exv10w1



 





Exhibit 10.1




 





AMENDED AND RESTATED CREDIT AGREEMENT




Dated as of March 7, 2007




among




ENCORE ACQUISITION COMPANY,

as the Borrower,




ENCORE OPERATING, L.P.

as a Guarantor,




BANK OF AMERICA, N.A.,

as the Administrative Agent and L/C Issuer,




FORTIS CAPITAL CORP. and WACHOVIA BANK, N.A.,

as Co-Syndication Agents,




BNP PARIBAS and CALYON NEW YORK BRANCH,

as Co-Documentation Agents,




and




The Other Lenders Party Hereto




BANC OF AMERICA SECURITIES LLC,




as




Sole Lead Arranger and Sole Book Manager




 





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	Section	 	Page
	Article I. DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	1.01 Defined Terms
	 	 	1	 
	1.02 Other Interpretive Provisions
	 	 	27	 
	1.03 Accounting Terms
	 	 	28	 
	1.04 Rounding
	 	 	29	 
	1.05 Times of Day
	 	 	29	 
	1.06 Letter of Credit Amounts
	 	 	29	 
	1.07 Petroleum Terms
	 	 	29	 
	 
	 	 	 	 
	Article II. THE COMMITMENTS AND CREDIT EXTENSIONS
	 	 	29	 
	2.01 Loans
	 	 	29	 
	2.02 Borrowings, Conversions and Continuations of Loans
	 	 	29	 
	2.03 Letters of Credit
	 	 	31	 
	2.04 Prepayments
	 	 	39	 
	2.05 Termination or Reduction of Commitments
	 	 	41	 
	2.06 Repayment of Loans
	 	 	42	 
	2.07 Interest
	 	 	42	 
	2.08 Fees
	 	 	42	 
	2.09 Computation of Interest and Fees
	 	 	43	 
	2.10 Evidence of Debt
	 	 	43	 
	2.11 Payments Generally; Administrative Agent’s Clawback
	 	 	44	 
	2.12 Sharing of Payments by Lenders
	 	 	46	 
	2.13 Borrowing Base
	 	 	46	 
	 
	 	 	 	 
	Article III. TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	48	 
	3.01 Taxes
	 	 	48	 
	3.02 Illegality
	 	 	51	 
	3.03 Inability to Determine Rates
	 	 	51	 
	3.04 Increased Costs; Reserves on Eurodollar Rate Loans
	 	 	51	 
	3.05 Compensation for Losses
	 	 	53	 
	3.06 Mitigation Obligations; Replacement of Lenders
	 	 	54	 
	3.07 Survival
	 	 	54	 
	 
	 	 	 	 
	Article IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
	 	 	54	 
	4.01 Conditions of Initial Credit Extension
	 	 	54	 
	4.02 Conditions to all Credit Extensions
	 	 	57	 
	4.03 Conditions to Acquisition Closing Date
	 	 	58	 
	 
	 	 	 	 
	Article V. REPRESENTATIONS AND WARRANTIES
	 	 	60	 
	5.01 Existence and Power of Each Borrower-Related Party
	 	 	60	 
	5.02 Credit Party and Governmental Authorization; Contravention
	 	 	61	 
	5.03 Binding Effect
	 	 	61	 
	5.04 Financial Information
	 	 	61	 
	5.05 Litigation
	 	 	62	 
	5.06 ERISA Compliance
	 	 	62	 
	5.07 Taxes and Filing of Tax Returns
	 	 	63	 






i









 






	 	 	 	 	 
	Section	 	Page
	5.08 Ownership of Properties Generally
	 	 	63	 
	5.09 Mineral Interests
	 	 	63	 
	5.10 Licenses, Permits, Etc
	 	 	64	 
	5.11 Compliance with Law
	 	 	64	 
	5.12 Full Disclosure
	 	 	64	 
	5.13 Organizational Structure; Nature of Business
	 	 	65	 
	5.14 Environmental Matters
	 	 	65	 
	5.15 Fiscal Year
	 	 	66	 
	5.16 No Default
	 	 	66	 
	5.17 Government Regulation
	 	 	66	 
	5.18 Gas Balancing Agreements and Advance Payment Contracts
	 	 	66	 
	5.19 Insurance
	 	 	66	 
	5.20 Subsidiaries; Equity Interests
	 	 	66	 
	 
	 	 	 	 
	Article VI. AFFIRMATIVE COVENANTS
	 	 	67	 
	6.01 Information
	 	 	67	 
	6.02 Business of the Borrower-Related Parties
	 	 	70	 
	6.03 Maintenance of Existence
	 	 	70	 
	6.04 Title Data
	 	 	70	 
	6.05 Books and Records; Right of Inspection
	 	 	70	 
	6.06 Maintenance of Insurance
	 	 	71	 
	6.07 Payment of Taxes and Claims
	 	 	71	 
	6.08 Compliance with Laws and Documents
	 	 	71	 
	6.09 Operation of Properties and Equipment
	 	 	71	 
	6.10 Environmental Law Compliance
	 	 	72	 
	6.11 ERISA Reporting Requirements
	 	 	72	 
	6.12 Additional Documents
	 	 	73	 
	6.13 Environmental Review
	 	 	73	 
	6.14 Security
	 	 	74	 
	6.15 Title Opinions
	 	 	75	 
	6.16 Guarantees
	 	 	75	 
	 
	 	 	 	 
	Article VII. NEGATIVE COVENANTS
	 	 	75	 
	7.01 Incurrence of Debt
	 	 	75	 
	7.02 Restricted Payments
	 	 	76	 
	7.03 Negative Pledge
	 	 	78	 
	7.04 Consolidations and Mergers
	 	 	78	 
	7.05 Dispositions
	 	 	78	 
	7.06 Amendments to Organization Documents; Other Material Agreements
	 	 	79	 
	7.07 Use of Proceeds
	 	 	79	 
	7.08 Investments
	 	 	80	 
	7.09 Transactions with Affiliates
	 	 	81	 
	7.10 Hedge Transactions
	 	 	81	 
	7.11 Fiscal Year
	 	 	82	 
	7.12 Change in Business
	 	 	82	 
	7.13 Financial Covenants
	 	 	82	 
	7.14 Burdensome Agreements
	 	 	82	 






ii









 






	 	 	 	 	 
	Section	 	Page
	7.15 Designation of Unrestricted Subsidiaries
	 	 	83	 
	7.16 Retirement of Permitted Subordinate Debt or Other Debt
	 	 	85	 
	7.17 Like-Kind Exchange
	 	 	85	 
	 
	 	 	 	 
	Article VIII. DEFAULTS
	 	 	85	 
	8.01 Events of Default
	 	 	85	 
	8.02 Remedies Upon Event of Default
	 	 	87	 
	8.03 Application of Funds
	 	 	88	 
	 
	 	 	 	 
	Article IX. ADMINISTRATIVE AGENT
	 	 	88	 
	9.01 Appointment and Authority
	 	 	88	 
	9.02 Rights as a Lender
	 	 	89	 
	9.03 Exculpatory Provisions
	 	 	89	 
	9.04 Reliance by the Administrative Agent
	 	 	90	 
	9.05 Delegation of Duties
	 	 	90	 
	9.06 Resignation of Administrative Agent
	 	 	90	 
	9.07 Non-Reliance on Administrative Agent and Other Lenders
	 	 	91	 
	9.08 No Other Duties, Etc
	 	 	91	 
	9.09 Administrative Agent May File Proofs of Claim
	 	 	92	 
	9.10 Collateral and Guaranty Matters
	 	 	92	 
	 
	 	 	 	 
	Article X. MISCELLANEOUS
	 	 	93	 
	10.01 Amendments, Etc
	 	 	93	 
	10.02 Notices; Effectiveness; Electronic Communication
	 	 	94	 
	10.03 No Waiver; Cumulative Remedies
	 	 	96	 
	10.04 Expenses; Indemnity; Damage Waiver
	 	 	96	 
	10.05 Payments Set Aside
	 	 	98	 
	10.06 Successors and Assigns
	 	 	98	 
	10.07 Treatment of Certain Information; Confidentiality
	 	 	103	 
	10.08 Right of Setoff
	 	 	103	 
	10.09 Interest Rate Limitation
	 	 	104	 
	10.10 Counterparts; Integration; Effectiveness
	 	 	104	 
	10.11 Survival of Representations and Warranties
	 	 	104	 
	10.12 Severability
	 	 	105	 
	10.13 Replacement of Lenders
	 	 	105	 
	10.14 Governing Law; Jurisdiction; Etc
	 	 	106	 
	10.15 Waiver of Jury Trial
	 	 	106	 
	10.16 USA PATRIOT Act Notice
	 	 	107	 
	10.17 Time of the Essence
	 	 	107	 
	10.18 Special Provisions
	 	 	107	 
	10.19 ENTIRE AGREEMENT
	 	 	108	 
	SIGNATURES
	 	 	S-1	 






iii









 






SCHEDULES



2.01 Commitments and Applicable Percentages

5.05 Litigation

5.13 Organizational Structure; Nature of Business

5.14 Environmental Matters

5.18 Gas Imbalances

5.20 Subsidiaries; Other Equity Investments

7.08(j) Permitted Investments

10.02 Administrative Agent’s Office; Certain Addresses for Notices




EXHIBITS



Form of

A            Loan Notice

B            Note

C            Compliance Certificate

D            Assignment and Assumption

E            Guaranty

F            Pledge Agreement

G            Letter of Credit Application

H            Opinion





iv









 





AMENDED AND RESTATED CREDIT AGREEMENT




     This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of March
7, 2007, among ENCORE ACQUISITION COMPANY, a Delaware corporation (the “Borrower”), ENCORE
OPERATING, L.P., a Texas limited partnership (“Operating”), each lender from time to time
party hereto (collectively, the “Lenders” and individually, a “Lender”), BANK OF
AMERICA, N.A., as the Administrative Agent and L/C Issuer, FORTIS CAPITAL CORP. and WACHOVIA BANK,
N.A., as Co-Syndication Agents, and BNP PARIBAS and CALYON NEW YORK BRANCH, as Co-Documentation
Agents.



     The Borrower and Operating have requested that the Lenders provide a revolving credit
facility, and the Lenders are willing to do so on the terms and conditions set forth herein.



     In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:



ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS




     1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings
set forth below:



     “Acquisition Agreement” means that certain Purchase and Sale Agreement dated January
23, 2007 between Howell Petroleum Corporation and Kerr-McGee Oil & Gas Onshore LP, as sellers, and
the Borrower, as purchaser.



     “Acquisition Closing Date” means the date all the conditions precedent in Section
4.03 are satisfied or waived in accordance with Section 10.01.



     “Acquisition Properties” means the “Properties,” as defined in and as contemplated by
the Acquisition Agreement.



     “Acquisition Properties SPE” has the meaning given in Section 4.03(d).



     “Administrative Agent” means Bank of America in its capacity as the Administrative
Agent under any of the Loan Documents, or any successor administrative agent.



     “Administrative Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02, or such other address or account as
the Administrative Agent may from time to time notify the Borrower and the Lenders.



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



     “Affiliate” means, with respect to any 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.



1









 





     “Agents” means, collectively, Administrative Agent, Fortis Capital Corp. and Wachovia
Bank, N.A., as Co-Syndication Agents, and BNP Paribas and Calyon New York Branch, as
Co-Documentation Agents.



     “Aggregate Commitments” means the Commitments of all the Lenders.



     “Agreement” means this Amended and Restated Credit Agreement.



     “Applicable Percentage” means with respect to any Lender at any time, the percentage
(carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s
Commitment at such time. If the commitment of each Lender to make Loans and the obligation of the
L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or
if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be
determined based on the Applicable Percentage of such Lender most recently in effect, giving effect
to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption
pursuant to which such Lender becomes a party hereto, as applicable.



