as attached as Annex II to the Second Lien Bridge Loan Agreement, as the
same may from time to time be amended, modified, supplemented or restated, provided, that,
with respect to material amendments relating to subordination and payment in Annex II to the Second
Lien Bridge Loan Agreement, the prior written consent of each of the Lenders hereto shall be
required.



     “Interest Election Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.04.



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



Credit Agreement




11









 








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



     “Interim Redetermination” has the meaning assigned such term in Section 2.07(b).



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



     “Issuing Bank” means BNP Paribas, in its capacity as an issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.08(i). Any Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of
such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.



     “Kaiser Francis Acquisition Documents” means (a) the Purchase and Sale Agreement
between Kaiser-Francis Oil Company, as Seller, and Linn Energy Mid-Continent Holdings, LLC, as
Buyer, dated July 21, 2006, and (b) all bills of sale, assignments, agreements, instruments and
documents executed and delivered in connection therewith, as amended.



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



     “LC Commitment” at any time means Fifty Million Dollars ($50,000,000).



Credit Agreement




12









 








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



     “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements
that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of
any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.



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



     “Letter of Credit” means any letter of credit issued pursuant to this Agreement.



     “Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto) submitted by the
Borrower, or entered into by the Borrower, with any Issuing Bank relating to any Letter of Credit
issued by such Issuing Bank.



     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing on Page BBAM of Bloomberg (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate quotations comparable
to those currently provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not available at such
time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/16th of 1%) at
which dollar deposits of $1,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in immediately available funds
in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period.



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



     “Loan Documents” means this Agreement, the Notes, the Letter of Credit Agreements, the
Letters of Credit, the Security Instruments and the Intercreditor Agreement.



Credit Agreement




13









 








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



     “Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Maximum Credit
Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate principal amount of the
Loans and participation interests in Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)).



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



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



     “Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary that (a)
is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries, owns Property having a fair
market value of $1,000,000 or more.



     “Material Indebtedness” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its
Subsidiaries in an aggregate principal amount exceeding $1,000,000. For purposes of determining
Material Indebtedness, the “principal amount” of the obligations of the Borrower or any of its
Subsidiaries in respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to
pay if such Swap Agreement were terminated at such time.



     “Maturity Date” means August 1, 2010.



     “Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such
Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be (a) reduced
or terminated from time to time in connection with a reduction or termination of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b) or (b) modified from time to time pursuant to
any assignment permitted by Section 12.04(b).



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



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



     “Multiemployer Plan” means a Plan which is a multiemployer plan as defined in section
3(37) or 4001 (a)(3) of ERISA.



     “New Borrowing Base Notice” has the meaning assigned such term in Section 2.07(d).



Credit Agreement





14









 








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



     “Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future
unitization, pooling agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production sharing contracts and
agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues
and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements,
hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real or personal, now owned
or hereinafter acquired and situated upon, used, held for use or useful in connection with the
operating, working or development of any of such Hydrocarbon Interests or Property (excluding
drilling rigs, automotive equipment, rental equipment or other personal Property which may be on
such premises for the purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers,
casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and all of the foregoing.



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



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



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



     “Permitted Holders” means Quantum Energy Partners II, LP, a Delaware limited
partnership (“QEP II”), and the management and board of directors of the Borrower on the
date hereof, provided, that if QEP II dissolve or otherwise distribute their ownership interests in
the Borrower to their respective partners or members, the term Permitted Holders shall include each
of those partners or members of QEP II who were partners or members, or affiliates of such partners
or members, of QEP II, as the case may be, on the date hereof; provided that, with respect to the
board of directors of the
Borrower, the board of directors shall continue to include future boards of the Borrower so
long as occupation of the majority of the seats (other than vacant seats) on the board of directors
(or board of managers) of the Borrower are by Persons who were either (i) nominated by the board of
directors of the Borrower as of the Effective Date or (ii) appointed by directors a majority of
whom were so nominated.



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     “Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all of the Second
Lien Bridge Loan Debt (the “Refinanced Debt”); provided that (a) such new Debt is in an
aggregate principal amount not in excess of the aggregate principal amount then outstanding of the
Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the
principal amount thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount); (b) such new Debt has a stated maturity no earlier than the day 365 days after the
Maturity Date; (c) such new Debt does not contain any covenants which are more onerous to the
Borrower and its Subsidiaries than those imposed by the Refinanced Debt; and (d) such new Debt (and
any guarantees thereof) is subordinated in right of payment to the Indebtedness (or, if applicable,
the Guaranty Agreement) to at least the same extent as the Refinanced Debt or is otherwise
subordinated on terms substantially reasonably satisfactory to the Administrative Agent.



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



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



     “Prime Rate” means the rate of interest per annum publicly announced from time to time
by BNP Paribas as its prime rate in effect at its principal office in New York City; each change in
the Prime Rate shall be effective from and including the date such change is publicly announced as
being effective. Such rate is set by BNP Paribas as a general reference rate of interest, taking
into account such factors as BNP Paribas may deem appropriate; it being understood that many of BNP
Paribas’s commercial or other loans are priced in relation to such rate, that it is not necessarily
the lowest or best rate actually charged to any customer and that BNP Paribas may make various
commercial or other loans at rates of interest having no relationship to such rate.



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



     “Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).



     “Proposed Borrowing Base Notice” has the meaning assigned to such term in Section
2.07(c)(ii).



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



     “Proved Properties” means Oil and Gas Properties which are identified as “Proved
Reserves” on the most recent Engineering Report.



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



     “Redetermination Date” means, with respect to any Scheduled Redetermination or any
Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes
effective pursuant to Section 2.07(d).



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



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



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



     “Reserve Report” means a report, in form and substance reasonably satisfactory to the
Administrative Agent, setting forth, as of each January 1st or July 1st (or such other date in the
event of an Interim Redetermination) the oil and gas reserves attributable to the Oil and Gas
Properties of the Borrower and its Subsidiaries, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital expenditures with respect
thereto as of such date, based upon the economic assumptions consistent with the Administrative
Agent’s lending requirements at the time.



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



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



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



     “Scheduled Redetermination” has the meaning assigned such term in Section 2.07(b).



     “Scheduled Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section
2.07(d).



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



     “Second Lien Bridge Loan Administrative Agent” means BNP Paribas, as administrative
agent for the lenders (in such capacity, together with its successors and assigns).



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     “Second Lien Bridge Loan Agreement” means that certain Second Lien Bridge Loan
Agreement, dated as of August 1, 2006, by and among the Borrower, the several lenders from time to
time parties thereto, and the Second Lien Bridge Loan Administrative Agent, as the same shall be
amended, supplemented or otherwise modified from time to time in accordance with Section 9.04(b).



     “Second Lien Bridge Loan” means any Debt incurred pursuant to Section 9.02(f) and all
Debt and other obligations under the Second Lien Bridge Loan Documents.



     “Second Lien Bridge Loan Documents” means the Second Lien Bridge Loan Agreement and
the other Loan Documents (as defined in the Second Lien Bridge Loan Agreement) as the same shall be
amended, supplemented or otherwise modified from time to time in accordance with Section 9.04(b).



     “Second Lien Bridge Loan Notes” means the Notes from time to time issued under the
Second Lien Bridge Loan Agreement.



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



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



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



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



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



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



     “Termination Date” means the earlier of the Maturity Date and the date of termination
of the Commitments.



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



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



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



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



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



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




     Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and certificates and
reports as to financial matters required to be furnished to the Administrative Agent or the Lenders
hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements except for changes in which the Borrower’s independent certified public
accountants concur and which are disclosed to Administrative Agent on the next date on which
financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a);
provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no
such change shall modify or affect the manner in which compliance with the covenants contained
herein is computed such that all such computations shall be conducted utilizing financial
information presented consistently with prior periods.



ARTICLE II

The Credits




     Section 2.01 Commitments. Subject to the terms and conditions set forth herein, each
Lender agrees to make Loans to the Borrower during the Availability Period in an aggregate
principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such
Lender’s Commitment or (b) the total Revolving Credit Exposures exceeding the total Commitments.
Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans.



     Section 2.02 Loans and Borrowings.



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




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




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          (c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each
Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that
is an integral multiple of $500,000 and not less than $1,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of
$250,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.08(e). Borrowings of more
than one Type may be outstanding at the same time; provided that there shall not at any time be
more than a total of twelve (12) Eurodollar Borrowings outstanding. Notwithstanding any other
provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.




          (d) Notes. The Loans made by each Lender shall be evidenced by a single promissory
note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender
party hereto as of the date of this Agreement, as of the date of this Agreement or (ii) any Lender
that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of
the Assignment and Assumption, payable to the order of such Lender in a principal amount equal to
its Maximum Credit Amount as in effect on such date, and otherwise duly completed. In the event
that any Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to
Section 2.06, Section 12.04(b) or otherwise), the Borrower shall deliver or cause to be delivered
on the effective date of such increase or decrease, a new Note payable to the order of such Lender
in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or
decrease, and otherwise duly completed. The date, amount, Type, interest rate and, if applicable,
Interest Period of each Loan made by each Lender, and all payments made on account of the principal
thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer,
may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or
on any separate record maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such
Loans or affect the validity of such transfer by any Lender of its Note.




          (e) Loans and Borrowings under the Existing Credit Agreement. On the Effective Date
(or as soon as practicable with respect to (iii)):




               (i) the Borrower shall pay all accrued and unpaid commitment fees, break funding fees under
Section 5.02 and all other fees that are outstanding under the Existing Credit Agreement for the
account of each “Lender” under the Existing Credit Agreement;



               (ii) each “ABR Loan” and “Eurodollar Loan” outstanding under the Existing Credit Agreement
shall be deemed to be repaid with the proceeds of a new ABR Loan or Eurodollar Loan, as applicable,
under this Agreement;



               (iii) the Administrative Agent shall use reasonable efforts to cause such “Lender” under the
Existing Credit Agreement to deliver to the Borrower as soon as practicable after the Effective
Date the Note issued by the Borrower to it under the Existing Credit Agreement, marked “canceled”
or otherwise similarly defaced;



               (iv) any letters of credit outstanding under the Existing Credit Agreement shall be deemed
issued under this Agreement; and



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21









 








               (v) the Existing Credit Agreement and the commitments thereunder shall be superceded by this
Agreement and such commitments shall terminate.



               (vi) Bank of America, N.A. and Bank of Scotland will cease to be Lenders under the Credit
Agreement. Such parties are signing this Agreement solely for the purpose of exiting the Credit
Agreement and acknowledging that their Maximum Credit Amounts and Commitments have been reduced to
zero. On the Effective Date, Bank of America, N.A. and Bank of Scotland shall have their Revolving
Credit Exposure repaid (at a price equal to par, together with all accrued and unpaid interest and
fees) from the proceeds of the Loans to be advanced on such date.



     It is the intent of the parties hereto that this Agreement not constitute a novation of the
obligations and liabilities existing under the Existing Credit Agreement or evidence repayment of
any such obligations and liabilities and that this Agreement amend and restate in its entirety the
Existing Credit Agreement and re-evidence the obligations of the Borrower outstanding thereunder.



     Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall notify
the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., Houston time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Houston time, on the
date of the proposed Borrowing; provided that no such notice shall be required for any deemed
request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e). Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing
Request in a form approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information in compliance with
Section 2.02:



               (i) the aggregate amount of the requested Borrowing;



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



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



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



               (v) the amount of the then effective Borrowing Base, the current total Revolving Credit
Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit
Exposures (giving effect to the requested Borrowing); and



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


If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be a
Eurodollar Loan having an Interest Period of one month. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected
an Interest Period of one month’s duration. Each Borrowing Request shall constitute a
representation




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22









 







that the amount of the requested Borrowing shall not cause the total Revolving
Credit Exposures to exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit
Amounts and the then effective Borrowing Base).