     “Applicable Margin” means, on any date, with respect to each Loan, an amount
determined by reference to the ratio of Total Outstandings on such date to the Borrowing Base on
such date in accordance with the table below:



	 	 	 	 	 
	Ratio of Total	 	Applicable Margin	 	 
	Outstandings to	 	for Eurodollar Rate	 	Applicable Margin
	Borrowing Base	 	Loans	 	for Base Rate Loans
	less than .50 to 1
	 	1.000%
	 	0.000%
	 	 	 	 	 
	greater than or equal 

to .50 to 1 but 

less than .75 to 1
	 	1.250%
	 	0.000%
	 	 	 	 	 
	greater than or equal 

to .75 to 1 but 

less than .90 to 1
	 	1.500%
	 	0.250%
	 	 	 	 	 
	greater than or equal 

to .90 to 1
	 	1.750%
	 	0.500%






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



     “Approved Petroleum Engineer” means Miller and Lents, Ltd. or any other reputable firm
of independent petroleum engineers as shall be selected by the Borrower and approved by the
Administrative Agent, such approval not to be unreasonably withheld.



2









 





     “Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger
and sole book manager.



     “Asset Disposition” means the sale, assignment, transfer, exchange or other
disposition by any Credit Party of (i) any Borrowing Base Property or (ii) all or substantially all
of its right, title and interest in any Restricted Subsidiary owning any Borrowing Base Property,
other than to another Credit Party in accordance with the terms hereof.



     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.



     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of
Exhibit D or any other form approved by the Administrative Agent.



     “Availability” means, as of any date, the remainder of (a) the Borrowing Base in
effect on such date, minus (b) the Total Outstandings on such date.



     “Availability Period” means the period from and including the Closing Date to the
earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to Section 2.05, and (c) the date of termination of the commitment of each Lender
to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to
Section 8.02.



     “Bank of America” means Bank of America, N.A. and its successors.



     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a)
the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as
publicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a
rate set by Bank of America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced rate. Any change in
such rate announced by Bank of America shall take effect at the opening of business on the day
specified in the public announcement of such change.



     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.



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



     “Borrower-Related Parties” means, collectively, the Borrower, each Restricted
Subsidiary of the Borrower and each Unrestricted Subsidiary of the Borrower other than the MLP
Unrestricted Subsidiaries, and “Borrower-Related Party” means any one of the foregoing.



     “Borrowing” means a borrowing consisting of simultaneous Loans of the same Type and,
in the case of Eurodollar Rate Loans, having the same Interest Period, made by each of the Lenders
pursuant to Section 2.01.



3









 





     “Borrowing Base” means the loan value attributable to certain of the Credit Parties’
Mineral Interests as determined in accordance with Section 2.13 hereof.



     “Borrowing Base Deficiency” means, as of any date, the amount, if any, by which the
Total Outstandings on such date (less the Outstanding Amount of all L/C Obligations that have been
Cash Collateralized) exceed the Borrowing Base in effect on such date; provided, that, for purposes
of determining the existence and amount of any Borrowing Base Deficiency, L/C Obligations will not
be deemed to be outstanding to the extent they are secured by cash in the manner contemplated by
Section 2.03(g).



     “Borrowing Base Properties” means all Mineral Interests evaluated by the Lenders for
purposes of establishing the Borrowing Base. For the avoidance of doubt, the “Borrowing Base
Properties” shall include the Acquisition Properties to the extent encumbered by a Mortgage,
notwithstanding the fact that the Acquisition Properties may be owned by the Acquisition Properties
SPE at the time in question, pending the completion of the Like-Kind Exchange. The Borrowing Base
Properties on the Closing Date constitute all of the Mineral Interests described in the Initial
Reserve Report.



     “Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate
Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in
the London interbank eurodollar market.



     “Cash Collateral” means cash or deposit account balances.



     “Cash Collateralize” has the meaning specified in Section 2.03(g).



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



     “Change of Control” means the occurrence of any of the following, whether voluntarily
or involuntarily, including by operation of law:



     (a) any “person” or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”)), other than one or more Designated
Stockholders, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (a) such person shall be deemed to have
“beneficial ownership” of all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting power of the voting stock of the Borrower; provided, however, the
foregoing shall not constitute a Change of Control so long as the Designated Stockholders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a greater percentage of the total voting power of the voting stock of
the Borrower than such other person or group or have the right or ability by voting power,



4









 







contract
or otherwise to elect or designate for election a majority of the board of directors of the
Borrower (for the purposes of this clause (a), such other person or group referred to above shall
be deemed to beneficially own any voting stock of a Person (the “specified person”) held by any
other Person (the “parent entity”), if such other person or group is the beneficial owner (as
defined above in this clause (a)), directly or indirectly, of more than 35% of the voting power of
the voting stock of such parent entity and the Designated Stockholders beneficially own (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the voting stock of such parent entity and do not have the right
or ability by voting power, contract or otherwise to elect or designate for election a majority of
the board of directors of such parent entity); or



     (b) during any period of two consecutive years, individuals who, at the beginning of such
period, constituted the board of directors of the Borrower (together with (A) any new directors
whose election by such board of directors of the Borrower or whose nomination for election by the
shareholders of the Borrower was approved by a vote of the majority of the directors of the
Borrower then still in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved and (B) any representative of a
Designated Stockholder) cease for any reason to constitute a majority of the board of directors of
the Borrower then in office.



     “Closing Date” means the first date all the conditions precedent in Section
4.01 are satisfied or waived in accordance with Section 10.01.



     “Code” means the Internal Revenue Code of 1986.



     “Collateral” means all property of any kind which, under the terms of any Loan
Document, is subject to a Lien in favor of the Administrative Agent for the benefit of Persons to
whom any Secured Obligations are owed.



     “Commitment” means, as to each Lender, its obligation to (a) make Loans to the
Borrower pursuant to Section 2.01, and (b) purchase participations in L/C Obligations, in
an aggregate principal amount at any one time outstanding not to exceed the amount set forth
opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant
to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from
time to time in accordance with this Agreement.



     “Commitment Fee Percentage” means, on any date, the percentage determined pursuant to
the table below based on the ratio of the Total Outstandings on such date to the Borrowing Base in
effect on such date:



5









 





	 	 	 
	Ratio of Total	 	 
	Outstandings to Borrowing	 	Commitment Fee
	Base	 	Percentage
	less than .50 to 1
	 	0.250%
	 	 	 
	greater than or equal to .50 to 

1 but less than .75 to 1
	 	0.300%
	 	 	 
	greater than or equal to .75 to 

1 but less than .90 to 1
	 	0.375%
	 	 	 
	greater than or equal to

        .90 to 1
	 	0.375%






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



     “Consolidated Current Assets” means, at any time, the sum of (a) the current assets of
the Borrower and its Consolidated Restricted Subsidiaries at such time, plus (b) the Availability
at such time.



     “Consolidated Current Liabilities” means, at any time, the current liabilities of the
Borrower and its Consolidated Restricted Subsidiaries at such time, but excluding current
maturities of Long Term Debt of the Borrower and its Consolidated Restricted Subsidiaries
outstanding at such time.



     “Consolidated EBITDA” means, for any period, an amount equal to the Consolidated Net
Income of the Borrower and its Consolidated Restricted Subsidiaries for such period, plus each of
the following determined for the Borrower and its Consolidated Restricted Subsidiaries on a
consolidated basis for such period: (a) any provision for (or less any benefit from) income or
franchise Taxes included in determining Consolidated Net Income; (b) Consolidated Net Interest
Expense deducted in determining Consolidated Net Income; (c) depreciation, depletion, amortization
and exploration expense deducted in determining Consolidated Net Income; (d) other non-cash charges
deducted in determining Consolidated Net Income to the extent not already included in clauses (b)
and (c) of this definition, and (e) any unrealized non-cash gains or losses or charges in respect
of any Hedge Transactions resulting from the requirements of FAS 133 to the extent not already
included in clause (d) of this definition.



     “Consolidated Leverage Ratio” means the ratio of (a) Debt of the Borrower and its
Consolidated Restricted Subsidiaries at the time in question determined on a consolidated basis to
(b) Consolidated EBITDA for the four Fiscal Quarter period most recently ended prior to the date of
determination for which financial statements contemplated by Section 6.01(a) or (b)
are publicly available.



     “Consolidated Net Income” means, for any period, the net income (or loss) of the
Borrower and its Consolidated Restricted Subsidiaries for such period determined in accordance



6









 







with GAAP, but excluding (without duplication): (a) (i) the income of any other Person (other
than the Borrower’s Consolidated Restricted Subsidiaries) in which the Borrower or any of its
Consolidated Restricted Subsidiaries has an ownership interest, unless received by the Borrower or
any of its Consolidated Restricted Subsidiaries in a cash dividend, cash interest payment or other
cash distribution and (ii) the loss of any other Person (other than the Borrower’s Consolidated
Restricted Subsidiaries) in which the Borrower or any of its Consolidated Restricted Subsidiaries
has an ownership interest, except to the extent of the aggregate cash actually contributed to such
Person by the Borrower or any Consolidated Restricted Subsidiaries; (b) any after-tax gains or
losses attributable to asset dispositions by the Borrower or any of its Consolidated Restricted
Subsidiaries, together with all related fees and expenses; (c) any after-tax (i) extraordinary or
non-recurring gains, or (ii) extraordinary or nonrecurring losses, together with all related fees
and expenses; (d) any impairment losses on oil and natural gas properties; (e) any unrealized
non-cash gains or losses or charges in respect of any Hedge Transactions resulting from the
requirements of FAS 133 and (f) any non-cash compensation charge arising from any grant of stock,
stock options or other equity-based awards.



     “Consolidated Net Interest Expense” means, for any period, the remainder of the
following for the Borrower and its Consolidated Restricted Subsidiaries for such period: (a)
interest expense, minus (b) interest income.



     “Consolidated Restricted Subsidiary” or “Consolidated Restricted Subsidiaries”
means any Subsidiary, the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements, excluding each Unrestricted Subsidiary.



     “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. “Controlling” and “Controlled” have meanings
correlative thereto.



     “Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit
Extension.



     “Credit Parties” means, collectively, the Borrower, Operating and each other
Restricted Subsidiary of the Borrower, and “Credit Party” means any one of the foregoing.



     “Debt” means, for any Person at any time, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) capitalized lease obligations, other than usual and
customary oil and gas leases, of such Person, (d) all Guarantees by such Person of items described
in clauses (a) through (c) and (e) through (h) of this definition, (e) the unfunded or unreimbursed
portion of all letters of credit issued for the account of such Person, (f) any amount owed by such
Person representing the deferred purchase price of property or services (other than accounts
payable incurred in the ordinary course of business which have not been outstanding for more than
120 days past the invoice date), other than obligations contested in good faith by appropriate
proceedings, if required, and for which adequate reserves are maintained on the books of such
Person in accordance with GAAP, (g) indebtedness (excluding prepaid interest thereon) of such
Person secured by a Lien on any property or asset owned or being purchased by



7









 







that Person regardless of whether the indebtedness secured thereby shall have been assumed by
that Person or is non-recourse to the credit of that Person (the amount of such indebtedness being
deemed to be the lesser of the liquidation value of such property or asset and the amount of the
indebtedness so secured), (h) the undischarged balance of any production payment created by such
Person or for the creation of which such Person directly or indirectly received payment, and (i)
all liability of such Person as a general partner of a partnership for obligations of such
partnership of the nature described in (a) through (h) preceding, unless such obligations are
expressly non-recourse to such Person (subject to customary exceptions acceptable to the Required
Lenders).



     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.



     “Default” means any event or condition that constitutes an Event of Default or that,
with the giving of any notice, the passage of time, or both, would be an Event of Default.



     “Default Rate” means (a) when used with respect to Obligations other than Letter of
Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin, if any,
applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a
Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate
(including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and (b) when
used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin plus 2% per
annum.



     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Loans, or participations in L/C Obligations required to be funded by it hereunder within one
Business Day of the date required to be funded by it hereunder (unless such failure has been
cured), (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any
other amount required to be paid by it hereunder within one Business Day of the date when due,
unless the subject of a good faith dispute (unless such failure has been cured), or (c) has been
deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.



     “Designated Stockholders” means (a) I. Jon Brumley, (b) Jon S. Brumley, (c) Warburg
Pincus Equity Partners L.P., (d) trusts, the sole beneficiaries and trustees of which are the
individuals listed in clauses (a) and (b) above or their immediate family members, (e)
corporations, partnerships and other entities (i) of which the individuals listed in clauses (a)
and (b) above or their immediate family members are the beneficial owners of all capital stock and
other equity or voting interests, and (ii) that are controlled by such individuals and their
immediate family members, and (f) any Affiliates as of the Closing Date or successors of any of the
entities listed in clauses (c) and (d) above.



     “Disqualified Stock” has the meaning given such term in the Permitted Subordinate Debt
Indentures.



8









 





     “Distribution” by any Person means (a) with respect to any stock issued by such Person
or any partnership, joint venture, limited liability company, membership or other interest of such
Person, the retirement, redemption, purchase, or other acquisition for value of any such stock or
partnership, joint venture, limited liability company, membership or other interest, (b) the
declaration or payment of any dividend or other distribution on or with respect to any stock,
partnership, joint venture, limited liability company, membership or other interest of such Person,
and (c) any other payment by such Person with respect to such stock, partnership, joint venture,
limited liability company, membership or other interest of such Person.



     “Dollar” and “$” mean lawful money of the United States.



     “Domestic Restricted Subsidiary” means a Restricted Subsidiary incorporated or
organized under the laws of the United States, any State thereof or the District of Columbia.



     “Eligible Assignee” means any Person that meets the requirements to be an assignee
under Section 10.06(b)(iii) and (v) (subject to such consents, if any, as may be
required under Section 10.06(b)(iii)).



     “Environmental Complaint” means any complaint, summons, citation, notice, directive,
order, claim, litigation, investigation, proceeding, judgment, letter or other written
communication from any federal, state or municipal authority or any other party against any
Borrower-Related Party involving (a) a Hazardous Discharge from, onto or about any real property
owned, leased or operated at any time by any Borrower-Related Party, (b) a Hazardous Discharge
caused, in whole or in part, by any Borrower-Related Party or by any Person acting on behalf of or
at the instruction of any Borrower-Related Party, or (c) any violation of any Environmental Law by
any Borrower-Related Party.



     “Environmental Laws” means any and all Federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any Hazardous Substances into the environment,
including those related to hazardous substances or wastes, air emissions and discharges to waste or
public systems.



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



     “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership



9









 







or profit interests in) such Person, all of the securities convertible into or exchangeable
for shares of capital stock of (or other ownership or profit interests in) such Person or warrants,
rights or options for the purchase or acquisition from such Person of such shares (or such other
interests), and all of the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests are outstanding on any date of
determination.



     “ERISA” means the Employee Retirement Income Security Act of 1974.



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



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



     “Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate
Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing quotations of BBA LIBOR as
designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for
delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.
If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such
Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate
at which deposits in Dollars for delivery on the first day of such Interest Period in same day
funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by
Bank of America and with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch to major banks in the London interbank eurodollar market at their request
at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such
Interest Period.



     “Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the
Eurodollar Rate.



10









 





     “Event of Default” has the meaning specified in Section 8.01.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C
Issuer or any other recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section
10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is
attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment),
to receive additional amounts from the Borrower with respect to such withholding tax pursuant to
Section 3.01(a).



     “Existing Credit Agreement” means that certain Amended and Restated Credit Agreement
dated as of August 19, 2004, among the Borrower, Operating, Bank of America, N.A., as the
administrative agent, and the financial institutions party thereto.



     “Existing Letters of Credit” means all Letters of Credit (as defined in the Existing
Credit Agreement) issued and outstanding under the Existing Credit Agreement immediately prior to
the Closing Date.



     “Exiting Lenders” shall have the meaning set forth in Section 4.01(a)(xvii).



     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Bank of America on such day on such transactions as determined by the Administrative
Agent.



     “Fee Letter” means the letter agreement, dated February 13, 2007, among the Borrower,
the Administrative Agent and the Arranger.



     “First Tier Restricted Subsidiary” has the meaning specified in the definition of
Pledge Agreement.



     “Fiscal Quarter” means each three (3) month period ending on March 31, June 30,
September 30 and December 31 of each Fiscal Year.



11









 





     “Fiscal Year” means each twelve (12) month period ending December 31 of each calendar
year.



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



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



     “FRB” means the Board of Governors of the Federal Reserve System of the United States.



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



     “GAAP” means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the circumstances as of the date
of determination, consistently applied.



     “Governmental Authority” means the government of the United States or any other
nation, or of 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 (including any supra-national bodies such as the European Union or the European Central
Bank).



     “Granting Lender” has the meaning specified in Section 10.06(h).



     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any Debt or other
obligation payable or performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other
obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring
the obligee in respect of such Debt or other obligation of the payment or performance of such Debt
or other obligation, (iii) to maintain working capital, equity capital or any other financial
statement condition or liquidity or level of income or cash flow of the primary obligor so as to
enable the primary obligor to pay such Debt or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such Debt or other obligation of
the payment or performance thereof or to protect such obligee against loss in respect thereof (in
whole or in part), or (b) any Lien on any assets of such Person securing any Debt or other
obligation of any other Person, whether or not such Debt or other obligation is



12









 







assumed by such Person (or any right, contingent or otherwise, of any holder of such Debt to
obtain any such Lien) (the amount of such Debt or other obligation being deemed to be the lesser of
the liquidation value of such property or asset and the amount of the Debt or other obligation so
secured). The amount of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as
a verb has a corresponding meaning.



     “Guarantors” means, collectively, (i) Operating, (ii) all Domestic Restricted
Subsidiaries of the Borrower and (iii) to the extent no material adverse tax consequences would
result, all Foreign Restricted Subsidiaries of the Borrower.



     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative
Agent and the Lenders, substantially in the form of Exhibit E.



     “Hazardous Discharge” means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping of any
Hazardous Substance from or onto any real property owned, leased or operated at any time by any
Borrower-Related Party or any real property owned, leased or operated by any other party.



     “Hazardous Substance” means any pollutant, toxic substance, hazardous waste, compound,
element or chemical that is defined as hazardous, toxic, noxious, dangerous or infectious pursuant
to any Environmental Law or which is otherwise regulated by any Environmental Law or is required to
be investigated and/or remediated by or pursuant to any Environmental Law.



     “Hedge Transaction” means any commodity, interest rate, currency or other swap,
option, collar, futures contract or other contract pursuant to which a Person hedges risks related
to commodity prices, interest rates, currency exchange rates, securities prices or financial
market conditions. Hedge Transactions expressly include Oil and Gas Hedge Transactions.



     “Hydrocarbons” means oil, gas, casinghead gas, drip gasolines, natural gasoline,
condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in
conjunction therewith, and all products, by-products and all other substances derived therefrom or
the processing thereof, and all other minerals and substances, including, but not limited to,
sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium,
and any and all other minerals, ores, or substances of value, and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ combustion of coal or
lignite.



     “Immaterial Title Deficiencies” means, with respect to Borrowing Base Properties,
defects or clouds on title, discrepancies in reported net revenue and working interest ownership
percentage and other Liens, defects, discrepancies and similar matters which do not, individually
or in the aggregate, affect Borrowing Base Properties with a Recognized Value greater than two
percent (2%) of the Recognized Value of all such Borrowing Base Properties.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



13









 





     “Indemnitee” has the meaning specified in Section 10.04(b).



     “Information” has the meaning specified in Section 10.07.



     “Initial Reserve Report” means the engineering and economic analysis of Borrowing Base
Properties owned by the Borrower and its Restricted Subsidiaries as of December 31, 2006, prepared
by Miller and Lents, Ltd.



     “Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however,
that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates
that fall every three months after the beginning of such Interest Period shall also be Interest
Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June,
September and December and the Maturity Date.



     “Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the
date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan
and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its
Loan Notice, or such other period that is twelve months or less requested by the Borrower and
consented to by all the Lenders; provided that:




     (i) any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next preceding
Business Day;




     (ii) any Interest Period that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and




     (iii) no Interest Period shall extend beyond the Maturity Date.



     “Investment” means, as to any Person, any acquisition or investment by such Person by
means of (a) the purchase or other acquisition of capital stock or other securities of another
Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Debt of, or
purchase or other acquisition of any other Debt or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other Person and any
arrangement pursuant to which the investor Guarantees Debt of such other Person, or (c) the
purchase or other acquisition (in one transaction or a series of transactions) of assets of another
Person that constitute a business unit. For purposes of the definition of “Unrestricted
Subsidiary” and the definition of “Restricted Investment”: (x) “Investment” shall include the
portion (proportionate to the Borrower’s Equity Interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of the Borrower at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Borrower shall be deemed to continue to have a permanent
“Investment” in an Unrestricted Subsidiary equal to an amount (if positive) equal to (i) the
Borrower’s “Investment” in such Subsidiary at the time of such redesignation less (ii) the



14









 







portion (proportionate to the Borrower’s Equity Interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such redesignation; and (y) any
property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the board of directors of
the Borrower.



     “ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such
later version thereof as may be in effect at the time of issuance).



     “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit
Application, and any other document, agreement and instrument entered into by the L/C Issuer and
the Borrower (or any Restricted Subsidiary) or in favor of the L/C Issuer and relating to such
Letter of Credit.



     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable Percentage.



     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter
of Credit that has not been reimbursed on the date when made or refinanced as a Borrowing.



     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or any increase in the amount thereof.



     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder.



     “L/C Obligations” means, as at any date of determination, the aggregate undrawn amount
of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all
L/C Borrowings. For all purposes of this Agreement, if on any date of determination a Letter of
Credit has expired by its terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.



     “Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.



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



     “Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify the Borrower and the Administrative Agent.



15









 






     “Letter of Credit” means any letter of credit issued hereunder. A Letter of Credit may
be a commercial letter of credit or a standby letter of credit.



     “Letter of Credit Application” means an application and agreement for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer (the form of
letter of credit application customarily used by the Administrative Agent on the date hereof is
attached hereto as Exhibit G); provided, that, and notwithstanding anything to the
contrary contained herein, in the event of any conflict between any of the terms and provisions of
this Agreement and the terms and provisions of any Letter of Credit Application executed and
delivered by the Borrower, the terms and provisions of this Agreement shall control.



     “Letter of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business
Day).



     “Letter of Credit Fee” means, with respect to any Letter of Credit issued hereunder
for any day on which such Letter of Credit is outstanding, a fee in an amount equal to (i) the
amount available to be drawn under such Letter of Credit on such day multiplied by (ii) a
percentage determined by reference to the ratio of Total Outstandings on such day to the Borrowing
Base in effect on such day in accordance with the table below:



	 	 	 
	Ratio of Total	 	 
	Outstandings to	 	Per Annum Letter of
	Borrowing Base	 	Credit Fee
	less than .50 to 1
	 	1.000%
	 	 	 
	greater than or equal to .50 to 

1 but less than .75 to 1
	 	1.250%
	 	 	 
	greater than or equal to .75 to 

1 but less than .90 to 1
	 	1.500%
	 	 	 
	greater than or equal 

to .90 to 1
	 	1.750%






     Such fee shall be calculated quarterly in arrears and payable in accordance with the terms of
Section 2.03(i).



     “Letter of Credit Sublimit” means, at any time, an amount equal to 25% of the
Borrowing Base then in effect. The Letter of Credit Sublimit is part of, and not in addition to,
the Aggregate Commitments.



     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement in the nature of a security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any easement, right of way or
other encumbrance on title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).



16









 





     “Like-Kind Exchange” has the meaning given in Section 4.03(d).



     “Limited Recourse Equity Pledge” means the pledge of Equity Interests in any
Unrestricted Subsidiary to secure Non-Recourse Debt of such Unrestricted Subsidiary pursuant to an
agreement that expressly states that the pledgee shall have no recourse to the pledgor or any of
its assets or revenues under any circumstance other than recourse to the Equity Interests of the
Unrestricted Subsidiary that are described in such pledge.