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




     Section 2.04 Interest Elections.



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




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




          (c) Information in Interest Election Requests. Each telephonic and written Interest
Election Request shall specify the following information in compliance with Section 2.02:




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



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



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



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


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




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




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




     Section 2.05 Funding of Borrowings.



          (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Houston
time, to the account of the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the Borrower and
designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to
finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by
the Administrative Agent to the Issuing Bank that made such LC Disbursement. Nothing herein shall
be deemed to obligate any Lender to obtain the funds for its Loan in any particular place
or manner or to constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.




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




     Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.



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          (a) Scheduled Termination of Commitments. Unless previously terminated, the
Commitments shall terminate on the Maturity Date. If at any time the Aggregate Maximum Credit
Amounts or the Borrowing Base is terminated or reduced to zero, then the Commitments shall
terminate on the effective date of such termination or reduction.




          (b) Optional Termination and Reduction of Aggregate Credit Amounts.




               (i) The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum
Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be
in an amount that is an integral multiple of $500,000 and not less than $1,000,000 and (B) the
Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect
to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Revolving
Credit Exposures would exceed the total Commitments.



               (ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three Business Days prior to
the effective date of such termination or reduction, specifying such election and the effective
date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section
2.06(b)(ii) shall be irrevocable. Any termination or reduction of the Aggregate Maximum Credit
Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum
Credit Amounts shall be made ratably among the Lenders in accordance with each Lender’s Applicable
Percentage.



     Section 2.07 Borrowing Base.



          (a) Initial Borrowing Base. For the period from and including the Effective Date to
but excluding October 1st, 2006, the amount of the Borrowing Base shall be $265,000,000.
Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time
to time pursuant to Section 6.03, Section 6.04, Section 8.13(c), Section 9.02(e) or Section
9.12(d).




          (b) Scheduled and Interim Redeterminations. Subject to Section 2.07(d), the Borrowing
Base shall be redetermined (a “Scheduled Redetermination”) on April 1st and October 1st
of
each year, commencing October 1, 2006. In addition, either the Borrower or the Administrative
Agent, at the direction of the Majority Lenders, may once during each calendar year, each elect to
cause the Borrowing Base to be redetermined between Scheduled Redeterminations (an “Interim
Redetermination”) in accordance with this Section 2.07. The Borrower shall have the right, once
during each calendar year, to initiate an Interim Redetermination in addition to the one otherwise
provided in this Section 2.07(b) upon the proposed acquisition of Proved Developed Producing
Properties whose purchase price is greater than 10% of the Borrowing Base, provided such Interim
Redetermination is in accordance with this Section 2.07.




          (c) Scheduled and Interim Redetermination Procedure.





               (i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the Reserve Report
and the certificate required to be delivered by the Borrower to the Administrative Agent,
in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in
the case of an Interim Redetermination, pursuant to Section 8.12(b)



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and (c), and (B) such
other reports, data and supplemental information, including, without limitation, the
information provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such other
reports, data and supplemental information being the “Engineering Reports”), the
Administrative Agent shall evaluate the information contained in the Engineering Reports
and shall, in good faith, propose a new Borrowing Base (the “Proposed Borrowing
Base”) based upon such information and such other information (including, without
limitation, the status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Debt) as the
Administrative Agent deems appropriate in its sole discretion and consistent with its
normal oil and gas lending criteria as it exists at the particular time. In no event shall
the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts.



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



                    (A) in the case of a Scheduled Redetermination (1) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on or before the March 15th and September
15th of such year following the date of delivery of such Engineering Report or (2) if the
Administrative Agent shall not have received the Engineering Reports required to be delivered by
the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then promptly after the Administrative Agent has received complete Engineering Reports from
the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i) and in any event, within fifteen (15) days after the
Administrative Agent has received the required Engineering Report; and



                    (B) in the case of an Interim Redetermination, promptly, and in any event, within fifteen (15)
days after the Administrative Agent has received the required Engineering Reports.




               (iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved or deemed to have been approved by all of the Lenders
as provided
in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect must be approved or be deemed to have been
approved by the Majority Lenders as provided in this Section 2.07(c)(iii). Upon receipt of
the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with
the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
alternate Borrowing Base. If at the end of such fifteen (15) days, any Lender has not
communicated its approval or disapproval in writing to the Administrative Agent, such
silence shall be deemed to be an approval of the Proposed Borrowing Base. If, at the end
of such 15-day period, all of the Lenders, in the case of a Proposed Borrowing Base that
would increase the Borrowing Base then in effect, or the Majority Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect,
have approved or deemed to have approved, as aforesaid, then the Proposed Borrowing Base
shall become the new Borrowing Base, effective on the date specified in Section 2.07(d).
If, however, at the end of such 15-day period, all of the Lenders or the Majority Lenders,
as applicable, have not approved or deemed to have approved, as aforesaid, then the
Administrative Agent shall poll the Lenders to ascertain the highest



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Borrowing Base then
acceptable to a number of Lenders sufficient to constitute the Majority Lenders and, so
long as such amount does not increase the Borrowing Base then in effect, such amount shall
become the new Borrowing Base, effective on the date specified in Section 2.07(d).



          (d) Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing
Base is approved or is deemed to have been approved by all of the Lenders or the Majority Lenders,
as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower
and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing Base
Notice”), and such amount shall become the new Borrowing Base, effective and applicable to the
Borrower, the Administrative Agent, each Issuing Bank and the Lenders:




               (i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on the April 1st or October 1st, as
applicable, following delivery of the New Borrowing Base Notice, or (B) if the Administrative Agent
shall not have received the Engineering Reports required to be delivered by the Borrower pursuant
to Section 8.12(a) and (c) in a timely and complete manner, then on the Business Day next
succeeding delivery of the New Borrowing Base Notice; and



               (ii) in the case of an Interim Redetermination, on the Business Day next succeeding delivery
of such notice.



     Such amount shall then become the Borrowing Base until the next Scheduled Redetermination
Date, the next Interim Redetermination date or the next adjustment to the Borrowing Base under
Section 6.03, Section 6.04, Section 8.13(c), Section 9.02(e) or Section 9.12(d), whichever occurs
first.



     Section 2.08 Letters of Credit.



          (a) General. Subject to the terms and conditions set forth herein, the Borrower may
request any Issuing Bank to issue Letters of Credit for its own account or for the account of the
Borrower or any of its Subsidiaries, in a form reasonably acceptable to the Administrative Agent
and such Issuing Bank, at any time and from time to time during the Availability Period; provided
that the Borrower may not request the issuance, amendment, renewal or extension of Letters of
Credit hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result
thereof. In the event of any inconsistency between the terms and conditions of this Agreement and
the terms and conditions of any form of letter of credit application or other agreement submitted
by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.




          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter
of Credit), the Borrower shall deliver as permitted by Section 12.01(a) (or transmit by
electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to
any Issuing Bank and the Administrative Agent (not less than five (5) Business Days in advance of
the requested date of issuance, amendment, renewal or extension) a notice:




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               (i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit issued
by such Issuing Bank to be amended, renewed or extended;



               (ii) specifying the date of issuance, amendment, renewal or extension (which shall be a
Business Day);



               (iii) specifying the date on which such Letter of Credit is to expire (which shall comply with
Section 2.08(c));



               (iv) specifying the amount of such Letter of Credit;



               (v) specifying the name and address of the beneficiary thereof and such other information as
shall be necessary to prepare, amend, renew or extend such Letter of Credit; and



               (vi) specifying the amount of the then effective Borrowing Base and whether a Borrowing Base
Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the
requested Letter of Credit or the requested amendment, renewal or extension of an outstanding
Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of an outstanding
Letter of Credit).


Each notice shall constitute a representation that after giving effect to the requested issuance,
amendment, renewal or extension, as applicable, (i) the LC Exposure shall not exceed the LC
Commitment and (ii) the total Revolving Credit Exposures shall not exceed the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base.



If requested by any Issuing Bank, the Borrower also shall submit a letter of credit application on
such Issuing Bank’s standard form in connection with any request for a Letter of Credit.




          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance of such Letter of
Credit
(or, in the case of any renewal or extension thereof, one year after such renewal or
extension) and (ii) the date that is five Business Days prior to the Maturity Date.




          (d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of the
Issuing Bank that issues such Letter of Credit or the Lenders, each Issuing Bank that issues a
Letter of Credit hereunder hereby grants to each Lender, and each Lender hereby acquires from such
Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage
of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of any Issuing Bank that issues a Letter of Credit
hereunder, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank
and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any
reimbursement payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this Section
2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit
or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or
reduction




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or termination of the Commitments, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.




          (e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit issued by such Issuing Bank, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not later than 1:00
p.m., Houston time, on the third day after such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 9:00 a.m., Houston time, on such date, or, if such
notice has not been received by the Borrower prior to such time on such date, then not later than
1:00 p.m., Houston time, on (i) the third day after the Borrower receives such notice, if such
notice is received prior to 9:00 a.m., Houston time, on the day of receipt, or (ii) the Business
Day immediately following the third day after the Borrower receives such notice, if such notice is
not received prior to such time on the day of receipt; provided that if such LC Disbursement is not
less than $1,000,000, the Borrower shall, subject to the conditions to Borrowing set forth herein,
be deemed to have requested, and the Borrower does hereby request under such circumstances, that
such payment be financed with a Eurodollar Borrowing with an Interest Period of one month in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment
shall be discharged and replaced by the resulting Eurodollar Borrowing. If the Borrower fails to
make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s
Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such
Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank that issued such
Letter of Credit the amounts so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the
Administrative Agent shall distribute such payment to the Issuing Bank that issued such Letter of
Credit or, to the extent that Lenders have made payments pursuant to this Section 2.08(e) to
reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this Section 2.08(e) to reimburse any Issuing
Bank for any LC Disbursement
(other than the funding of ABR Loans as contemplated above) shall not
constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement. Any LC Disbursement not reimbursed by the Borrower or funded as a Loan prior to 1:00
p.m., Houston time, shall bear interest for such day at the ABR plus the Applicable Margin.




          (f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as
provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit,
any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft
or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by
any Issuing Bank under a Letter of Credit issued by such Issuing Bank against presentation of a
draft or other document that does not comply with the terms of such Letter of Credit or any Letter
of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a
legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their
Related Parties




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




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




          (h) Interim Interest. If any Issuing Bank shall make any LC Disbursement, then, until
the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own
funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans.
Interest accrued pursuant to this Section 2.08(h) shall be for the account of such Issuing Bank,
except that interest accrued on and after the date of payment by any Lender pursuant to Section
2.08(e) to reimburse such Issuing Bank shall be for the account of such Lender to the extent of
such payment.




          (i) Replacement of an Issuing Bank. Any Issuing Bank may be replaced or resign at any
time by written agreement among the Borrower, the Administrative Agent, such resigning or replaced
Issuing Bank and, in the case of a replacement, the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such resignation or replacement of an Issuing Bank. At the
time any such resignation or replacement shall become effective, the Borrower shall pay all unpaid
fees accrued for the account of the resigning or replaced Issuing Bank pursuant to Section 3.05(b).
In the case of the replacement of an Issuing Bank, from and after the effective date of such
replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the
replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued




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




          (j) Cash Collateralization. If (i) any Event of Default shall occur and be continuing
and the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding
the deposit of cash collateral pursuant to this Section 2.08(j), or (ii) the Borrower is required
to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an account with the
Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders,
an amount in cash equal to, in the case of an Event of Default, the LC Exposure, and in the case of
a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as
of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the occurrence of any Event of
Default with respect to the Borrower or any of its Subsidiaries described in Section 10.01(h) or
Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security
interest in and Lien on such account and all cash, checks, drafts, certificates and instruments,
if any, from time to time deposited or held in such account, all deposits or wire transfers
made thereto, any and all investments purchased with funds deposited in such account, all interest,
dividends, cash, instruments, financial assets and other Property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and
all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any
substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to
this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary
of any such Letter of Credit has attempted to draw down all or a portion of such amount under the
terms of a
Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be
subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the
Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, any
Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever.
Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and
any Guarantor’s obligations under this Agreement and the other Loan Documents. The Administrative
Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over
such account; provided that investments of funds in such account in investments permitted by
Section 9.05(c) or (e) may be made at the option of the Borrower at its direction, risk and
expense. Interest or profits, if any, on such investments shall accumulate in such account.
Moneys in such account shall be applied by the Administrative Agent to reimburse, on a pro rata
basis, each Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the
Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy other obligations of the Borrower and the Guarantors, if any, under this
Agreement or the other Loan Documents. If the Borrower is required to provide an amoun
t of cash
collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not
otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in
connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not
applied as aforesaid) shall be




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returned to the Borrower within three Business Days after all Events
of Default have been cured or waived.