     “Loan” has the meaning specified in Section 2.01.



     “Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, the Pledge Agreement, the Guaranty, and all other certificates, documents or instruments
delivered in connection with this Agreement, as the foregoing may be amended from time to time.



     “Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from one
Type to the other, or (c) a continuation of Eurodollar Rate Loans, in each case pursuant to
Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.



     “Long Term Debt” means Debt which matures more than one year from the date it is
incurred, or which can be extended at the option of the obligor(s) to a date more than one year
from the date it is incurred.



     “Margin Regulations” means Regulations T, U and X of the FRB, as in effect from time
to time.



     “Margin Stock” means “margin stock” as defined in Regulation U of the FRB, as in
effect from time to time.



     “Material Adverse Change” means any circumstance or event that has had a Material
Adverse Effect.



     “Material Adverse Effect” means a material adverse effect on (a) the assets,
properties, financial condition or business operations of the Borrower and the Borrower-Related
Parties, taken as a whole, (b) the right or ability of any Credit Party to perform its obligations
under the Loan Documents, (c) the validity or enforceability of any Loan Document against any
Credit Party (to the extent a party thereto), or (d) the rights and remedies of the Administrative
Agent or the Lenders under the Loan Documents.



     “Material Agreement” means any material written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such Person is directly or
indirectly bound, or to which any assets of such Person may be subject, which is not cancelable by
such Person upon notice of thirty (30) days or less without liability for further payment other
than nominal penalty.



     “Maturity Date” means March 7, 2012.



     “Maximum Rate” shall have the meaning set forth in Section 10.09.



17









 





     “Mineral Interests” means rights, estates, titles, and interests in and to oil and gas
leases and any oil and gas interests, royalty and overriding royalty interest, production payment,
net profits interests, oil and gas fee interests, and other rights therein, including, without
limitation, any reversionary or carried interests relating to the foregoing, together with rights,
titles, and interests created by or arising under the terms of any unitization, communitization,
and pooling agreements or arrangements, and all properties, rights and interests covered thereby,
whether arising by contract, by order, or by operation of Laws, which now or hereafter include all
or any part of the foregoing.



     “MLP Unrestricted Subsidiaries” means Encore Partners GP Holdings LLC, a Delaware
limited liability company, Encore Partners LP Holdings LLC, a Delaware limited liability company,
and their respective Subsidiaries.



     “Monthly Date” means the last day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day.



     “Mortgages” means all mortgages, deeds of trust, security agreements, pledge
agreements and similar documents, instruments and agreements (or the documents, instruments and
agreements, and the amendments and supplements to documents, instruments and agreements, of such
type delivered pursuant to the Existing Credit Agreement) creating, evidencing, perfecting or
otherwise establishing the Liens required by Section 6.14 hereof in the Proved Mineral
Interests of any Credit Party or the Acquisition Properties SPE, as applicable, as may heretofore
or may hereafter be granted or assigned to the Administrative Agent to secure payment of the
Secured Obligations or any part thereof. All Mortgages shall be in form and substance reasonably
satisfactory to the Administrative Agent.



     “Multiemployer Plan” means any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which any Borrower-Related Party or any ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has made or been
obligated to make contributions.



     “Net Cash Proceeds” means the remainder of (a) the gross cash proceeds received by any
Credit Party from any Asset Disposition less (b) commissions, legal, accounting and other
professional fees and expenses, and other usual and customary transaction costs, including, without
limitation, indemnification and other post-closing obligations and reserves related to any such
Asset Disposition, in each case only to the extent paid or payable by a Credit Party in cash and
related to such Asset Disposition.



     “Non-Recourse Debt” means Debt of a Subsidiary: (a) as to which neither the Borrower
nor any Restricted Subsidiary (i) provides credit support of any kind, including any Guarantee,
undertaking, agreement or instrument that would constitute Debt or any Lien on any of its assets or
revenues, other than a Limited Recourse Equity Pledge, nor (ii) is directly or indirectly liable as
a partner, guarantor or otherwise; (b) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would
permit upon notice, lapse of time or both any holder of Debt of the Borrower or any Restricted
Subsidiary to declare a default on such Debt or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (c) in the case of Debt for borrowed



18









 







money, as to which the lenders of such Debt, or if represented by a trustee, such trustee,
have been notified in writing that such lenders will not have any recourse to the Borrower, any
Restricted Subsidiary or any assets of any of them, other than a Limited Recourse Equity Pledge.



     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing
Loans made by such Lender, substantially in the form of Exhibit B.



     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Credit Party arising under any Loan Document or otherwise with respect to any
Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising and including
interest and fees that accrue after the commencement by or against any Credit Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor
in such proceeding, regardless of whether such interest and fees are allowed claims in such
proceeding.



     “Oil and Gas Hedge Transaction” means a Hedge Transaction pursuant to which any Person
hedges the price to be received by it for future production of Hydrocarbons.



     “Operating” means Encore Operating, L.P., a Texas limited partnership.



     “Organization Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents
with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; and (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or organization with
the applicable Governmental Authority in the jurisdiction of its formation or organization and, if
applicable, any certificate or articles of formation or organization of such entity.



     “Original Issuance” has the meaning set forth in the definition of Permitted
Subordinate Debt.



     “Other Taxes” means 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
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.



     “Outstanding Amount” means (i) with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date; and (ii) with respect to any L/C Obligations on any
date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit
Extension occurring on such date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any reimbursements by the Borrower of
Unreimbursed Amounts.



19









 





     “Participant” has the meaning specified in Section 10.06(d)



     “PBGC” means the Pension Benefit Guaranty Corporation.



     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by any Borrower-Related Party or any ERISA Affiliate or to which any
Borrower-Related Party or any ERISA Affiliate contributes or has an obligation to contribute, or in
the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.



     “Permitted Cash Equivalent Investments” means (a) readily marketable direct
obligations of the United States (or investments in mutual funds or similar funds which invest
solely in such obligations), (b) fully insured time deposits and certificates of deposit with
maturities of one year or less of any commercial bank operating in the United States having capital
and surplus in excess of $500,000,000, (c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest ratings categories of Standard and Poor’s
Corporation or Moody’s Investors Service, and (d) deposits in money market funds investing
exclusively in Investments described in the foregoing clauses (a), (b) and (c).



     “Permitted Encumbrances” means with respect to any asset:



          (a) Liens (if any) securing the Secured Obligations arising under Mortgages and the other Loan
Documents;




          (b) minor defects in title which do not secure the payment of money and otherwise have no
material adverse effect on the value or the operation of the subject property, and for the purposes
of this Agreement, a minor defect in title shall include, but not be limited to, easements, zoning
restrictions, rights-of-way, servitudes, permits, surface leases and other similar rights in
respect of surface operations, and easements for pipelines, streets, alleys, highways, telephone
lines, power lines, railways and other easements and rights-of-way, on, over or in respect of any
of the properties of any Credit Party that are customarily granted in the oil and gas industry;




          (c) (i) contractual or statutory Liens securing obligations for labor, services, materials and
supplies furnished to Mineral Interests, or (ii) Liens on pipeline or pipeline facilities which
arise out of operation of law, or (iii) Liens arising in the ordinary course of business under
operating agreements, joint venture agreements, partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, purchase, transportation, processing
or exchange of oil, gas or other hydrocarbons, unitization and pooling declarations and agreements,
area of mutual interest agreements, development agreements, joint ownership arrangements and other
agreements which are customary in the oil and gas business, provided that, in the case of
any Lien described in the foregoing clauses (i), (ii) or (iii), such Lien secures obligations that
are not Debt and are not delinquent (except to the extent permitted by Section 6.07), and
such Lien has no material adverse effect on the value or operation of the property encumbered
thereby;




20









 








          (d) contractual or statutory mechanic’s, materialmen’s, warehouseman’s, journeyman’s and
carrier’s Liens and other similar Liens arising in the ordinary course of business which are not
delinquent (except to the extent permitted by Section 6.07);




          (e) Liens for Taxes or assessments not yet due or not yet delinquent, or, if delinquent, that
are not required to be paid subject to satisfaction of the conditions set forth in Section
6.07;




          (f) lease burdens payable to third parties which are deducted in the calculation of discounted
present value in any Reserve Report including, without limitation, any royalty, overriding royalty,
net profits interest, production payment, carried interest or reversionary working interest;




          (g) Liens encumbering assets securing Debt incurred to finance the purchase of such assets
(including Liens in respect of capital leases), provided, that (i) the principal amount of the Debt
secured by a purchased asset shall not exceed one hundred percent (100%) of the purchase price of
such asset, (ii) such Liens shall not extend to or encumber any other asset of any Credit Party
(other than all improvements, additions and accessions thereto and products and proceeds thereof),
(iii) such Liens shall attach to such purchased asset substantially simultaneously with the
purchase of such asset, and (iv) the Debt secured by such Liens is permitted by Section
7.01(d);




          (h) Liens securing Hedge Transactions, including, without limitation, pledges of cash or cash
equivalents, provided, that, (i) such Hedge Transactions comply with Section 7.10 to the
extent applicable, and (ii) the aggregate amount of cash or cash equivalents pledged (or the fair
market value of other, non-cash collateral pledged) shall not, at any time, exceed ten percent
(10%) of the Borrowing Base then in effect;




          (i) to extent and only to the extent that such Liens secure Debt permitted under Section
7.01(d) or (e), (i) any Lien existing on any property of a Person at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary or becomes a Subsidiary
(and not incurred in anticipation of or in connection with such transaction), and (ii) any Lien
existing on any property at the time of the acquisition thereof (and not incurred in anticipation
of or in connection with such transaction); provided that such Liens are not extended to
other property of the Borrower or the Restricted Subsidiaries (other than all improvements,
additions and accessions thereto and products and proceeds thereof);




          (j) Liens securing any Special Mandatory Redemption Escrow Account;




          (k) rights of first refusal, purchase options and similar rights granted pursuant to joint
operating agreements, joint ownership agreements, stockholders agreements, organic documents and
other similar agreements and documents that have been disclosed to the Administrative Agent in
writing;




          (l) Liens incurred in the ordinary course of business on cash or securities pledged in
connection with workmen’s compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of tenders, statutory obligations, leases and
contracts (other than for Debt) entered into in the ordinary course of business




21









 







(including lessee and operator obligations under statute, governmental regulations or
instruments related to the ownership, exploration and production of oil, gas and minerals on state,
federal or foreign lands or waters) or to secure obligations on surety or appeal bonds;




          (m) pre-judgment Liens and judgment Liens in existence less than 15 days after the entry
thereof or with respect to which execution has been stayed or the payment of which is covered in
full (subject to a customary deductible) by insurance;




          (n) Liens resulting from the deposit of funds or evidences of Debt in trust for the purpose of
defeasing Debt of the Borrower or any of its Subsidiaries to the extent any such defeasance is not
prohibited by this Agreement;




          (o) customary Liens for the fees, costs and expenses of trustees and escrow agents pursuant to
the indenture, escrow agreement or other similar agreement establishing such trust or escrow
arrangement;




          (p) Liens pursuant to merger agreements, stock purchase agreements, asset sale agreements and
similar agreements (i) limiting the transfer of properties and assets pending consummation of the
subject transaction and (ii) in respect of earnest money deposits, good faith deposits, purchase
price adjustment escrows and similar deposits and escrow arrangements made or established
thereunder;




          (q) rights reserved to or vested in any municipality or governmental, statutory or public
authority by the terms of any right, power, franchise, grant, license or permit, or by any
provision of law, to terminate such right, power, franchise, grant, license or permit or to
purchase, condemn, expropriate or recapture or to designate a purchaser of any of the property of
such Person; rights reserved to or vested in any municipality or governmental, statutory or public
authority to control or regulate any property of such Person, or to use such property in a manner
which does not materially impair the use of such property for the purposes for which it is held by
such Person; and any obligation or duties affecting the property of such Person to any municipality
or governmental, statutory or public authority with respect to any franchise, grant, license or
permit;




          (r) Limited Recourse Equity Pledges;




          (s) to the extent not included in clauses (a) through (r) above, Permitted Encumbrances under
and as defined in the Mortgages; and




          (t) Liens on property not securing the Secured Obligations and not otherwise permitted by the
foregoing clauses of this definition; provided that the aggregate principal or face amount of all
Debt secured under this clause (t) shall not exceed $50,000,000 at any time.




     “Permitted Refinancing” means any Debt of the Borrower, and Debt constituting
Guarantees thereof by Restricted Subsidiaries, issued in exchange for, or the net proceeds of which
are used solely to extend, refinance, renew, replace (whether or not contemporaneously), defease or
refund, other Debt of the Borrower, in whole or in part, from time to time; provided that:



22









 





          (i) the principal amount of such Permitted Refinancing (or if such Permitted Refinancing is
issued at a discount, the initial issuance price of such Permitted Refinancing) does not exceed the
principal amount of the Debt so extended, refinanced, renewed, replaced, defeased or refunded (plus
the amount of any premiums paid and reasonable expenses incurred in connection therewith); and




          (ii) in the case of a Permitted Refinancing of Permitted Subordinate Debt, such Permitted
Refinancing otherwise meets the criteria of subsections (1), (2) and (3) of item (d) of the
definition of Permitted Subordinate Debt.




     “Permitted Subordinate Debt” means, collectively, (a) Debt of the Borrower, and Debt
constituting Guarantees thereof by Restricted Subsidiaries, resulting from the issuance of the
Borrower’s 6.25% Senior Subordinated Notes Due 2014 in an aggregate original principal amount of
$150,000,000 (the “Original Issuance”); (b) Debt of the Borrower, and Debt constituting
Guarantees thereof by Restricted Subsidiaries, resulting from the issuance of the Borrower’s 6.00%
Senior Subordinated Notes Due July 15, 2015 in an aggregate original principal amount of
$300,000,000; (c) Debt of the Borrower, and Debt constituting Guarantees thereof by Restricted
Subsidiaries, resulting from the issuance of the Borrower’s 7.25% Senior Subordinated Notes Due
2017 in an aggregate original principal amount of $150,000,000; (d) Debt of the Borrower, and Debt
constituting Guarantees thereof by Restricted Subsidiaries, which (1) is unsecured and is fully
subordinated to the Obligations to the same extent set forth in the Original Issuance, unless
otherwise approved by the Required Lenders, (2) is not subject to negative covenants or events of
default (or other provisions which have the same effect as negative covenants or events of default)
which, taken as a whole, are materially more restrictive on the Borrower than those set forth in
the Original Issuance, unless otherwise approved by the Required Lenders, and (3) does not have a
maturity date prior to the maturity date relative to the Original Issuance, unless otherwise
approved by the Required Lenders, and any Permitted Refinancing of any Debt incurred under this
clause (d), provided that the aggregate principal amount of any Debt at any time
outstanding under this clause (d) plus the principal amount of any Debt at any time
outstanding constituting a Permitted Refinancing of Debt incurred under this clause (d) (or, if
such Debt is issued at a discount, the initial issuance price thereof) shall not exceed
$300,000,000 in the aggregate (plus, in the case of any such Permitted Refinancing, the amount of
any premiums paid and reasonable expenses incurred in connection with any such Permitted
Refinancing), and (e) any Permitted Refinancing of items (a), (b), (c) and (d).



     “Permitted Subordinate Debt Indentures” means the indentures governing the Permitted
Subordinate Debt in the form existing on the date hereof.



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



     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by any Borrower-Related Party or, with respect to any such plan that is subject
to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.



     “Pledge Agreement” means a pledge agreement substantially in the form of Exhibit F
attached hereto to be executed by (i) the Borrower, pursuant to which the Borrower shall pledge



23









 







to the Administrative Agent all of the issued and outstanding Equity Interests directly owned
by the Borrower in each existing or hereafter created or acquired (x) Domestic Restricted
Subsidiary of the Borrower, and (y) to the extent no material adverse tax consequences would
result, Foreign Restricted Subsidiary of the Borrower, and (ii) each existing and future Domestic
Restricted Subsidiary of the Borrower (any such Restricted Subsidiary being referred to herein as a
“First Tier Restricted Subsidiary”), pursuant to which such First Tier Restricted
Subsidiary shall pledge to the Administrative Agent all of the issued and outstanding Equity
Interests directly owned by such First Tier Restricted Subsidiary in each existing or hereafter
created (x) Domestic Restricted Subsidiary of such First Tier Restricted Subsidiary and (y) to the
extent no material adverse tax consequences would result, Foreign Restricted Subsidiary of such
First Tier Restricted Subsidiary, in each case to secure the Secured Obligations.



     “Proved Mineral Interests” means, collectively, Proved Producing Mineral Interests,
Proved Non-producing Mineral Interests, and Proved Undeveloped Mineral Interests.



     “Proved Non-producing Mineral Interests” means all Mineral Interests which constitute
proved developed non-producing reserves.



     “Proved Producing Mineral Interests” means all Mineral Interests which constitute
proved developed producing reserves.



     “Proved Undeveloped Mineral Interests” means all Mineral Interests which constitute
proved undeveloped reserves.



     “RCRA” means the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980, the Solid Waste Recovery Act of 1976, as amended by the Solid Waste
Disposal Act of 1980, and the Hazardous and Solid Waste Amendments of 1984 as amended from time to
time.



     “Recognized Value” means, with respect to Mineral Interests, the discounted present
value of the estimated net cash flow to be realized from the production of Hydrocarbons from such
Mineral Interests as determined by the Administrative Agent for purposes of determining the portion
of the Borrowing Base which it attributes to such Mineral Interests in accordance with Section
2.13 hereof.



     “Redetermination” means (i) any Scheduled Redetermination, (ii) any Special
Redetermination, or (iii) any redetermination pursuant to Sections 2.13(d) or (e).



     “Redetermination Date” means (a) with respect to any Scheduled Redetermination, each
April 1 and October 1, commencing October 1, 2007, (b) with respect to any Special Redetermination,
the first day of the first month which is not less than twenty (20) Business Days following the
date of a request for a Special Redetermination, and (c) with respect to any redetermination
pursuant to Section 2.13(d), the date upon which any Credit Party completes any Asset
Disposition.



     “Register” has the meaning specified in Section 10.06(c).



24









 





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



     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived.



     “Request for Credit Extension” means (a) with respect to a Borrowing, conversion or
continuation of Loans, a Loan Notice and (b) with respect to an L/C Credit Extension, a Letter of
Credit Application.



     “Required Lenders” means, as of any date of determination, at least two Lenders having
more than 50% of the Aggregate Commitments or, if the commitment of each Lender to make Loans and
the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 8.02, at least two Lenders holding in the aggregate more than 50% of the Total
Outstandings (with the aggregate amount of each Lender’s risk participation and funded
participation in L/C Obligations being deemed “held” by such Lender for purposes of this
definition); provided that the Commitment of, and the portion of the Total Outstandings held or
deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of
Required Lenders.



     “Reserve Report” means an unsuperseded engineering analysis of the Mineral Interests
owned by the Credit Parties and, if applicable, the Acquisition Properties SPE, in form and
substance reasonably acceptable to the Administrative Agent, prepared in accordance with customary
and prudent practices in the petroleum engineering industry and Financial Accounting Standards
Board Statement 69. Each Reserve Report required to be delivered pursuant to Section
2.13(a) that is prepared as of December 31 shall be prepared by the Approved Petroleum
Engineer. Each other Reserve Report shall be prepared by the Borrower’s in-house staff.
Notwithstanding the foregoing, in connection with any Special Redetermination requested by the
Borrower, the Reserve Report shall be in form and scope mutually acceptable to the Borrower and the
Administrative Agent. Until superseded, the Initial Reserve Report shall be considered a Reserve
Report.



     “Responsible Officer” of any Credit Party means the chief executive officer,
president, chief financial officer, treasurer or assistant treasurer of such Credit Party (or, if
such Credit Party is a limited partnership, the chief executive officer, president, chief financial
officer, treasurer or assistant treasurer of the general partner of such Credit Party). Any
document delivered hereunder that is signed by a Responsible Officer of a Credit Party shall be
conclusively presumed to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Credit Party and such Responsible Officer shall be conclusively presumed
to have acted on behalf of such Credit Party.



     “Restricted Investment” means Investments in Unrestricted Subsidiaries (including any
Investment in any Subsidiary at the time of its designation as an Unrestricted Subsidiary) and
Investments in Persons not otherwise permitted under clauses (a) through (k) of Section
7.08, in either case who are principally engaged in the businesses specified in Section
6.02; provided that (i) the Borrower shall comply with Section 6.13 and Section
7.15, if applicable, (ii) no Default



25









 







exists or will result therefrom, (iii) no Borrowing Base Deficiency exists, and (iv) the
representations and warranties set forth in Article V will be true and correct in all material
respects after giving effect thereto, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and correct as of such
earlier date.



     “Restricted Payment” means, with respect to any Credit Party, (a) any Distribution by
such Credit Party (other than Distributions by one Credit Party to another Credit Party,
Distributions consisting of common or preferred Equity Interests of the Borrower and, in the case
of a Credit Party that is not a wholly owned Restricted Subsidiary of the Borrower, Distributions
made by such Credit Party on a pro rata basis (or on a basis more favorable to the Borrower or to a
Restricted Subsidiary) to the Persons owning Equity Interests in such Credit Party), (b) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Debt of any Credit
Party which is subordinate or junior in right of payment to the Permitted Subordinate Debt (other
than the purchase, repurchase, redemption, defeasance or other acquisition of any Debt of any
Credit Party which is subordinate or junior in right of payment to the Permitted Subordinate Debt
or retirement for value in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value), and (c)
Restricted Investments.



     “Restricted Subsidiary” means any Subsidiary that is not an Unrestricted Subsidiary.



     “Scheduled Redetermination” means any Redetermination of the Borrowing Base pursuant
to Section 2.13(b).



     “Secured Obligations” means the Obligations and the Secured Hedge Obligations.



     “Secured Hedge Obligations” means all obligations arising from time to time under
Hedge Transactions entered into between any Credit Party and a counterparty that is a Lender or an
Affiliate of a Lender at the time of entering into such Hedge Transaction.



     “Solvent” means, with respect to any Person on a particular date, the condition that,
on such date (a) the fair value of the property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount that will be required
to pay the liability of such Person on its debts as they become absolute and matured, and (c) such
Person is able to realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of business.



     “Special Mandatory Redemption” means the mandatory redemption of any Permitted
Subordinate Debt issued after the date of this Agreement due to the termination or abandonment of
an acquisition, provided that such redemption is capable of being fully funded by and is funded by
funds on deposit in the Special Mandatory Redemption Escrow Account funded with the proceeds of
such Permitted Subordinate Debt.



26









 





     “Special Mandatory Redemption Escrow Account” means an escrow account containing
proceeds of any Permitted Subordinate Debt issued after the date of this Agreement, which may be
used to fund a Special Mandatory Redemption.



     “Special Redetermination” means any Redetermination of the Borrowing Base pursuant to
Section 2.13(c).



     “SPC” has the meaning specified in Section 10.06(h).



     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other governing body (other
than securities or interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of the Borrower.



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



     “Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C
Obligations.



     “Type” means, with respect to a Loan, its character as a Base Rate Loan or a
Eurodollar Rate Loan.



     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets,
determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section
412 of the Code for the applicable plan year.



     “United States” and “U.S.” mean the United States of America.



     “Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).



     “Unrestricted Subsidiary” means (i) any Subsidiary that has been designated as an
Unrestricted Subsidiary by the Borrower in accordance with Section 7.15, and (ii) each
Subsidiary of any such Unrestricted Subsidiary. Prior to the Closing Date, the MLP Restricted
Subsidiaries were designated by the Borrower as Unrestricted Subsidiaries under the Existing Credit
Agreement and shall, subject to the ongoing requirements and provisions of Section 7.15,
remain designated as Unrestricted Subsidiaries under this Agreement.