ARTICLE III

Payments of Principal and Interest; Prepayments; Fees




     Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of each Lender the then unpaid principal amount of each
Loan on the Termination Date.



     Section 3.02 Interest.



          (a) ABR Loans. Each ABR Loan comprising an ABR Borrowing shall bear interest at the
Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.




          (b) Eurodollar Loans. Each Eurodollar Loan comprising a Eurodollar Borrowing shall
bear interest at the LIBO Rate for the Interest Period in effect for such Eurodollar Loan plus the
Applicable Margin, but in no event to exceed the Highest Lawful Rate.




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




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




          (e) Interest Rate Computations. All interest hereunder shall be computed on the basis
of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case
interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except
that interest computed by reference to the Alternate Base Rate shall be computed on the basis




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of a
year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The applicable
Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error, and be binding upon the parties hereto.




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



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




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



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




     Section 3.04 Prepayments.



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




          (b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the
case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Houston time, three
Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing,
not later than 12:00 noon, Houston time, one Business Day before the date of prepayment. Each such
notice shall be irrevocable and shall specify the prepayment date and the principal amount of each
Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice relating
to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a
Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 3.02.




          (c) Mandatory Prepayments.




               (i) If, after giving effect to any termination or reduction of the Aggregate Maximum Credit
Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures exceeds the total
Commitments, then the Borrower shall, on the same Business Day, (A) prepay the



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Borrowings on the
date of such termination or reduction in an aggregate principal amount equal to such excess, and
(B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as
cash collateral as provided in Section 2.08(j).




               (ii) Upon any redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07 or Section 8.13(c), if the total Revolving Credit Exposures exceeds
the redetermined or adjusted Borrowing Base, then the Borrower shall (A) prepay the Borrowings in
an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying
all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of
the Lenders an amount equal to such excess to be held as cash collateral as provided in Section
2.08(j). The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral
within ninety days (90) following the later of its receipt of the New Borrowing Base Notice in
accordance with Section 2.07(d) or the date the adjustment occurs; provided that all payments
required to be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the
Termination Date.



               (iii) Upon any adjustments to the Borrowing Base pursuant to Section 9.12(d), if the total
Revolving Credit Exposures exceed the Borrowing Base as adjusted, then the Borrower shall (A)
prepay the Borrowings in an aggregate principal amount equal to such excess, and (B) if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). The Borrower shall be obligated to make such prepayment
and/or deposit of cash collateral on the date it or any Subsidiary receives cash proceeds
as a
result of such disposition; provided that all payments required to be made pursuant to this Section
3.04(c)(iii) must be made on or prior to the Termination Date.



               (iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first,
ratably to any ABR Borrowings then outstanding, and, second, to any Eurodollar Borrowings then
outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar
Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of
days remaining in the Interest Period applicable thereto and ending with the Eurodollar Borrowing
with the most number of days remaining in the Interest Period applicable thereto.



               (v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to
the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall
be accompanied by accrued interest to the extent required by Section 3.02.



          (d) No Premium or Penalty. Prepayments permitted or required under this Section 3.04
shall be without premium or penalty, except as required under Section 5.02.




     Section 3.05 Fees.



          (a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee, which shall accrue at a rate per annum equal to the
Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such
Lender during the period from and including the date of this Agreement to but excluding the
Termination Date. Accrued commitment fees shall be payable in arrears on the last day of March,




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June, September and December of each year and on the Termination Date, commencing on the first such
date to occur after the date hereof. All commitment fees shall be computed on the basis of a year
of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).




          (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Margin used to determine the interest rate
applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to
each Issuing Bank a fronting fee equal to 0.125% per annum on the face amount of each Letter of
Credit issued by such Issuing Bank hereunder, provided that in no event shall such fee
be less than $500 and (iii) to each Issuing Bank, for its own account, its standard fees with
respect to the amendment, renewal or extension of any Letter of Credit issued by such Issuing Bank
or processing of drawings thereunder. Participation fees accrued through and including the last
day of March, June, September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the date of this
Agreement and fronting fees with respect to any Letter of Credit shall be payable at the time of
issuance of such Letter of Credit; provided that all such fees shall be payable on the Termination
Date and any such
fees accruing after the Termination Date shall be payable on demand. Any other
fees payable to an Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on the basis of a year of
360 days, unless such computation would exceed the Highest Lawful Rate, in which case such fees
shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).




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




          (d) Borrowing Base Increase Fees. The Borrower agrees to pay to the Administrative
Agent, for the account of each Lender then party to this Agreement, ratably in accordance with its
Applicable Percentage, a Borrowing Base increase fee equal to 0.25% on the amount of any increase
of the Borrowing Base over the highest Borrowing Base previously in effect, payable on the day a
New Borrowing Base Notice is given.




ARTICLE IV

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




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



          (a) Payments by the Borrower. The Borrower shall make each payment required to be
made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 1:00 p.m.,
Houston time, on the date when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and




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shall not be
refundable under any circumstances. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments to be made directly
to an Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled
thereto. The Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following receipt thereof. If
any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall
be extended to the next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments hereunder shall
be made in dollars.




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




          (c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of
set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on
any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements
and accrued interest thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans and participations
in LC Disbursements; provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations shall be rescinded and
the purchase price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a participation in any of
its Loans or participations in LC Disbursements to any assignee or participant, other than to the
Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c)
shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.




     Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative Agent shall
have received notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or any Issuing Bank that the Borrower will not
make such payment, the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption, distribute



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36









 







to the
Lenders or such Issuing Bank, as the case may be, the amount due. In such event, if the Borrower
has not in fact made such payment, then each of the Lenders or such Issuing Bank, as the case may
be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or such Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on interbank compensation.




     Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall fail to
make any payment required to be made by it pursuant to Section 2.05(b), Section 2.08(d), Section
2.08(e) or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such
Sections until all such unsatisfied obligations are fully paid.



ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality




     Section 5.01 Increased Costs.



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




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



               (ii) impose on any Lender or the London interbank market any other condition affecting this
Agreement or Eurodollar Loans made by such Lender;


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




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




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




          (d) Effect of Failure or Delay in Requesting Compensation. Failure or delay on the
part of any Lender or any Issuing Bank to demand compensation pursuant to this Section 5.01 shall
not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation,
provided that no Lender may make any such demand more than 180 days after the
Termination Date, nor
for any amount which has accrued more than 270 days prior to such Lender or Issuing Bank delivering
the certificate required in Section 5.01(c).




     Section 5.02 Break Funding Payments. In the event of (a) the payment of any principal of
any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including
as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan
other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto, then, in any such event, the Borrower shall compensate each Lender for the loss,
cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the principal amount of
such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such Lender would bid
were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.


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




     Section 5.03 Taxes.



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38









 








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




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




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




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




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




     Section 5.04 Designation of Different Lending Office. If any Lender requests compensation
under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender
shall use reasonable efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or assignment (a)
would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may
be, in the future and (b) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise



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39









 







be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such designation or
assignment.




     Section 5.05 Illegality. Notwithstanding any other provision of this Agreement, in the
event that it becomes unlawful for any Lender or its applicable lending office to honor its
obligation to make or maintain Eurodollar Loans either generally or having a particular Interest
Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative
Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain such Eurodollar Loans
and (b) all Affected Loans which would otherwise be made by such Lender shall be made instead as
ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected Loans of such Lender
then outstanding shall be automatically converted into ABR Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into)
ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected
Loans shall be applied instead to its ABR Loans.



ARTICLE VI

Conditions Precedent




     Section 6.01 Effective Date. The obligations of the Lenders to make Loans and of any
Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance with Section 12.02):



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




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




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



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40










 







          (d) The Administrative Agent shall have received a compliance certificate which shall be
substantially in the form of Exhibit B, duly and properly executed by a Responsible Officer and
dated as of the Effective Date.




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




          (f) The Administrative Agent shall have received duly executed Notes payable to the order of
each Lender in a principal amount equal to its Maximum Credit Amount dated as of the date hereof.




          (g) The Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of the Security
Instruments, including the Guaranty Agreement and the other Security Instruments described on
Exhibit C-1. In connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall





          (i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of
the definition thereof, but subject to the provisos at the end of such definition) on at
least 80% of the total value of the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report.




          (ii) have received certificates, together with undated, blank stock powers for each
such certificate, representing all of the issued and outstanding Equity Interests of each of
the Guarantors.



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




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




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




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




          (l) The Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties the Borrower, and its Subsidiaries




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41









 







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




          (m) The Administrative Agent shall have received a certificate of a Responsible Officer of the
Borrower certifying that funding under the Second Lien Bridge Loan Agreement has occurred, or is
occurring contemporaneously with the initial funding hereunder, which shall result in available
commitments of up to $250,000,000.




          (n) The Administrative Agent shall have received evidence that the Borrower has entered into
Swap Agreements, the prices, volumes and terms of which are satisfactory to the Arrangers.




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




     The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and
such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of
the Lenders to make Loans and of each Issuing Bank to issue Letters of Credit hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 12.02) at or prior to 1:00 p.m., Houston time, on August 15, 2006 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at such time).



     Section 6.02 Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing (including the initial funding), and of each Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following
conditions:



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




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




          (c) The representations and warranties of the Borrower and the Guarantors, set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such representations and
warranties shall continue to be true and correct as of such specified earlier date.




          (d) The making of such Loan or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, would not conflict with, or cause any Lender or any Issuing Bank to violate
or exceed, any applicable Governmental Requirement, and no Change in Law shall have occurred, and
no litigation shall be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the Second
Lien Bridge Loan, the issuance, amendment, renewal, extension or repayment of any Letter




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42









 







of Credit
or any participations therein or the consummation of the transactions contemplated by this
Agreement or any other Loan Document.



          (e) The receipt by the Administrative Agent of a Borrowing Request in accordance with Section
2.03 or a request for a Letter of Credit in accordance with Section 2.08(b), as applicable.




     Each request for a Borrowing and each issuance, amendment, renewal or extension of any Letter
of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date
thereof as to the matters specified in Section 6.02(a) through (e).



     Section 6.03 Kaiser Francis. If the following conditions are satisfied within the
Availability Period, the Borrowing Base will increase by $50,000,000:



          (a) The Administrative Agent shall have received (i) a certificate of a Responsible Officer of
the Borrower certifying: (A) that the Borrower is concurrently consummating the Kaiser Francis
Acquisition in accordance with the terms of the Kaiser Francis Acquisition Documents (with all of
the material conditions precedent thereto having been satisfied in all material respects by the
parties thereto) and acquiring substantially all of the Kaiser Francis Acquisition Properties
contemplated by the Kaiser Francis Acquisition Documents; (B) as to the final purchase price for
the Kaiser Francis Acquisition Properties after giving effect to all adjustments as of the closing
date contemplated by the Kaiser Francis Acquisition Documents and specifying, by category, the
amount of such adjustment; (C) that attached thereto is a true and complete list of the Kaiser
Francis Acquisition Properties which have been excluded from the Acquisition pursuant to the terms
of the Acquisition Documents, specifying with respect thereto the basis of exclusion as (1) title
defect, (2) preferential purchase right, (3) environmental or (4) casualty loss; (D) that attached
thereto is a true and complete list of all Kaiser Francis Acquisition Properties for which any
seller has elected to cure a title defect, (E) that attached thereto is a true and complete list of
all Kaiser Francis Acquisition Properties for which any seller has elected to remediate an adverse
environmental condition, and (F) that attached thereto is a true and complete list of all Kaiser
Francis Acquisition Properties which are currently pending final decision by a third party
regarding purchase of such property in accordance with any preferential right; (ii) a true and
complete executed copy of each of the Kaiser Francis Acquisition Documents; (iii) original
counterparts or copies, certified as true and complete, of the assignments, deeds and leases for
all of the Kaiser Francis Acquisition Properties; and (iv) such other related documents and
information as the Administrative Agent shall have reasonably requested.




     The Borrower recognizes and agrees that (a) it shall have delivered to the Administrative
Agent a preliminary draft of the certificate described herein not less than three (3) days prior to
the Effective Date identifying which Kaiser Francis Acquisition Properties will be excluded from
the Kaiser Francis Acquisition on the Effective Date, and (b) if the aggregate value as reflected
in the Initial Reserve Report of the Kaiser Francis Acquisition Properties excluded under clause
(i)(C) above is greater than $1,000,000 or any Kaiser Francis Acquisition Properties are excluded
for other reasons or any seller in respect thereof makes any adjustment to the purchase price under
the Kaiser Francis Acquisition Documents, then Administrative Agent shall suggest to the Lenders a
Borrowing Base value for each such excluded Property or such Property subject of such adjustment
and the Majority Lenders shall reach a consensus as to all allocation of value for such Property.
Promptly upon the making by the Majority Lenders of such allocation, the Administrative Agent shall
notify the Borrower and each Lender of such allocation.



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          (b) The Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of the Security
Instruments, including the Guaranty Agreement and the other Security Instruments described on
Exhibit C-2. In connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall





          (i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of
the definition thereof, but subject to the provisos at the end of such definition) on at
least 80% of the total value of the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report.




          (ii) have received certificates, together with undated, blank stock powers for each
such certificate, representing all of the issued and outstanding Equity Interests of each of
the Guarantors.



          (c) The Administrative Agent shall have received an opinion of local counsel in each of the
following states: Oklahoma and any other jurisdictions requested by the Administrative Agent, in
form and substance satisfactory to the Administrative Agent.




          (d) The Administrative Agent shall have received title information as the Administrative Agent
may reasonably require satisfactory to the Administrative Agent setting forth the status of title
to at least 80% of the total value of the Oil and Gas Properties evaluated in the Reserve Report of
Kaiser Francis Acquisition Properties.




          (e) The Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties of the Borrower and the Subsidiaries for each
of the following jurisdictions: Oklahoma and any other jurisdiction requested by the Administrative
Agent; other than those being assigned or released on or prior to the consummation of the
Kaiser Francis Acquisition or Liens permitted by Section 9.03.




          (f) The Administrative Agent shall be reasonably satisfied with the environmental condition of
the Kaiser Francis Acquisition Properties.




          (g) The Administrative Agent shall have received a Reserve Report covering the Kaiser Francis
Acquisition Properties accompanied by a certificate covering the matters described in Section
8.12(c).




          (h) The Administrative Agent shall have received a certificate of a Responsible Officer
certifying that the Borrower has received all consents and approvals required by Section 7.03 in
connection with the Kaiser Francis Acquisition.




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




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




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     Section 6.04 Blacksand. If the following conditions are satisfied within the Availability
Period, the Borrowing Base will increase by $165,000,000:



          (a) The Administrative Agent shall have received (i) a certificate of a Responsible Officer of
the Borrower certifying: (A) that the Borrower is concurrently consummating the Blacksand
Acquisition in accordance with the terms of the Blacksand Acquisition Documents (with all of the
material conditions precedent thereto having been satisfied in all material respects by the parties
thereto) and acquiring substantially all of the Blacksand Acquisition Properties contemplated by
the Blacksand Acquisition Documents; and (B) as to the final purchase price for the Blacksand
Acquisition Properties after giving effect to all adjustments as of the closing date
contemplated by the Blacksand Acquisition Documents and specifying, by category, the amount of
such adjustment.




          (b) The Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of the Security
Instruments, including the Guaranty Agreement and the other Security Instruments described on
Exhibit C-3. In connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall





          (i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of
the definition thereof, but subject to the provisos at the end of such definition) on at
least 80% of the total value of the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report.




          (ii) have received certificates, together with undated, blank stock powers for each
such certificate, representing all of the issued and outstanding Equity Interests of each of
the Guarantors.



          (c) The Administrative Agent shall have received an opinion of local counsel in each of the
following states: California and any other jurisdictions requested by the Administrative Agent, in
form and substance satisfactory to the Administrative Agent.




          (d) The Administrative Agent shall have received title information as the Administrative Agent
may reasonably require satisfactory to the Administrative Agent setting forth the status of title
to at least 80% of the total value of the Oil and Gas Properties evaluated in the Reserve Report of
Blacksand Acquisition Properties.




          (e) The Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties of the Borrower and the Subsidiaries for each
of the following jurisdictions: California and any other jurisdiction requested by the
Administrative Agent; other than those being assigned or released on or prior to the
consummation of the Blacksand Acquisition or Liens permitted by Section 9.03.




          (f) The Administrative Agent shall be reasonably satisfied with the environmental condition of
the Blacksand Acquisition Properties.




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          (g) The Administrative Agent shall have received a Reserve Report covering the Blacksand
Acquisition Properties accompanied by a certificate covering the matters described in Section
8.12(c).




          (h) The Borrower shall have provided to the Administrative Agent at least 5 days prior to the
date that the Blacksand Acquisition Loan is to be requested, the following: (i) the name of the
Person (“Target”) whose assets are to be acquired (such acquisition, whether acquired from
the Target or pursuant to a Capital Expenditure, the “Target Acquisition”); (ii) a
description of the Target’s business in which such assets are employed; (iii) copies of
documentation (or substantially final drafts of the documentation) intended to effect the proposed
Target Acquisition (the “Target Acquisition Agreements”); (iv) a summary of the terms and
conditions of the proposed Target Acquisition; (v) a certificate of the chief financial officer of
the Borrower that no Default or Event of
Default exists or could reasonably be expected to occur as a result of the proposed Target
Acquisition; (vi) the details of computations proposed by the Borrower to determine compliance with
the financial covenants as set forth in Section 9.01 below; (vii) copies of such due diligence
materials the Administrative Agent deems reasonably necessary to complete its evaluation, and
(viii) any other information the Agent may reasonably request.




          (i) The Borrower shall provide to the Administrative Agent evidence that:





          (i) Neither the Target nor its assets shall be subject to any contingent obligations
(including contingent obligations arising from any environmental liabilities), environmental
liabilities, unsatisfied judgments or any pending action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration that could reasonably be expected to have a
Material Adverse Effect; and




          (ii) The following criteria are satisfied:




               (A) The Borrower shall have provided the Administrative Agent (I) copies of the pro forma
financial statements of the Target for the period of the three fiscal quarters recently ended prior
to the closing of the proposed Target Acquisition for which financial statements are available and
(II) a pro forma financial projection of the Borrower and its Subsidiaries (including the Target
Acquisition) following the date of the consummation of the proposed Target Acquisition to the
Maturity Date which reflects compliance with the financial covenants set forth in Section 9.01; and




               (B) The Borrower shall have provided to the Administrative Agent a certificate executed by the
chief financial officer of the Borrower which certifies compliance with the criteria set forth in
this Section 6.04(i)(ii).



     The Administrative Agent, in its sole judgment, shall be satisfied with the results of each of
the foregoing



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




          (k) The Administrative Agent shall have received evidence satisfactory to it that all Liens
associated with the Blacksand Acquisition Properties have been released or terminated




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contemporaneously with the Blacksand Acquisition and that arrangements satisfactory to the
Administrative Agent has been made for recording and filing of such releases.



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




ARTICLE VII



Representations and Warranties




     The Borrower represents and warrants to the Lenders that:



     Section 7.01 Organization; Powers. Each of the Borrower and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority, and has all material governmental licenses,
authorizations, consents and approvals necessary, to own its assets and to carry on its business as
now conducted, and is qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required, except where failure to have such power, authority, licenses,
authorizations, consents, approvals and qualifications could not reasonably be expected to have a
Material Adverse Effect.



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



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



     Section 7.04 Financial Position; No Material Adverse Change.



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          (a) The Borrower has heretofore furnished to the Lenders (i) the audited consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2005, and related
audited consolidated statements of income, cash flows and changes in members’ equity for the fiscal
year ending December 31, 2005 and (ii) the unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of and for the fiscal quarter and the portion of
the fiscal year ended March 31, 2006, certified by its chief financial officer. Such
financial statements present fairly, in all material respects, the financial position and results
of operations and cash flows of the Borrower and its consolidated subsidiaries as of such date and
for such period in accordance with GAAP.




          (b) Since December 31, 2005, (i) there has been no event, development or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the
Borrower and its Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.




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




     Section 7.05 Litigation. Except as set forth on Schedule 7.05, there are no actions,
suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries (a) as to which there is a reasonable possibility of an adverse determination
that, if adversely determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (b) that involve any Loan Document or the Transactions.
Since the date of this Agreement, there has been no change in the status of the matters disclosed
in Schedule 7.05 that, individually or in the aggregate, has resulted in, or materially increased
the likelihood of, a Material Adverse Effect.



     Section 7.06 Environmental Matters. Except as could not be reasonably expected to have a
Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such
actions could not be reasonably expected to have a Material Adverse Effect):



          (a) neither any Property of the Borrower or any of its Subsidiaries nor the operations
conducted thereon violate any order or requirement of any court or Governmental Authority or any
Environmental Laws.




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




          (c) all notices, permits, licenses, exemptions, approvals or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of any and all Property of
the Borrower and each of its Subsidiaries, including, without limitation, past or present
treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste
into the




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48









 







environment, have been duly obtained or filed or requested, and the Borrower and each of
its
Subsidiaries are in compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations.




          (d) all hazardous substances, solid waste and oil and gas waste, if any, generated at any and
all Property of the Borrower or any of its Subsidiaries have in the past been transported, treated
and disposed of in accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and, to the knowledge of
the Borrower, all such transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the subject of any
existing, pending or threatened action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws.




          (e) the Borrower has taken all steps reasonably necessary to determine and has determined that
no oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise
released and there has been no threatened release of any oil, hazardous substances, solid waste or
oil and gas waste on or to any Property of the Borrower or any of its Subsidiaries except in
compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment
to public health or welfare or the environment.




          (f) to the extent applicable, all Property of the Borrower and each of its Subsidiaries
currently satisfies all design, operation, and equipment requirements imposed by the OPA, and the
Borrower does not have any reason to believe that such Property, to the extent subject to the OPA,
will not be able to maintain compliance with the OPA requirements during the term of this
Agreement.




          (g) neither the Borrower nor any of its Subsidiaries has any known contingent liability or
Remedial Work in connection with any release or threatened release of any oil, hazardous substance,
solid waste or oil and gas waste into the environment.




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



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




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




          (c) No Default has occurred and is continuing.




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     Section 7.08 Investment Company Act. Neither the Borrower nor any of its Subsidiaries is
an “investment company” or a company “controlled” by an “investment company,” within the meaning
of, or subject to regulation under, the Investment Company Act of 1940, as amended.



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



     Section 7.10 ERISA.