     1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan
Document, unless otherwise specified herein or in such other Loan Document:



27









 





     (a) 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, (i)
any definition of or reference to any agreement, instrument or other document (including any
Organization Document) 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 herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar
import when used in any Loan Document, shall be construed to refer to such Loan Document in its
entirety and not to any particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference
to any law shall include all statutory and regulatory provisions consolidating, amending replacing
or interpreting such law and any reference to any law or regulation shall, unless otherwise
specified, refer to such law or regulation as amended, modified or supplemented from time to time,
and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.



     (b) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;”
and the word “through” means “to and including.”



     (c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.



     1.03 Accounting Terms.



     (a) Generally. All accounting terms not specifically or completely defined herein
shall be construed in conformity with, and all financial data (including financial ratios and other
financial calculations) required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the financial statements for the Fiscal Year ended
December 31, 2005, except as disclosed in the Borrower’s Forms 10-Q for the first three Fiscal
Quarters of 2006 or as otherwise specifically prescribed herein.



     (b) Changes in GAAP. If at any time any change in GAAP would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or
the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval of the
Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to
be



28









 







computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall
provide to the Administrative Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth a reconciliation
between calculations of such ratio or requirement made before and after giving effect to such
change in GAAP.



     1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to
this Agreement shall be calculated by dividing the appropriate component by the other component,
carrying the result to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a rounding-up if there is no
nearest number).



     1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be
references to Eastern time (daylight or standard, as applicable).



     1.06 Letter of Credit Amounts. Unless otherwise specified, all references herein to the
amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such
Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit
or the Issuer Documents related thereto, whether or not such maximum face amount is in effect at
such time.



     1.07 Petroleum Terms. As used herein, the terms “proved reserves,” “proved developed
reserves,” “proved developed producing reserves,” “proved developed non-producing reserves,” and
“proved undeveloped reserves” have the meaning given such terms from time to time and at the time
in question by the Society of Petroleum Engineers of the American Institute of Mining Engineers.



ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS




     2.01 Loans. Subject to the terms and conditions set forth herein, each Lender severally
agrees to make loans (each such loan, a “Loan”) to the Borrower from time to time, on any
Business Day during the Availability Period, in an aggregate amount not to exceed at any time
outstanding the amount of such Lender’s Commitment; provided, however, that immediately after
giving effect to any Borrowing, (a) the Total Outstandings shall not exceed the lesser of (i) the
Aggregate Commitments and (ii) the Borrowing Base then in effect, and (b) the aggregate Outstanding
Amount of the Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding
Amount of all L/C Obligations shall not exceed such Lender’s Commitment.
Within the foregoing limits, and subject to the other terms and conditions hereof, the
Borrower may borrow under this Section 2.01, prepay under Section 2.04, and
reborrow under this Section 2.01. Loans may be Base Rate Loans or Eurodollar Rate Loans,
as further provided herein.



     2.02 Borrowings, Conversions and Continuations of Loans.



     (a) Each Borrowing, each conversion of Loans from one Type to the other, and each continuation
of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative
Agent, which may be given by telephone. Each such notice must be received



29









 







by the Administrative
Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any
Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of
Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base
Rate Loans; provided, however, that if the Borrower wishes to request Eurodollar Rate Loans having
an Interest Period other than one, two, three or six months in duration as provided in the
definition of “Interest Period,” the applicable notice must be received by the
Administrative Agent not later than 11:00 a.m. four Business Days prior to the requested date of
such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt
notice to the Lenders of such request and determine whether the requested Interest Period is
acceptable to all of them. Not later than 11:00 a.m., three Business Days before the requested
date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the
Borrower (which notice may be by telephone) whether or not the requested Interest Period has been
consented to by all the Lenders. Each telephonic notice by the Borrower pursuant to this
Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a
written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.
Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal
amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in
Section 2.03(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Loan Notice (whether
telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a
conversion of Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii)
the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be
a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv)
the Type of Loans to be borrowed or to which existing Loans are to be converted, and (v) if
applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to
specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting
a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base
Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day
of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the
Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any
such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an
Interest Period of one month.



     (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each
Lender of the amount of its Applicable Percentage of the applicable Loans, and if no
timely notice of a conversion or continuation is provided by the Borrower, the Administrative
Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans
described in the preceding subsection. In the case of a Borrowing, each Lender shall make the
amount of its Loan available to the Administrative Agent in immediately available funds at the
Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the
applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section
4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the
Administrative Agent shall make all funds so received available to the Borrower in like funds as
received by the Administrative Agent either by (i) crediting the account of the Borrower on the
books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each
case in accordance with instructions provided to (and reasonably acceptable to) the Administrative
Agent by the Borrower; provided, however, that if, on the date the Loan Notice with respect to



30









 







such
Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second,
shall be made available to the Borrower as provided above.



     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted
only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of
a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without
the consent of the Required Lenders.



     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the
interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of
such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent
shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in
determining the Base Rate promptly following the public announcement of such change.



     (e) On any date, after giving effect to all Borrowings, all conversions of Loans from one Type
to the other, and all continuations of Loans as the same Type, there shall not be more than ten
Interest Periods in effect with respect to Loans outstanding on such date.



     2.03 Letters of Credit.



     (a) The Letter of Credit Commitment.




     (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in
reliance upon the agreements of the Lenders set forth in this Section 2.03, (1) from
time to time on any Business Day during the period from the Closing Date until the Letter of
Credit Expiration Date (the “Letter of Credit Availability Period”), to issue
Letters of Credit for the account of the Borrower or its Restricted Subsidiaries, and to
amend or extend Letters of Credit previously issued by it, in accordance with subsection (b)
below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally
agree to participate in Letters of Credit issued for the account of the Borrower or its
Restricted Subsidiaries and any drawings thereunder; provided that immediately after giving
effect to any L/C Credit Extension with respect to any Letter of Credit,
(1) the Total Outstandings shall not exceed the lesser of (x) the Aggregate Commitments
and (y) the Borrowing Base then in effect, (2) the aggregate Outstanding Amount of the Loans
of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C
Obligations shall not exceed such Lender’s Commitment, and (3) the Outstanding Amount of the
L/C Obligations shall not exceed the Letter of Credit Sublimit then in effect. Each request
by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a
representation by the Borrower that the L/C Credit Extension so requested complies with the
conditions set forth in the proviso to the preceding sentence. Within the foregoing limits,
and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of
Credit shall be fully revolving, and accordingly the Borrower may, during the Letter of
Credit Availability Period, obtain Letters of Credit to replace Letters of Credit that have
expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall
be deemed to have been issued



31









 







pursuant hereto, and from and after the Closing Date shall be
subject to and governed by the terms and conditions hereof.




     (ii) The L/C Issuer shall not issue any Letter of Credit if:




     (A) subject to Section 2.03(b)(iii), the expiry date of such requested
Letter of Credit would occur more than twelve months after the date of issuance or
last extension thereof, unless the Required Lenders have approved such expiry date;
or




     (B) the expiry date of such requested Letter of Credit would occur after the
Letter of Credit Expiration Date, unless all the Lenders have approved such expiry
date.




     (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit
if:




     (A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such
Letter of Credit, or any Law applicable to the L/C Issuer or any request or
directive (whether or not having the force of law) from any Governmental Authority
with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer
refrain from, the issuance of letters of credit generally or such Letter of Credit
in particular or shall impose upon the L/C Issuer with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the L/C Issuer is
not otherwise compensated hereunder) not in effect on the Closing Date, or shall
impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the L/C Issuer in good faith deems material
to it;




     (B) the issuance of such Letter of Credit would violate one or more policies of
the L/C Issuer;




     (C) except as otherwise agreed by the Administrative Agent and the L/C Issuer,
such Letter of Credit is in an initial face amount less than $100,000, in the case
of a commercial Letter of Credit, or $500,000, in the case of a standby Letter of
Credit;




     (D) such Letter of Credit is to be denominated in a currency other than
Dollars; or




     (E) a default of any Lender’s obligations to fund under Section 2.03(c)
exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C
Issuer has entered into satisfactory arrangements with the Borrower or such Lender
to eliminate the L/C Issuer’s risk with respect to such Lender.



32









 






     (iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be
permitted at such time to issue such Letter of Credit in its amended form under the terms
hereof.




     (v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A)
the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does
not accept the proposed amendment to such Letter of Credit.




     (vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of
Credit issued by it and the documents associated therewith, and the L/C Issuer shall have
all of the benefits and immunities (A) provided to the Administrative Agent in Article IX
with respect to any acts taken or omissions suffered by the L/C Issuer in connection with
Letters of Credit issued by it or proposed to be issued by it and Issuer Documents
pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used
in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the L/C Issuer.



     (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of
Credit.




     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative
Agent) in the form of a Letter of Credit Application, appropriately completed and signed by
a Responsible Officer of the Borrower. Such Letter of Credit Application must be received
by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two
Business Days (or such later date and time as the Administrative Agent and the L/C Issuer
may agree in a particular instance in their sole discretion) prior to the proposed issuance
date or date of amendment, as the case may be. In the case of a request for an initial
issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and
detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested
Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry
date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be
presented by such beneficiary in case of any drawing thereunder; (F) the
full text of any certificate to be presented by such beneficiary in case of any drawing
thereunder; (G) whether the requested Letter of Credit is to be a commercial Letter of
Credit or a standby Letter of Credit; and (H) such other matters as the L/C Issuer may
require. In the case of a request for an amendment of any outstanding Letter of Credit,
such Letter of Credit Application shall specify in form and detail satisfactory to the L/C
Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof
(which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such
other matters as the L/C Issuer may require. Additionally, the Borrower shall furnish to
the L/C Issuer and the Administrative Agent such other documents and information pertaining
to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as
the L/C Issuer or the Administrative Agent may reasonably require.



33









 






     (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will
confirm with the Administrative Agent (by telephone or in writing) that the Administrative
Agent has received a copy of such Letter of Credit Application from the Borrower and, if
not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the
L/C Issuer has received written notice from any Lender, the Administrative Agent or any
Credit Party, at least one Business Day prior to the requested date of issuance or amendment
of the applicable Letter of Credit, that one or more applicable conditions contained in
Article IV shall not then be satisfied, then, subject to the terms and conditions hereof,
the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the
Borrower (or the applicable Restricted Subsidiary) or enter into the applicable amendment,
as the case may be, in each case in accordance with the L/C Issuer’s usual and customary
business practices. Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the
L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product
of such Lender’s Applicable Percentage times the amount of such Letter of Credit.




     (iii) If the Borrower so requests in any applicable Letter of Credit Application, the
L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that
has automatic extension provisions (each, an “Auto-Extension Letter of Credit”);
provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent
any such extension at least once in each twelve-month period (commencing with the date of
issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not
later than a day (the “Non-Extension Notice Date”) in each such twelve-month period
to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by
the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C
Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the
Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit
the extension of such Letter of Credit at any time to an expiry date not later than the
Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit
any such extension if (A) the L/C Issuer has determined that it would not be permitted, or
would have no obligation, at such time to issue such Letter of Credit in its revised form
(as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of
Section 2.03(a) or otherwise), or (B) it has received
notice (which may be by telephone or in writing) on or before the day that is five
Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that
the Required Lenders have elected not to permit such extension or (2) from the
Administrative Agent, any Lender or the Borrower that one or more of the applicable
conditions specified in Section 4.02 is not then satisfied, and in each such case
directing the L/C Issuer not to permit such extension.




     (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter
of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C
Issuer will also deliver to the Borrower and the Administrative Agent a true and complete
copy of such Letter of Credit or amendment.



     (c) Drawings and Reimbursements; Funding of Participations.



34









 






     (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the
Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the
L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower
shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the
amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time,
the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of
the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such
Lender’s Applicable Percentage thereof. In such event, the Borrower shall be deemed to have
requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount
equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in
Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount
of the unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.02 (other than the delivery of a Loan Notice). Any notice given by the
L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be
given by telephone if immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of such notice.