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




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




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




          (d) No Plan (other than a defined contribution plan) or any trust created under any such Plan
has been terminated since September 2, 1974. No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any of its Subsidiaries or any ERISA
Affiliate has been or is expected by the Borrower, any of its Subsidiaries or any ERISA Affiliate
to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred.




          (e) Full payment when due has been made of all amounts which the Borrower, any of its
Subsidiaries or any ERISA Affiliate is required under the terms of each Plan, if any, or applicable
law to have paid as contributions to such Plan as of the date hereof, and no accumulated funding
deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived,
exists with respect to any Plan.




          (f) The actuarial present value of the benefit liabilities under each Plan, if any, which is
subject to Title IV of ERISA does not, as of the end of the Borrower’s most recently ended fiscal
year, exceed the current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term “actuarial
present value of the benefit liabilities” shall have the meaning specified in section 4041 of
ERISA.




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          (g) Neither the Borrower, its Subsidiaries nor any ERISA Affiliate sponsors, maintains, or
contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by the Borrower, any of its Subsidiaries or any ERISA
Affiliate in its sole discretion at any time without any material liability.




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




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




     Section 7.11 Disclosure; No Material Misstatements. As set forth on Schedule 7.11, the
Borrower has disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of the reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent,
any other Agent or any Lender or any of their Affiliates in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished) contains any material misstatement of
fact or omits to state any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. There is no fact peculiar
to the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material
Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which
has not been set forth in this Agreement or the Loan Documents or the other documents, certificates
and statements furnished to the Administrative Agent, any other Agent or the Lenders by or on
behalf of the Borrower or any of its Subsidiaries prior to, or on, the date hereof in connection
with the transactions contemplated hereby. There are no statements or conclusions in any Reserve
Report which are based upon or include misleading information or fail to take into account material
information regarding the matters reported therein.



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



     Section 7.13 Restriction on Liens. Neither the Borrower nor any of its Subsidiaries is a
party to any material agreement or arrangement, or subject to any order, judgment, writ or decree,
which either restricts or purports to restrict its ability to grant Liens to the Administrative
Agent and the Lenders on or in respect of their Properties to secure the Indebtedness and the Loan
Documents.



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     Section 7.14 Subsidiaries. Except as set forth on part 1 of Schedule 7.14 or as disclosed
in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which
shall be a supplement to Schedule 7.14, the Borrower has no Subsidiaries. After the Blacksand
Acquisition, the Borrower’s Subsidiaries shall include those Subsidiaries listed on part 2 of
Schedule 7.14. The Borrower has no Foreign Subsidiaries.



     Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of organization
is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of
organization is Linn Energy, LLC, and the organizational identification number of the Borrower in
its jurisdiction of organization is 3951040 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(l) in accordance with Section 12.01). The
Borrower’s principal place of business and chief executive offices are located at the address
specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(l) and
Section 12.01(c)). Each Subsidiary’s jurisdiction of organization, name as listed in the public
records of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of business and chief
executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to
Section 8.01(l)).



     Section 7.16 Properties; Titles, Etc.



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




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




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




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




          (e) The Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual Property material to its business,




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and the
use thereof by the Borrower and such Subsidiary does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. The Borrower and its Subsidiaries
either own or have valid licenses or other rights to use all databases, geological data,
geophysical data, engineering data, seismic data, maps, interpretations and other technical
information used in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as
could not reasonably be expected to have a Material Adverse Effect.




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



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



     Section 7.19 Marketing of Production. Except for contracts listed and in effect on the
date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative
Agent or included in the most recently delivered Reserve Report (with respect to all of which
contracts the Borrower represents that it or its Subsidiaries are receiving a price for all
production sold thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below the subject
Property’s delivery capacity), no material agreements exist which are not cancelable on 60 days
notice or less without penalty or detriment for the sale of production from the Borrower’s or its
Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently



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being exercised) that (a) pertain to the sale of
production at a fixed price and (b) have a maturity or expiry date of more than six (6) months from
the date hereof.




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



     Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters
of Credit shall be used (a) to provide working capital, (b) to refinance existing indebtedness
(including the Existing Credit Agreement), (c) for the acquisition, exploration and development of
oil and gas properties, including the Blacksand Acquisition and the Kaiser Francis Acquisition, (d)
for the issuance of Letters of Credit, and (e) for general corporate purposes, including Restricted
Payments, provided that if the Borrowing Base Utilization Percentage is equal to or exceeds 90%
before or after giving effect to the requested Loan or Letter of Credit, then no proceeds of any
Loan or any Letter of Credit may be used to fund Restricted Payments under Section 9.04. The
Borrower and its Subsidiaries are not engaged principally, or as one of its or their important
activities, in the business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the
Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.



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



     Section 7.23 Specified Senior Indebtedness . The Indebtedness of the Borrower
constitutes “Senior Indebtedness” as defined in the Intercreditor Agreement.



     Section 7.24 Acquisitions. The copies of the Kaiser Francis Acquisition Documents
and Blacksand Acquisition Documents previously delivered by the Borrower to the Administrative
Agent are true, accurate and complete and have not been amended or modified in any manner, other
than pursuant to amendments or modifications previously delivered to the Administrative Agent. No
party to any Kaiser Francis Acquisition Document or Blacksand Acquisition Document is in default in
respect of any material term or obligation thereunder.



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ARTICLE VIII



Affirmative Covenants




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



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



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




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




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




          (d) Swap Agreements. Concurrently with any delivery of financial statements under
Section 8.01(a) and Section 8.01(b), a true and complete list of all Swap Agreements, as of the
last Business Day of such calendar month or fiscal year, of the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net mark-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.20, any margin required or supplied
under any credit support document, and the counterparty to each such agreement.




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




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




          (g) SEC and Other Filings; Reports to shareholders. Promptly after the same become
publicly available, copies of all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the SEC, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may be.




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




          (i) Lists of Purchasers. Concurrently with the delivery of any Reserve Report to the
Administrative Agent pursuant to Section 8.12, a list of all Persons purchasing Hydrocarbons from
the Borrower or any of its Subsidiaries.




          (j) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any of
its Subsidiaries intends to sell, transfer, assign or otherwise dispose of any Oil or Gas
Properties included in the most recently delivered Reserve Report (or any Equity Interests in any
Subsidiary owning interests in such Oil and Gas Properties) during any period between two
successive Scheduled Redetermination Dates having a fair market value, individually or in the
aggregate, in excess of $250,000, prior written notice of such disposition, the price thereof, the
anticipated date of closing, and any other details thereof requested by the Administrative Agent or
any Lender.




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




          (l) Information Regarding Borrower and Guarantors. Prompt written notice (and in any
event within thirty (30) days prior thereto) of any change (i) in the Borrower or any Guarantor’s
corporate name or in any trade name used to identify such Person in the conduct of its business or
in the ownership of its Properties, (ii) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or any Guarantor’s identity
or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv)
in the Borrower or any Guarantor’s jurisdiction of organization or such Person’s organizational
identification number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor’s federal taxpayer identification number, if any.




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




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




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




          (p) Subordinated Debt. Promptly, but in any event not less than fifteen (15) Business
Days prior to incurring any Debt pursuant to Section 9.02(e), written notice of its intent to incur
such Debt, the amount thereof, and the anticipated closing date, together with copies of drafts
of the material definitive documents therefor and, when completed, copies of the final
versions of such material definitive documents.




          (q) Kaiser Francis Acquisition Notices. In the event that (i) the Borrower (or one of
its Subsidiaries) is required or decides to purchase any of the Properties which had previously
been excluded from the Kaiser Francis Acquisition Properties, (ii) the Borrower (or one of its
Subsidiaries) is required to honor any preferential purchase right in respect of any Kaiser Francis
Acquisition Property which has not been waived, (iii) any matter is disputed in accordance with the
terms of the Kaiser Francis Acquisition Documents or any such disputed matter is resolved, (iv) any
material notices are received or delivered by the Borrower (or one of its Subsidiaries) pursuant to
either the Kaiser Francis Acquisition Documents, or (v) the Borrower (or one of its Subsidiaries)
and the sellers calculate and agree upon the Final Settlement Statement, pursuant to Section 10.5
of the Kaiser Francis Acquisition Documents, then, in each such case, the Borrower shall promptly
give the Administrative Agent notice in reasonable detail of such circumstances.




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




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



          (a) the occurrence of any Default;




          (b) the filing or commencement of, or the threat in writing of, any action, suit,
investigation, arbitration or proceeding by or before any arbitrator or Governmental Authority
against




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or affecting the Borrower or any Subsidiary thereof, or any material adverse development in
any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to
the Lenders), that, in either case, if adversely determined, could reasonably be expected to result
in liability in excess of $3,000,000;



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



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



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




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



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



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



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



          (a) operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas
Properties and other material Properties to be operated in a careful and efficient manner in
accordance with the practices of the industry and in compliance with all applicable contracts and
agreements and in compliance with all Governmental Requirements, including, without limitation,
applicable proration requirements and Environmental Laws, and all applicable laws, rules and
regulations of every other Governmental Authority from time to time constituted to regulate the




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development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons
and other minerals therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.




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




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




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




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




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



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



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



     Section 8.10 Environmental Matters.



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          (a) The Borrower shall, and shall cause each of its Subsidiaries to: (i) comply, and shall
cause its Properties and operations and each of its Subsidiaries and each Subsidiary’s Properties
and operations to comply, with all applicable Environmental Laws, the breach of which could be
reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release,
and shall cause each Subsidiary not to dispose of or otherwise release, any oil, oil and gas waste,
hazardous substance, or solid waste on, under, about or from any of the Borrower’s or its
Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable Environmental Laws, the
disposal or release of which could reasonably be expected to have a Material Adverse Effect; (iii)
timely obtain or file, and shall cause each of its Subsidiaries to timely obtain or file, all
notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in connection with the
operation or use of the Borrower’s or its Subsidiaries’ Properties, which failure to obtain or file
could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and
diligently prosecute to completion, and shall cause each of its Subsidiaries to promptly commence
and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in the event any Remedial Work is required or
reasonably necessary under applicable Environmental Laws because of or in connection with the
actual or suspected past, present or future disposal or other release of any oil, oil and gas
waste, hazardous substance or solid waste on, under, about or from any of the Borrower’s or its
Subsidiaries’ Properties, which failure to commence and diligently prosecute to completion could
reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and
shall cause each of its Subsidiaries to establish and implement, such procedures as may be
reasonably necessary to continuously determine and assure that the Borrower’s and its Subsidiaries’
obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish
and implement could reasonably be expected to have a Material Adverse Effect.




          (b) The Borrower will promptly, but in no event later than five days after the occurrence
thereof, notify the Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any
landowner or other third party against the Borrower or its Subsidiaries or their Properties of
which the Borrower has knowledge in connection with any Environmental Laws (excluding routine
testing and corrective action) if the Borrower reasonably anticipates that such action will result
in liability (whether individually or in the aggregate) in excess of $500,000, not fully covered by
insurance, subject to normal deductibles.




          (c) The Borrower will, and will cause each of its Subsidiaries to, provide environmental
audits and tests in accordance with American Society of Testing Materials standards upon request by
the Administrative Agent and the Lenders (or as otherwise required to be obtained by the
Administrative Agent or the Lenders by any Governmental Authority), in connection with any future
acquisitions of Oil and Gas Properties or other material Properties.




     Section 8.11 Further Assurances.



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




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




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




     Section 8.12 Reserve Reports.



          (a) On or before March 1st and September 1st of each year, commencing September 1st, 2006, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report as of the
immediately preceding January 1 or July 1, as applicable. The Reserve Report as of January 1 of
each year shall be prepared by one or more petroleum engineers reasonably acceptable to the
Administrative Agent and the July 1 Reserve Report of each year shall be prepared by or under the
supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true
and accurate and to have been prepared in accordance with the procedures used in the immediately
preceding January 1 Reserve Report.




          (b) In the event of an Interim Redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately preceding January 1
Reserve Report. For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve Report with an “as
of” date as required by the Administrative Agent as soon as possible, but in any event no later
than thirty (30) days following the receipt of such request.




          (c) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative
Agent and the Lenders a certificate from a Responsible Officer certifying that in all material
respects: (i) the information provided by the Borrower in connection with the preparation of such
Reserve Report and any other information delivered in connection therewith by the Borrower is true
and correct, and any projections based upon such information have been prepared in good faith based
upon assumptions believed by the Borrower to be reasonable, subject to uncertainties inherent in
all projections, (ii) the Borrower or its Subsidiaries owns good and defensible title to the Oil
and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess
of the volume specified in Section 7.18 with respect to their Oil and Gas Properties evaluated in
such Reserve Report that would require the Borrower or any of its Subsidiaries to deliver
Hydrocarbons either generally or produced




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from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor, (iv) none of their Oil and Gas
Properties have been sold since the date of the last
Borrowing Base determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably
required by the Administrative Agent, (v) attached to the certificate is a list of all marketing
agreements entered into subsequent to the later of the date hereof or the most recently delivered
Reserve Report that the Borrower could reasonably be expected to have been obligated to list on
Schedule 7.20 had such agreement been in effect on the date hereof and (vi) attached thereto is a
schedule of the Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged
Properties and demonstrating the percentage of the present value that such Mortgaged Properties
represent.




     Section 8.13 Title Information.



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




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




          (c) If the Borrower is unable to cure any title defect requested by the Administrative Agent
or the Lenders to be cured within the 60-day period or the Borrower does not comply with the
requirements to provide acceptable title information covering 80% of the value of the Oil and Gas
Properties evaluated in the most recent Reserve Report, such default shall not be a Default, but
instead the Administrative Agent and/or the Majority Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative
Agent or the Lenders. To the extent that the Administrative Agent or the Majority Lenders are not
reasonably satisfied with title to any Mortgaged Property after the 60-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the 80% requirement, and the Administrative
Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base
shall be reduced by an amount as determined by the Majority Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 80% of the value of the
Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt
of such notice.




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     Section 8.14 Additional Collateral; Additional Guarantors.



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




          (b) In the event that (i) the Borrower determines that any Subsidiary is a Material Domestic
Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees any Debt, then the Borrower shall
promptly cause such Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement.
In connection with any such guaranty, the Borrower shall, or shall cause such Subsidiary to, (A)
execute and deliver a supplement to the Guaranty Agreement executed by such Subsidiary, (B) pledge
all of the Equity Interests of such Subsidiary (including, without limitation, delivery of original
stock certificates evidencing the Equity Interests of such Subsidiary, together with an appropriate
undated stock powers for each certificate duly executed in blank by the registered owner thereof)
and (C) execute and deliver such other additional closing documents, certificates and legal
opinions as shall reasonably be requested by the Administrative Agent or its designee.




          (c) Prior to or contemporaneously with the granting of any Lien on any Property to or for the
benefit of any agent or lender under the Second Lien Bridge Loan Agreement pursuant to any Second
Lien Bridge Loan Document or otherwise, the Borrower or applicable Subsidiary shall grant to the
Administrative Agent a first priority Lien interest (subject only to Excepted Liens of the type
described in clauses (a) to (d) and (f) in the definition thereof, but subject to the provisos at
the end of such definition) on such Property for the benefit of the Lenders to secure the
Indebtedness. All such Liens will be created and perfected by and in accordance with the
provisions of deeds of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in a
sufficient number of executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes. In order to comply with the foregoing, if any Subsidiary places a Lien on its
Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and
comply with Section 8.14(b).




          (d) The Borrower agrees that it will not, and will not permit any Subsidiary to, grant a Lien
on any Property to secure the Second Lien Bridge Loan Notes without first (i) giving
fifteen (15) days’ prior written notice to the Administrative Agent thereof and (ii) granting
to the Administrative Agent to secure the Indebtedness a first-priority, perfected Lien on this
same Property




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pursuant to Security Instruments in form and substance satisfactory to the
Administrative Agent. In connection therewith, the Borrower shall, or shall cause its Subsidiaries
to, execute and deliver such other additional closing documents, certificates and legal opinions as
shall reasonably be requested by the Administrative Agent.




     Section 8.15 ERISA Compliance. The Borrower will promptly furnish, and will cause its
Subsidiaries and any ERISA Affiliate to promptly furnish, to the Administrative Agent (a) promptly
after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or
the PBGC, copies of each annual and other report with respect to each Plan, if any, or any trust
created thereunder, (b) immediately upon becoming aware of the occurrence of any ERISA Event or of
any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code,
in connection with any Plan or any trust created thereunder, a written notice signed by the
President or the principal Financial Officer of the Borrower, its Subsidiaries or the ERISA
Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, its
Subsidiaries or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when
known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the
PBGC with respect thereto, and (c) immediately upon receipt thereof, copies of any notice of the
PBGC’s intention to terminate or to have a trustee appointed to administer any Plan. With respect
to each Plan, if any (other than a Multiemployer Plan), the Borrower will, and the Borrower will
cause each of its Subsidiaries and ERISA Affiliates to, (i) satisfy in full and in a timely manner,
without incurring any late payment or underpayment charge or penalty and without giving rise to any
lien, all of the contribution and funding requirements of section 412 of the Code (determined
without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be
paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.



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



ARTICLE IX



Negative Covenants




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



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     Section 9.01 Financial Covenants.



          (a) Ratio of EBITDA to Interest Expense. The Borrower will not, as of the last day of
any fiscal quarter





          (i) commencing with the fiscal quarter ending September 30, 2006 through the last day of the
fiscal quarter in which the Second Lien Bridge Loan is repaid, permit its ratio of EBITDA for the
period of four fiscal quarters then ended to Interest Expense for such period to be less than 2.0
to 1.0 and




          (ii) commencing with each fiscal quarter occurring after the repayment of the Second Lien
Bridge Loan, permit its ratio of EBITDA for the period of four fiscal quarters then ended to
Interest Expense for such period to be less than 2.5 to 1.0; provided, that for purposes of this
Section 9.01(a)(ii), the fiscal quarter periods for EBITDA and Interest Expense shall be as
follows: (A) for the first full fiscal quarter after the repayment of the Second Lien Bridge Loan,
EBITDA and Interest Expense shall be EBITDA and Interest Expense for such fiscal quarter, (B) for
the first two full fiscal quarters after the repayment of the Second Lien Bridge Loan, EBITDA and
Interest Expense shall be EBITDA and Interest Expense for such six-month period and (C) for the
first three full fiscal quarters following repayment of the Second Lien Bridge Loan, EBITDA and
Interest Expense shall be EBITDA and Interest Expense for such nine-month period.



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




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



          (a) the Notes or other Indebtedness arising under the Loan Documents or any guaranty of or
suretyship arrangement for the Notes or other Indebtedness arising under the Loan Documents.




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




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




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




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          (e) Debt and any guarantees thereof subordinated in right of payment and liquidation to the
Indebtedness and any guarantees thereof, provided that (i) (A) at the time such Debt is incurred,
no Default has occurred and is then continuing and (B) no Default would result from the incurrence
of such Debt after giving effect to the incurrence of such Debt (and any concurrent repayment of
Debt with the proceeds of such incurrence), (ii) the incurrence of such Debt (and any concurrent
repayment of Debt with the proceeds of such incurrence) would not result in the total Revolving
Credit Exposure exceeding the Borrowing Base as adjusted pursuant to Section 9.02(e)(vii), (iii)
such Debt does not have any scheduled amortization prior to four years after the Maturity Date,
(iv) such Debt does not mature sooner than four years after the Maturity Date; (v) such Debt and
any guarantees thereof are subordinated on terms satisfactory to the Administrative Agent and the
Majority Lenders, (vi) such Debt does not have any mandatory prepayment or redemption provisions
which would require a mandatory prepayment or repurchase in priority to the Indebtedness and (vii)
prior to the incurrence of such Debt, the Majority Lenders shall have the right to adjust the
amount of the Borrowing Base to reflect the incurrence of such Debt utilizing the most recently
delivered Reserve Reports, and in no event shall the Borrower incur such Debt until the Borrowing
Base has been so adjusted or the Borrower has received a written notice from the Administrative
Agent notifying the Borrower that the Majority Lenders have elected not to adjust the Borrowing
Base.




          (f) Debt incurred by the Borrower pursuant to the Second Lien Bridge Loan Agreement and/or the
Permitted Refinancing Debt in respect thereof and any guarantees thereof by any of the Guarantors;
provided that, without the prior written consent of all of the Lenders, (i) the aggregate
principal amount of such Debt shall not exceed $250,000,000, (ii) the maturity date of any
Permitted Refinancing Debt shall be at least five (5) years from the Effective Date, (iii) such
Debt and the holders thereof shall at all times be subject to the Intercreditor Agreement, and (iv)
such Debt has no amortization.




          (g) other Debt not to exceed (i) $10,000,000 in the aggregate at any one time outstanding so
long as the Second Lien Bridge Loan is outstanding or (ii) $20,000,000 in the aggregate at any one
time outstanding after the Second Lien Bridge Loan is repaid in full.




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



          (a) Liens securing the payment of any Indebtedness.




          (b) Excepted Liens.




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




          (d) Liens on Property not constituting collateral for the Indebtedness and not otherwise
permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or
face amount of all Debt secured under this Section 9.03(d) shall not exceed $100,000 at any time.




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     Section 9.04 Dividends, Distributions and Redemptions.



          (a) Restricted Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, return any capital to its stockholders or make any distribution of their Property to their
respective Equity Interest holders, except (i) the Borrower may declare and pay dividends or
distributions with respect to its Equity Interests payable solely in additional shares of its
Equity Interests (other than Disqualified Capital Stock), (ii) Subsidiaries may declare and pay
dividends or distributions ratably with respect to their Equity Interests and (iii) so long as no
Borrowing Base Deficiency, Default or Event of Default has occurred and is continuing or would
result therefrom, and subject to the proviso in Section 7.21(e), the Borrower may declare and pay
quarterly cash dividends to its members of Available Cash.




          (b) Redemption or Repayment of Subordinated Debt. The Borrower will not, and will not
permit any Subsidiary to: (i) call, make or offer to make any Redemption of or otherwise Redeem
(whether optional or mandatory and whether in whole or in part) or repay any subordinated Debt
permitted to be incurred hereunder, including the Second Lien Bridge Loan Debt except with a sale
or issuance of Equity Interests or Permitted Refinancing Debt; (ii) amend, modify, waive or
otherwise change, consent or agree to any amendment, modification, waiver or other change to, any
of the terms of any notes evidencing any subordinated Debt permitted hereunder, including the
Second Lien Bridge Loan Debt or any indenture, agreement, instrument, certificate or other document
relating to any subordinated Debt permitted hereunder (including the Second Lien Bridge Loan
Agreement, any Second Lien Bridge Loan Document and any other document or agreement relating
thereto) relating to any Second Lien Bridge Loan Debt if (A) the effect of such amendment,
modification or waiver is to shorten the final maturity, create amortization of principal thereof,
or increase the amount of any payment of principal thereof or increase the rate or shorten any
period for payment of interest thereon or modify the method of calculating the interest rate, (B)
such action requires the payment of a consent, amendment, waiver or other similar fee on the stated
principal amount thereof, (C) such action adds covenants, events of default or other agreements to
the extent more restrictive than those contained in this Agreement, or (D) such action adds
collateral unless the Loan Documents are being amended at the same time to reflect such new
collateral, the execution of agreements in connection with the issuance of Permitted Refinancing
Debt or the addition of guarantors if required by the terms thereof; (iii) designate any Debt
(other than obligations of the
Borrower and the Subsidiaries pursuant to the Loan Documents) as “Specified Senior
Indebtedness” or “Specified Guarantor Senior Indebtedness” or give any such other Debt any other
similar designation for the purposes of any indentures or other documents relating to any
subordinated Debt permitted hereunder, including the Second Lien Bridge Loan Debt; or (iv) permit
the principal amount of the Debt incurred pursuant to the Second Lien Bridge Loan Agreement or
Permitted Refinancing Debt in respect thereof to exceed $250,000,000.