     (ii) Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make
funds available to the Administrative Agent for the account of the L/C Issuer at the
Administrative Agent’s Office in an amount equal to its Applicable Percentage of the
Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by
the Administrative Agent, whereupon, subject to the provisions of Section
2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a
Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the
funds so received to the L/C Issuer.




     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot
be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the
L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so
refinanced, which L/C Borrowing shall be due and payable on demand (together with
interest) and shall bear interest at the Default Rate. In such event, each Lender’s
payment to the Administrative Agent for the account of the L/C Issuer pursuant to
Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such
L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its
participation obligation under this Section 2.03.




     (iv) Until each Lender funds its Loan or L/C Advance pursuant to this Section
2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Applicable Percentage of such amount shall be solely
for the account of the L/C Issuer.




     (v) Each Lender’s obligation to make Loans or L/C Advances to reimburse the L/C Issuer
for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c),
shall be absolute and unconditional and shall not be affected by any



35









 







circumstance, including
(A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have
against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of a Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however, that each Lender’s
obligation to make Loans pursuant to this Section 2.03(c) is subject to the
conditions set forth in Section 4.02 (other than delivery by the Borrower of a Loan
Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation
of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C
Issuer under any Letter of Credit, together with interest as provided herein.




     (vi) If any Lender fails to make available to the Administrative Agent for the account
of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section
2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting
through the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment is
immediately available to the L/C Issuer at a rate per annum equal to the greater of the
Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking
industry rules on interbank compensation, plus any administrative, processing or similar
fees customarily charged by the L/C Issuer in connection with the foregoing. If such Lender
pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute
such Lender’s Loan included in the relevant Borrowing or L/C Advance in respect of the
relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted to
any Lender (through the Administrative Agent) with respect to any amounts owing under this
clause (vi) shall be conclusive absent manifest error.



     (d) Repayment of Participations.




     (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and
has received from any Lender such Lender’s L/C Advance in respect of such payment in
accordance with Section 2.03(c), if the Administrative Agent receives for the
account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or
interest thereon (whether directly from the Borrower or otherwise, including proceeds
of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent
will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in
the case of interest payments, to reflect the period of time during which such Lender’s L/C
Advance was outstanding) in the same funds as those received by the Administrative Agent.




     (ii) If any payment received by the Administrative Agent for the account of the L/C
Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the
circumstances described in Section 10.05 (including pursuant to any settlement
entered into by the L/C Issuer in its discretion), each Lender shall pay to the
Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on
demand of the Administrative Agent, plus interest thereon from the date of such demand to
the date such amount is returned by such Lender, at a rate per annum equal to the Federal
Funds



36









 







Rate from time to time in effect. The obligations of the Lenders under this clause
shall survive the payment in full of the Obligations and the termination of this Agreement.



     (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer
for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following:




     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or
any other Loan Document;




     (ii) the existence of any claim, counterclaim, setoff, defense or other right that the
Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such transferee
may be acting), the L/C Issuer or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement
or instrument relating thereto, or any unrelated transaction;




     (iii) any draft, demand, certificate or other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under such
Letter of Credit;




     (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of
a draft or certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit, including any arising in connection with any
proceeding under any Debtor Relief Law; or




     (v) any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or any Subsidiary.



     The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto
that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s
instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The
Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its
correspondents unless such notice is given by the Borrower within five (5) Business Days after the
Borrower’s receipt of a copy of such Letter of Credit or amendment thereto.



     (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any
drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any
document (other than any sight draft, certificates and documents expressly required by the Letter
of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the



37









 







authority of the Person executing or delivering any such document. None of the L/C Issuer, the
Administrative Agent, any of their respective Related Parties nor any correspondent, participant or
assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in
connection herewith at the request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document
or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all
risks of the acts or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to, and shall not,
preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent,
any of their respective Related Parties nor any correspondent, participant or assignee of the L/C
Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v)
of Section 2.03(e); provided, however, that anything in such clauses to the contrary
notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be
liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused
by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to
pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear
on their face to be in order, without responsibility for further investigation, regardless of any
notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity
or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.



     (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C
Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing
has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C
Obligation for any reason remains outstanding, the Borrower shall, in each case,
immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations.
Sections 2.04 and 8.02(c) set forth certain additional requirements to deliver Cash
Collateral hereunder. For purposes of this Section 2.03, Section 2.04 and
Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or deliver
to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for
the L/C Obligations, Cash Collateral pursuant to documentation in form and substance reasonably
satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented
to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby
grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security
interest in all such cash, deposit accounts and all balances therein and all proceeds of the
foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts
at Bank of America.



     (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer
and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an
Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby



38









 







Letter of Credit,
and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently
published by the International Chamber of Commerce at the time of issuance, shall apply to each
commercial Letter of Credit.



     (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the
account of each Lender in accordance with its Applicable Percentage the Letter of Credit Fee for
each Letter of Credit issued hereunder. Letter of Credit Fees shall be due and payable quarterly
in arrears not later than fifteen (15) days following the first Business Day after the end of each
March, June, September and December in respect of the most recently ended quarterly period (or
portion thereof, in the case of the first payment), commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter
on demand. Notwithstanding anything to the contrary contained herein, upon the request of the
Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the
Default Rate to the fullest extent permitted by applicable laws.



     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The
Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to
each Letter of Credit, at the rate per annum specified in the Fee Letter, computed on the actual
daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum
amount is then in effect under such Letter of Credit) and on a quarterly basis in arrears, and due
and payable not later than fifteen (15) days following the first Business Day after the end of each
March, June, September and December in respect of the most recently ended quarterly period (or
portion thereof, in the case of the first payment), commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter
on demand. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the
customary issuance, presentation, amendment and other processing fees, and other standard costs and
charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such
customary fees and standard costs and charges are due and payable on demand and are nonrefundable.



     (k) Conflict with Issuer Documents. In the event of any conflict between the terms
hereof and the terms of any Issuer Document, the terms hereof shall control.



     (l) Letters of Credit Issued for Restricted Subsidiaries. Notwithstanding that a
Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the
account of, a Restricted Subsidiary, the Borrower shall be obligated to reimburse the L/C Issuer
hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges
that the issuance of Letters of Credit for the account of Restricted Subsidiaries inures to the
benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the
businesses of such Restricted Subsidiaries.



     2.04 Prepayments.



     (a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to
time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i)
such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three
Business Days prior to any date of prepayment of Eurodollar Rate Loans (or, in connection



39









 







with the
termination of the Aggregate Commitments pursuant to Section 2.05, such later date as may
be agreed to by the Administrative Agent) and (B) on the date of prepayment of Base Rate Loans;
(ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a
whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall
be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each
case, if less, the entire principal amount thereof then outstanding. Each such notice shall
specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if
Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative
Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of
such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower,
the Borrower shall make such prepayment and the payment amount specified in such notice shall be
due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any additional amounts
required pursuant to Section 3.05. Each such prepayment shall be applied to the Loans of
the Lenders in accordance with their respective Applicable Percentages.



     (b) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then
in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C
Obligations in an aggregate amount equal to such excess; provided, however, that
the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this
Section 2.04(b) unless after the prepayment in full of the Loans the Total Outstandings
exceed the Aggregate Commitments then in effect.



     (c) Except with respect to (i) a Special Redetermination pursuant to Section 2.13(c)
or (ii) a Borrowing Base adjustment pursuant to Section 2.13(d) or 2.13(e), in the
event a Borrowing Base Deficiency exists after giving effect to any Redetermination, the Borrower
shall, within ten (10) days following notice thereof from the Administrative Agent, provide written
notice (the “Election Notice”) to the Administrative Agent stating the action which the
Borrower proposes to take to remedy such Borrowing Base Deficiency, and the Borrower shall
thereafter,
at its option, either (1) eliminate such Borrowing Base Deficiency by making a single
mandatory prepayment of the Loans in an amount equal to the entire amount of such Borrowing Base
Deficiency within thirty (30) days after the date on which the Borrower provides the Election
Notice to the Administrative Agent (the “Election Date”), (2) eliminate such Borrowing Base
Deficiency by making six (6) consecutive mandatory prepayments of the Loans, each of which shall be
in an amount equal to one-sixth (1/6th) of the amount of such Borrowing Base Deficiency, commencing
on the first Monthly Date following the applicable Election Date and continuing on each of the five
next succeeding Monthly Dates thereafter, and in connection therewith, the Credit Parties shall (A)
dedicate a sufficient amount (as determined by the Administrative Agent in its sole discretion) of
the monthly cash flow from the Credit Parties’ oil and gas properties to satisfy such payments, and
(B) execute and deliver such collateral assignments and/or security agreements in form and
substance satisfactory to the Administrative Agent which the Administrative Agent may, in its
discretion, require with respect thereto, or (3) within thirty (30) days following the applicable
Election Date, submit additional oil and gas properties owned by the Credit Parties for
consideration in connection with the redetermination of the Borrowing Base which Administrative
Agent and Required Lenders deem sufficient in their sole discretion to eliminate such Borrowing
Base Deficiency. If a Borrowing Base



40









 







Deficiency on any Election Date cannot be eliminated pursuant
to this Section 2.04(c) by prepayment of the Loans in full (as a result of outstanding L/C
Obligations on such Election Date), on up to six Monthly Dates immediately following such Election
Date, the Borrower shall also deposit cash with the Administrative Agent, to be held by the
Administrative Agent to secure outstanding L/C Obligations in the manner contemplated by
Section 2.03, in an amount on each such Monthly Date at least equal to one sixth (1/6th) of
the balance of such Borrowing Base Deficiency (i.e., one-sixth of the difference between the
Borrowing Base Deficiency on such Election Date and the remaining outstanding principal amount of
the Loans on such Election Date), until the aggregate amount of cash so deposited with the
Administrative Agent equals the balance of such Borrowing Base Deficiency. In the event a
Borrowing Base Deficiency shall occur (or an increase in any pre-existing Borrowing Base Deficiency
shall occur) as a result of a Special Redetermination pursuant to Section 2.13(c), the
Borrower shall be required to make a mandatory prepayment of the Loans within thirty (30) days
following receipt of notice of such Borrowing Base Deficiency (or increase in any pre-existing
Borrowing Base Deficiency) in an amount equal to the amount of such Borrowing Base Deficiency (or
increase in any pre-existing Borrowing Base Deficiency).



     (d) Within one Business Day of the consummation by any Credit Party of any Asset Disposition,
the Borrower shall make a mandatory prepayment of the Loans in an amount, if any, required to
eliminate any Borrowing Base Deficiency existing after giving effect to such Asset Disposition.
Notwithstanding the foregoing, in the event a Default or Event of Default is in existence on the
date of the consummation of any Asset Disposition, all Net Cash Proceeds from such Asset
Disposition shall immediately be applied as a mandatory prepayment of the Loans.



     (e) Immediately upon the incurrence by any Credit Party of any Debt described in clause (d) of
the definition of Permitted Subordinate Debt, the Borrower shall make a mandatory prepayment of the
Loans in an amount, if any, required to eliminate any Borrowing Base Deficiency existing on the
date of such incurrence. Notwithstanding the foregoing, in the event a Default or Event of Default
is in existence on the date of the incurrence of any Permitted
Subordinate Debt, all proceeds from any such Permitted Subordinate Debt shall be applied as a
mandatory prepayment of the Loans.



     2.05 Termination or Reduction of Commitments. The Borrower may, upon notice to the
Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce
the Aggregate Commitments; provided that (i) any such notice shall be received by the
Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination
or reduction (or, in connection with the termination of the Aggregate Commitments, such later date
as may be agreed to by the Administrative Agent), (ii) any such partial reduction shall be in an
aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the
Borrower shall not terminate or reduce the Aggregate Commitments if, after giving effect thereto
and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Commitments, the
Letter of Credit Sublimit exceeds the amount of the Aggregate Commitments, such Letter of Credit
Sublimit shall be automatically reduced by the amount of such excess. The Administrative Agent
will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each
Lender according to its



41









 







Applicable Percentage. All fees accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of such termination.