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



          (a) Investments reflected in the Financial Statements.




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




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




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




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




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




          (g) Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary
in or to the Borrower or any Guarantor, and (iii) made by the Borrower or any Guarantor in
Subsidiaries that are not Guarantors, provided that the aggregate of all Investments made by the
Borrower and the Guarantors in or to all Subsidiaries that are not Guarantors shall not exceed
$2,000,000 at any time.




          (h) Investments (including, without limitation, capital contributions) in general or limited
partnerships or other types of entities (each a “venture”) entered into by the Borrower or
any of its Subsidiaries with others in the ordinary course of business; provided that (i) any such
venture is engaged exclusively in oil and gas exploration, development, production, processing and
related activities, including transportation, (ii) the interest in such venture is acquired in the
ordinary course of business and on fair and reasonable terms and (iii) such venture interests
acquired and capital contributions made (valued as of the date such interest was acquired or the
contribution made) do not exceed, in the aggregate at any time outstanding an amount equal to
$2,000,000.




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




          (j) loans or advances to employees, officers or directors in the ordinary course of business
of the Borrower or any of its Subsidiaries, in each case only as permitted by applicable law,
including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed $250,000 in
the aggregate at any time.




          (k) Investments in stock, obligations or securities received in settlement of debts arising
from Investments permitted under this Section 9.04(b) owing to the Borrower or any of its
Subsidiaries as a result of a bankruptcy or other insolvency proceeding of the obligor in respect
of such debts or upon the enforcement of any Lien in favor of the Borrower or any of its
Subsidiaries; provided that the Borrower shall give the Administrative Agent prompt written notice
in the event




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that the aggregate amount of all investments held at any one time under this Section
9.05(i) exceeds $250,000.




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



     Section 9.07 Limitation on Leases. Neither the Borrower nor any of its Subsidiaries will
create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property
of any kind whatsoever (real or personal but excluding leases of Hydrocarbon Interests), under
leases or lease agreements which would cause the aggregate amount of all payments made by the
Borrower and its Subsidiaries pursuant to all such leases or lease agreements, including, without
limitation, any residual payments at the end of any lease, to exceed $2,000,000 in any period of
twelve consecutive calendar months during the life of such leases.



     Section 9.08 Proceeds of Notes. The Borrower will not permit the proceeds of the Notes to
be used for any purpose other than those permitted by Section 7.21. Neither the Borrower nor any
Person acting on behalf of the Borrower has taken or will take any action which might cause any of
the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereinafter be in effect. If requested by the
Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other
form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.



     Section 9.09 ERISA Compliance. The Borrower and its Subsidiaries will not at any time:



          (a) engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with
which the Borrower any of its Subsidiaries or any ERISA Affiliate could be subjected to either a
civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax
imposed by Chapter 43 of Subtitle D of the Code.




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




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




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




          (e) permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit
liabilities under any Plan maintained by the Borrower, any of its Subsidiaries or any ERISA
Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets




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(computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term “actuarial present value of the benefit liabilities” shall
have the meaning specified in section 4041 of ERISA.




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




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




          (h) incur, or permit any ERISA Affiliate to incur, a liability to or on account of a Plan
under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.




          (i) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to
provide benefits to former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.




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




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



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



     Section 9.12 Sale of Properties. The Borrower will not, and will not permit any of its
Subsidiaries to, sell, assign, farm-out, convey or otherwise transfer any Property except for: (a)
the sale of Hydrocarbons in the ordinary course of business; (b) farmouts of undeveloped acreage
and assignments in connection with such farmouts; (c) the sale or transfer of equipment that is no
longer



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necessary for the business of the Borrower or such Subsidiary or is replaced by equipment of
at least comparable value and use; (d) sales or other dispositions (including Casualty Events) of
Oil and Gas Properties or any interest therein or Subsidiaries owning Oil and Gas Properties;
provided that (i) 100% of the consideration received in respect of such sale or other disposition
shall be cash, (ii) the consideration received in respect of such sale or other disposition shall
be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or
Subsidiary subject of such sale or other disposition (as reasonably determined by the board of
directors of the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver
a certificate of a Responsible Officer of the Borrower certifying to that effect), (iii) if such
sale or other disposition of Oil and Gas Property or Subsidiary owning Oil and Gas Properties
included in the most recently delivered Reserve Report during any period between two successive
Scheduled Redetermination Dates has a fair market value (as determined by the Administrative
Agent), individually or in the aggregate, in excess of $5,000,000, the Borrowing Base shall be
reduced, effective immediately upon such sale or disposition, by an amount equal to the value, if
any, assigned such Property as determined by the Majority Lenders assigned such Property in the
most recently delivered Reserve Report and (iv) if any such sale or other disposition is of a
Subsidiary owning Oil and Gas Properties, such sale or other disposition shall include all the
Equity Interests of such Subsidiary; and (e) sales and other dispositions of Properties not
regulated by Section 9.12(a) to (d) having a fair market value not to exceed $250,000 during any
12-month period.




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



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



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



     Section 9.16 Negative Pledge Agreements; Dividend Restrictions. Neither the Borrower nor
any of its Subsidiaries will create, incur, assume or suffer to exist any contract, agreement or
understanding (other than this Agreement or the Security Instruments) that in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of its Property in
favor of the Administrative Agent and the Lenders or restricts any Subsidiary from paying dividends
or making distributions to the Borrower or any Guarantor, or which requires the consent of or
notice to other Persons in connection therewith.



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



     Section 9.18 Swap Agreements. Neither the Borrower nor any of its Subsidiaries will enter
into any Swap Agreements with any Person other than (a) Swap Agreements in respect of commodities
(i) with an Approved Counterparty, (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is
executed, 85% of the reasonably anticipated projected production from Proved Properties for each
month during the period during which such Swap Agreement is in effect for each of crude oil and
natural gas, calculated separately, for the remainder of the calendar year plus the next two full
calendar years succeeding the
execution of such Swap Agreement and 70% of the reasonably anticipated projected production from
Proved Properties for each month during the period during which such Swap Agreement is in effect
for each of crude oil and natural gas, calculated separately, for each month thereafter, and (iii)
the notional volumes for which do not exceed the current net monthly production (regardless of
projected production levels) at the time such Swap Agreement is executed, calculated separately for
each of crude oil and natural gas, and (b) Swap Agreements in respect of interest rates with an
Approved Counterparty, which effectively convert interest rates from floating to fixed, the
notional amounts of which (when aggregated with all other Swap Agreements of the Borrower and its
Subsidiaries then in effect effectively converting interest rates from floating to fixed) do not
exceed 75% of the then outstanding principal amount of the Borrower’s Debt for borrowed money which
bears interest at a floating rate. In no event shall any Swap Agreement contain any requirement,
agreement or covenant for the Borrower or any of its Subsidiaries to post collateral or margin to
secure their obligations under such Swap Agreement or to cover market exposures. Notwithstanding
anything to the contrary in this Section 9.18, there shall be no prohibition against the Borrower
entering into any “put” contracts or commodity price floors
so long as such agreements
are entered
into for non-speculative purposes and in the ordinary course of
business for the purpose of hedging against fluctuations of commodity prices.



     Section 9.19 Tax Status as Partnership; Operating Agreements. The Borrower shall not alter
its status as a partnership for purposes of United States Federal Income taxes. The Borrower shall
not, and shall not permit any Subsidiary to, amend or modify any provision of its articles, bylaws,
or partnership or limited liability company organization or operating documents or agreements, or
any agreements with Affiliates of the type referred to in Section 9.14, if such amendment or
modification could reasonably be expected to have a Material Adverse Effect.



ARTICLE X



Events of Default; Remedies




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



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




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




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




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




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




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




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




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




          (i) the Borrower or any of its Subsidiaries shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii)




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consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower
or any of its Subsidiaries or for a substantial part of its assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing; or any member of the Borrower shall make any request or take any action for the
purpose of calling a meeting of the members of the Borrower to consider a resolution to dissolve
and wind-up the Borrower’s affairs.




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




          (k) (i) one or more judgments for the payment of money in an aggregate amount in excess of
$3,000,000 (to the extent not covered by independent third party insurance provided by insurers of
the highest claims paying rating or financial strength as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more non monetary
judgments that have, or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, shall be rendered against the Borrower, any of its Subsidiaries or any
combination thereof and the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any of its Subsidiaries to
enforce any such judgment.




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




          (m) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when
taken together with all other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$3,000,000 in any year.




          (n) any Default or Event of Default shall have occurred pursuant to the Second Lien Bridge
Loan Agreement, including, but not limited to, the failure to make all payments of any interest,
fees and other amounts due thereunder or in respect thereof in full on or prior to August 1, 2007
with either (i) the cash proceeds of one or more sales or issuances of Equity Interests of the
Borrower or (ii) the Permitted Refinancing Debt.




          (o) a Change in Control shall occur.




     Section 10.02 Remedies.



          (a) In the case of an Event of Default other than one described in Section 10.01(h), Section
10.01(i) or Section 10.01(j), at any time thereafter during the continuance of such Event of
Default, the Administrative Agent, at the request of the Majority Lenders, shall, by notice to




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the
Borrower, take either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Notes and the Loans then outstanding to be due and payable in whole (or in part, in
which case any principal not so declared to be due and payable may thereafter be declared to be due
and payable), and thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors
accrued hereunder and under the Notes and the other Loan Documents (including, without limitation,
the payment of cash collateral to secure the LC Exposure as provided in Section 2.08(j)), shall
become due and payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(h),



Section 10.01(i) or Section 10.01(j), the Commitments shall automatically terminate and the
Notes and the principal of the Loans then outstanding, together with accrued interest thereon and
all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under
the Notes and the other Loan Documents (including, without limitation, the payment of cash
collateral to secure the LC Exposure as provided in Section 2.08(j)), shall automatically become
due and payable, without presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.




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




          (c) All proceeds realized from the liquidation or other disposition of collateral or otherwise
received after maturity of the Notes, whether by acceleration or otherwise, shall be applied:
first, to reimbursement of expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Notes; third, to fees; fourth, pro rata to
principal outstanding on the Notes and Indebtedness referred to in Clause (b) of the definition of
Indebtedness owing to a Lender or an Affiliate of a Lender; fifth, to any other Indebtedness;
sixth, to serve as cash collateral to be held by the Administrative Agent to secure the LC
Exposure; and any excess shall be paid to the Borrower or as otherwise required by any Governmental
Requirement.




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



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ARTICLE XI



The Administrative Agent




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



     Section 11.02 Duties and Obligations of Administrative Agent. The Administrative Agent shall have no duties or obligations except those expressly set forth in
the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent
shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with
reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law; rather, such term is used
merely as a matter of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative Agent shall have no
duty to take any discretionary action or exercise any discretionary powers, except as provided in
Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall have no
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made in or in connection
with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or
other document delivered hereunder or under any other Loan Document or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants, agreements or other terms
or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in ARTICLE VI or elsewhere
herein, other than to confirm receipt of items expressly required to be delivered to the
Administrative Agent, (vi) the existence, value, perfection or priority of any collateral security
or the financial or other condition of the Borrower and its Subsidiaries or any other obligor or
guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform
any of its obligations hereunder or under any other Loan Document or the performance or observance
of any covenants, agreements or other terms or conditions set forth herein or therein. For
purposes of determining compliance with the conditions specified in ARTICLE VI, each Lender shall
be deemed to have consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable or satisfactory to
a Lender unless the Administrative Agent shall have received written notice from such Lender prior
to the proposed closing date specifying its objection thereto.



     Section 11.03 Action by Agent. The Administrative Agent shall have no duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is
required to exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section



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12.02) and in all cases the Administrative Agent shall be fully justified in failing or refusing to
act hereunder or under any other Loan Documents unless it shall (a) receive written instructions
from the Majority Lenders or the Lenders, as applicable, (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the
action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all
liability and expenses which may be incurred by it by reason of taking or continuing to take any
such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto
by the Administrative Agent shall be binding on all of the Lenders. If a Default has occurred and
is continuing, then the Administrative Agent shall take such action with
respect to such Default as shall be directed by the requisite Lenders in the written instructions
(with indemnities) described in this Section 11.03, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders. In no event, however,
shall the Administrative Agent be required to take any action which exposes the Administrative
Agent to personal liability or which is contrary to this Agreement, the Loan Documents or
applicable law. If a Default has occurred and is continuing, the Syndication Agent and the
Co-Documentation Agents shall have no obligation to perform any act in respect thereof. No Agent
shall be liable for any action taken or not taken by it with the consent or at the request of the
Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for herein or therein or
in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross
negligence or willful misconduct.




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



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



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     Section 11.06 Resignation or Removal of Agents. Subject to the appointment and acceptance
of a successor Agent as provided in this Section 11.06, any Agent may resign at any time by
notifying the Lenders, each Issuing Bank and the Borrower, and any Agent may be removed at any time
with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority
Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no
successor shall have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives
notice of its resignation or removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders and each Issuing Bank, appoint a successor Agent. Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to
a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Agent’s resignation hereunder, the provisions
of this ARTICLE XI and Section 12.03 shall continue in effect for the benefit of such retiring
Agent, its sub-agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while it was acting as Agent.



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



     Section 11.08 No Reliance.



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




          (b) The Lenders acknowledge that the Administrative Agent and the Arrangers are acting solely
in administrative capacities with respect to the structuring and syndication of this




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facility and
have no duties, responsibilities or liabilities under this Agreement and the other Loan Documents
other than their administrative duties, responsibilities and liabilities specifically as set
forth in the Loan Documents and in their capacity as Lenders hereunder. In structuring,
arranging or syndicating this facility, each Lender acknowledges that the Administrative Agent
and/or Arrangers may be agents or lenders under these Notes, the Second Lien Bridge Loan Notes,
other loans or other securities and waives any existing or future conflicts of interest associated
with the their role in such other debt instruments. If in its administration of this facility or
any other debt instrument, the Administrative Agent determines (or is given written notice by any
Lender) that a conflict exists, then it shall eliminate such conflict within 90 days or resign
pursuant to Section 11.06 and shall have no liability for action taken or not taken, other than
actions taken or not taken which represent Administrative Agent’s gross negligence or willful
misconduct, while such conflict existed.




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



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




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



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



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




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



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with any sale or other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan
Documents.




     Section 11.11 The Arrangers and the Agents. The Arrangers, the Syndication Agent and the
Co-Documentation Agents shall have no duties, responsibilities or liabilities under this Agreement
and the other Loan Documents other than their duties, responsibilities and liabilities in its
capacity as Lenders hereunder to the extent they are a party to this Agreement as a Lender.



ARTICLE XII



Miscellaneous




     Section 12.01 Notices.



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





	 	(i)	 	if to the Borrower, to it at




Linn Energy, LLC

600 Travis Street, Suite 6910

Houston, TX 77002



Attention: Kolja Rockov

Telephone: 713-223-0880 x1101

Fax: 713-223-0888

E-Mail: kr@linnenergy.com



with a copy to:



Linn Energy, LLC

650 Washington Road, 8th Floor

Pittsburgh, Pennsylvania 15228



Attention: Michael Linn/Chip Keddie

Telephone: 412-440-1400

Fax: 412-440-1499

E-mail: mcl@linnenergy.com; rpk@linnenergy.com





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




919 Third Avenue

New York, New York 10022

Attention: Dina Wilson, Loan Assistant

Telecopy: 212-841-2683



with a copy to the Administrative Agent at:




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1200 Smith Street, Suite 3100

Houston, Texas 77002

Attention: Betsy Jocher

Telecopy: 713-659-6915




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



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




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




     Section 1.02
Waivers; Amendments


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




          (b) Neither this Agreement nor any provision hereof nor any Security Instrument nor any other Loan Document nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the written consent of the Majority Lenders; provided t
hat no such agreement shall (i) increase the Maximum Credit Amount of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base without the written consent of each Lender, decrease or maintain the Borrowing Base without the consent of the




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Majority Lenders,
or modify in any manner Section 2.07 without the consent of each Lender, (iii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, or reduce any other Indebtedness hereunder or under any other Loan Document,
without the written consent of each Lender affected thereby, (iv) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or
reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination Date
or the Maturity Date without the written consent of each Lender affected thereby, (v) change
Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (vi) waive or amend Section 6.01,
Section 10.02(c) or Section 8.14 or change the definition of the terms “Domestic Subsidiary”,
“Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent
of each Lender, (vii) release any Guarantor (except as set forth in the Guaranty Agreement),
release all or substantially all of the collateral (other than as provided in Section 11.09), or
reduce the percentage set forth in Section 8.14(a) to less than 80%, without the written consent of
each Lender, or (viii) change any of the provisions of this Section 12.02(b) or the definition of
“Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or under any other Loan Documents or make
any determination or grant any consent hereunder or any other Loan Documents, without the written
consent of each Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, any other Agent, or any Issuing Bank
hereunder or under any other Loan Document without the prior written consent of the Administrative
Agent, such other Agent or such Issuing Bank, as the case may be. Notwithstanding the foregoing,
any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.




     Section 12.03 Expenses, Indemnity; Damage Waiver.



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




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hereunder, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.




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




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




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




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




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




     Section 12.04 Successors and Assigns.



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




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




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




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



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



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



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



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



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



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



               (iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and after
the effective date specified in each Assignment and Assumption the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption, be released from
its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all
of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section 5.01,



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Section 5.02,
Section 5.03 and Section 12.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(c).




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



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



          (c) (i) Any Lender may, without the consent of the Borrower the Administrative Agent or any
Issuing Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations
under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (C) the Borrower, the
Administrative Agent, each Issuing Bank and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and obligations
under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to enforce this Agreement
and to approve any amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the proviso to Section
12.02 that affects such Participant. In addition such agreement must provide that the Participant
be bound by the provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower agrees
that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section
5.03 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant
to Section 12.04(b). To the extent permitted by law, each Participant also shall be entitled to
the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.




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



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




     Section 12.05 Survival; Revival; Reinstatement.



          (a) All covenants, agreements, representations and warranties made by the Borrower herein and
in the certificates or other instruments delivered in connection with or pursuant to this Agreement
or any other Loan Document shall be considered to have been relied upon by the other parties hereto
and shall survive the execution and delivery of this Agreement and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any such other party or
on its behalf and notwithstanding that the Administrative Agent, any other Agent, any Issuing Bank
or any Lender may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of Section 5.01, Section
5.02, Section 5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement, any other Loan Document or any provision hereof or thereof.




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




     Section 12.06 Counterparts; Integration; Effectiveness.



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




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




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




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



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



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



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




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




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




          (d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION 12.09.




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



     Section 12.11 Confidentiality. Each of the Agents, each Issuing Bank and the Lenders
agrees to maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and
agents, including



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accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the extent requested by
any regulatory authority, (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan
Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section 12.11, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap
Agreement relating to the Borrower and their obligations, (g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available other than as a result of a
breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, any Issuing
Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section 12.11, “Information” means all information received from the
Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries and their
businesses, other than any such information that is available to the Administrative Agent, any
Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any of
its Subsidiaries; provided that, in the case of information received from the Borrower, or any of
its Subsidiaries after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of Information as
provided in this Section 12.11 shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to its own
confidential information.




     Section 12.12 Interest Rate Limitation. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the
transactions contemplated hereby would be usurious as to any Lender under laws applicable to it
(including the laws of the United States of America and the State of Texas or any other
jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as security for the
Notes, it is agreed as follows: (a) the aggregate of all consideration which constitutes interest
under law applicable to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on
the principal amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (b) in the event that the maturity of the Notes is accelerated by reason of an
election of the holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender may never include more than the maximum
amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement
or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been
or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or
agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall,
to the extent permitted by law applicable to such Lender, be amortized,



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prorated, allocated and
spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that
the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such
Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation
period the amount of interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then
the amount of interest payable to such Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the
total amount of interest payable to such Lender shall equal the total amount of interest which
would have been payable to such Lender if the total amount of interest had been computed without
giving effect to this Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender
elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time
to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrower’s
obligations hereunder.




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



     Section 12.14 Collateral Matters; Swap Agreements. The benefit of the Security Instruments
and of the provisions of this Agreement relating to any collateral securing the Indebtedness shall
also extend to and be available to those Lenders or their Affiliates which are counterparties to
any Swap Agreement with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any such Swap
Agreement while such Person or its Affiliate is a Lender, but only while such Person or its
Affiliate is a Lender, including any Swap Agreements between such Persons in existence prior to the
date hereof. No Lender or any Affiliate of a Lender shall have any voting rights under any Loan
Document as a result of the existence of obligations owed to it under any such Swap Agreements.



     Section 12.15 No Third Party Beneficiaries. This Agreement, the other Loan Documents, and
the agreement of the Lenders to make Loans and the Issuing Bank to issue, amend, renew or



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extend
Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person
(including, without limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges
hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the
Issuing Bank or any Lender for any reason whatsoever. There are no third party beneficiaries.




     Section 12.16 USA Patriot Act Notice. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the “Act”), it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of the Borrower and
other information that will allow such Lender to identify the Borrower in accordance with the Act.



[SIGNATURES BEGIN NEXT PAGE]




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



	 	 	 	 	 	 	 	 	 
	BORROWER:	 	LINN ENERGY, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Kolja Rockov	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Kolja Rockov	 	 
	 

	 	 	 	 	 	Executive Vice President and Chief	 	 
	 

	 	 	 	 	 	Financial Officer	 	 






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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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	 	 	ROYAL BANK OF CANADA, 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/ Graeme R. Bullen	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Graeme R. Bullen	 	 
	 

	 	Title:	 	Director	 	 






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	 	 	COMERICA BANK, as a Co-Documentation 
Agent and a Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Huma Vadgama	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Huma Vadgama	 	 
	 

	 	Title:	 	Vic President	 	 






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	 	 	FORTIS CAPITAL CORP., as a Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Trond Rokholt	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Trond Rokholt	 	 
	 

	 	Title:	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ David Montgomery	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	David Montgomery	 	 
	 

	 	Title:	 	Senior Vice President	 	 






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	 	 	LEHMAN COMMERICAL PAPER INC., as a 
Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Maria M. Lund	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Maria M. Lund	 	 
	 

	 	Title:	 	Authorized Signatory	 	 






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	 	 	CITIBANK TEXAS, N.A., as a Co-Documentation
 Agent and
a Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas Benavides	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Thomas Benavides	 	 
	 

	 	Title:	 	Vice President	 	 






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	 	 	KEYBANK NATIONAL ASSOCIATION, as a 
Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas Rajan	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Thomas Rajan	 	 
	 

	 	Title:	 	Senior Vice President	 	 






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	 	 	BANK OF AMERICA, N.A., as an exiting Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Charles W. Patterson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	     Charles W. Patterson	 	 
	 

	 	Title:	 	     Managing Director	 	 






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	 	 	BANK OF SCOTLAND, as an exiting Lender
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Karen Weich	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Karen Weich	 	 
	 

	 	Title:	 	Assistant Vice President	 	 






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