     2.06 Repayment of Loans. The Borrower shall repay to the Lenders on the Maturity Date the
aggregate principal amount of Loans outstanding on such date.



     2.07 Interest.



     (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin; and (ii)
each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin.



     (b) (i) If any amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount
shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws.




     (ii) If any amount (other than principal of any Loan) payable by the Borrower under any
Loan Document is not paid when due (without regard to any applicable grace periods), whether
at stated maturity, by acceleration or otherwise, then upon the request of the Required
Lenders, such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.




     (iii) Upon the request of the Required Lenders, while any Event of Default exists, the
Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder
at a fluctuating interest rate per annum at all times equal to the Default Rate to the
fullest extent permitted by applicable Laws.




     (iv) Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.



     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment, and before and after
the commencement of any proceeding under any Debtor Relief Law.



     2.08 Fees. In addition to certain fees described in subsections (i) and (j) of Section
2.03:



     (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the
account of each Lender in accordance with its Applicable Percentage, a commitment fee equal to the
Commitment Fee Percentage times the actual daily amount by which the Borrowing Base exceeds the
Total Outstandings. The commitment fee shall accrue at all times during the



42









 







Availability Period,
including at any time during which one or more of the conditions in Article IV is not met, and
shall be due and payable quarterly in arrears not later than fifteen (15) days following the first
Business Day after the end of each March, June, September and December, commencing with the first
such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be
calculated quarterly in arrears, and if there is any change in the Commitment Fee Percentage during
any quarter, the actual daily amount by which the Borrowing Base exceeds the Total Outstandings
shall be computed and multiplied by the Commitment Fee Percentage separately for each period during
such quarter that such Commitment Fee Percentage was in effect.



     (b) Other Fees. (i) The Borrower shall pay to the Arranger and the Administrative
Agent for their own respective accounts fees in the amounts and at the times specified in the Fee
Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason
whatsoever.




     (ii) The Borrower shall pay to the Lenders such fees, if any, as shall have been
separately agreed upon in writing in the amounts and at the times so specified. Such fees
shall be fully earned when paid and shall not be refundable for any reason whatsoever.



     2.09 Computation of Interest and Fees. All computations of interest for Base Rate Loans when
the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year
of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of fees and interest shall be
made on the basis of a 360-day year and actual days elapsed (which results in more fees or
interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or
any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan
that is repaid on the same day on which it is made shall, subject to Section 2.11(a), bear
interest for one day. Each determination by the Administrative Agent of an interest rate or fee
hereunder shall be conclusive and binding for all purposes, absent manifest error.



     2.10 Evidence of Debt.



     (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender and by the Administrative Agent in the ordinary course of
business. The accounts or records maintained by the Administrative Agent and each Lender shall be
prima facie evidence of the amount of the Credit Extensions made by the Lenders to the Borrower and
the interest and payments thereon. Any failure to so record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing
with respect to the Obligations. In the event of any conflict between the accounts and records
maintained by any Lender and the accounts and records of the Administrative Agent in respect of
such matters, the accounts and records of the Administrative Agent shall control in the absence of
manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower
shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall
evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach
schedules to its Note and endorse



43









 







thereon the date, Type (if applicable), amount and maturity of
its Loans and payments with respect thereto.



     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the
Administrative Agent shall maintain in accordance with its usual practice accounts or records
evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the
event of any conflict between the accounts and records maintained by the Administrative Agent and
the accounts and records of any Lender in respect of such matters, the accounts and records of the
Administrative Agent shall control in the absence of manifest error.



     2.11 Payments Generally; Administrative Agent’s Clawback.



     (a) General. All payments to be made by the Borrower shall be made without condition
or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly
provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent,
for the account of the respective Lenders to which such payment is owed, at the Administrative
Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date
specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Lending Office. All
payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to accrue. If any
payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall
be made on the next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.



     (b) (i) Funding by Lenders; Presumption by the Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the proposed date of any
Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to
12:00 noon on the date of such 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 2.02
(or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available
in accordance with and at the time required by Section 2.02) and may, in reliance upon such
assumption, make available to the 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 in immediately available funds 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 (A) in the case of a payment to be made by such
Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation, plus any administrative,
processing or similar fees customarily charged by the Administrative Agent in connection with the
foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate
applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the
Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly
remit to the Borrower the amount of such



44









 







interest paid by the Borrower for such period. If such
Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower
shall be without prejudice to any claim the Borrower may have against a Lender that shall have
failed to make such payment to the Administrative Agent.




     (ii) Payments by the Borrower; Presumptions by the Administrative Agent. 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 the
L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, 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 the L/C Issuer, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed to such
Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day
from and including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate
determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.



     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest error.



     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the
Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and such funds are not made available to the Borrower by the
Administrative Agent because the conditions to the applicable Credit Extension set forth in Article
IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall
return such funds (in like funds as received from such Lender) to such Lender, without interest.



     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make
Loans, to fund participations in Letters of Credit and to make payments pursuant to Section
10.04(c) are several and not joint. The failure of any Lender to make any Loan, to fund any
such participation or to make any payment under Section 10.04(c) on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date,
and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to
purchase its participation or to make its payment under Section 10.04(c).



     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain
the funds for any 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 any Loan in any particular place or
manner.



45









 





     2.12 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of
the Loans made by it, or the participations in L/C Obligations held by it resulting in such
Lender’s receiving payment of a proportion of the aggregate amount of such Loans or participations
and accrued interest thereon greater than its pro rata share thereof as provided herein, then the
Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact,
and (b) purchase (for cash at face value) participations in the Loans and subparticipations in L/C
Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans and other amounts
owing them, provided that:




     (i) if any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the extent of such
recovery, without interest; and



     (ii) the provisions of this Section shall not be construed to apply to (x) any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or subparticipations in L/C
Obligations to any assignee or participant, other than to the Borrower or any Subsidiary
thereof (as to which the provisions of this Section shall apply).



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



     2.13 Borrowing Base.



     (a) Reserve Report; Proposed Borrowing Base. As soon as available and in any event by
February 28 and August 31 of each year, commencing August 31, 2007, the Borrower shall deliver to
the Administrative Agent and each Lender a Reserve Report prepared as of the immediately preceding
December 31 and June 30, respectively. Simultaneously with the delivery to the Administrative
Agent and each Lender of each Reserve Report, the Borrower shall notify the Administrative Agent
and each Lender of the amount of the Borrowing Base which the Borrower requests become effective on
the next Redetermination Date (or such date promptly following such Redetermination Date as the
Required Lenders shall elect).



     (b) Scheduled Redeterminations of the Borrowing Base; Procedures and Standards. Based
in part on the Reserve Reports made available to the Lenders pursuant to Section 2.13(a),
the Lenders shall redetermine the Borrowing Base on or prior to the next Redetermination Date (or
such date promptly thereafter as is reasonably possible based on the engineering and other
information available to the Lenders). Any Borrowing Base which becomes effective as a result of
any Redetermination of the Borrowing Base shall be subject to the following restrictions: (a)



46









 







such Borrowing Base shall not exceed the Borrowing Base requested by the Borrower pursuant to
Section 2.13(a) or 2.13(c) (as applicable), (b) such Borrowing Base shall not
exceed the Aggregate Commitments then in effect, (c) to the extent such Borrowing Base represents
an increase from the Borrowing Base in effect prior to such Redetermination, such Borrowing Base
shall be approved by all Lenders, and (d) any Borrowing Base which represents a decrease in the
Borrowing Base in effect prior to such Redetermination, or a reaffirmation of such prior Borrowing
Base, shall be approved by the Required Lenders. Each Redetermination shall be made by the Lenders
in accordance with their normal and customary procedures for evaluating oil and gas reserves and
other related assets as such exist at that particular time and will otherwise be in their sole
discretion. Without limiting such discretion, the Borrower acknowledges and agrees that each
Lender may consider such credit factors as it deems appropriate which are consistent with its
normal and customary procedures for evaluating oil and gas reserves and shall have no obligation in
connection with any Redetermination to approve any increase from the Borrowing Base in effect prior
to such Redetermination. The Administrative Agent shall propose such redetermined Borrowing Base
to the Lenders within 15 days following receipt by the Administrative Agent and each Lender of a
Reserve Report pursuant to Section 2.13(a). Such proposed Borrowing Base shall be
determined by the Administrative
Agent (1) in accordance with its normal and customary procedures for evaluating oil and gas
reserves and other related assets as such exist at that particular time, (2) in part by utilizing
the arithmetic average of the Administrative Agent’s pricing forecast and discount rates
established by the Administrative Agent and in existence at that particular time, adjusted to
reflect the effect of the Borrower’s and its Restricted Subsidiaries’ Hedge Transactions, and (3)
otherwise in its sole discretion. After having received notice of such proposed Borrowing Base by
the Administrative Agent, the Required Lenders (or all Lenders in the event of a proposed increase)
shall have fifteen (15) days to agree or disagree with such proposal. If at the end of such
fifteen (15) day period, the Required Lenders (or all Lenders in the event of a proposed increase)
have not communicated their approval or disapproval of the proposed Borrowing Base, such silence
shall be deemed an approval and the Administrative Agent’s proposal shall be the new Borrowing
Base. If, however, the Required Lenders (or any Lender in the event of a proposed increase) notify
Administrative Agent within such fifteen (15) day period of their disapproval, the Required Lenders
(or all Lenders in the event of a proposed increase) shall, within a reasonable period of time,
agree on a new Borrowing Base. Promptly following any Redetermination of the Borrowing Base, the
Administrative Agent shall notify the Borrower of the amount of the Borrowing Base as redetermined,
which Borrowing Base shall be effective as of the date specified in such notice, and shall remain
in effect for all purposes of this Agreement until the next Redetermination.



     (c) Special Redetermination. In addition to Scheduled Redeterminations, the Borrower
and the Required Lenders shall each be permitted to make (i) Special Redeterminations pursuant to
Section 5.09, and (ii) other Special Redeterminations of the Borrowing Base; provided,
that, the Required Lenders shall be permitted to make only one (1) Special Redetermination pursuant
to this Section 2.13(c) in any calendar year, and the Borrower shall be permitted to make
only two (2) Special Redeterminations pursuant to this Section 2.13(c) in any calendar
year. Any request for a Special Redetermination shall be made pursuant to a written notice to the
other parties to this Agreement, and, in the case of a request by the Borrower, such notice shall
be accompanied by a Reserve Report and a notification of the Borrowing Base requested by the
Borrower in connection with such Special Redetermination.



47









 







Any Special Redetermination shall be
made by the Administrative Agent and the Lenders in accordance with the procedures and standards
set forth in Section 2.13(b); provided, that, no Reserve Report will be required to be
delivered to the Administrative Agent and the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 2.13(c).



     (d) Asset Disposition Adjustment. In addition to Scheduled Redeterminations, Special
Redeterminations, and Permitted Subordinate Debt adjustments as set forth below in Section
2.13(e), the Borrowing Base shall reduce simultaneously with the completion by any Credit Party
of any Asset Disposition by the lesser of (i) the Borrowing Base value of the Borrowing Base
Properties which are subject to such Asset Disposition (which shall be the Borrowing Base value
assigned thereto by the Administrative Agent and approved by the Required Lenders in the most
recent Redetermination, and which, in the case of any exchange, shall be the net reduction in the
Borrowing Base value realized or resulting from such exchange), and (ii) the Net Cash Proceeds
received by any Credit Party from such Asset Disposition.



     (e) Permitted Subordinate Debt Adjustment. In addition to Scheduled Redeterminations,
Special Redeterminations and Asset Disposition adjustments as set forth above in Section
2.13(d), if Debt described in clause (d) of the definition of Permitted Subordinate Debt is
issued in any amount, the Borrowing Base then in effect pursuant to the terms of this Section
2.13 shall be automatically reduced by 33-1/3% of the principal amount of such Permitted
Subordinate Debt. Each determination of the Borrowing Base after such a reduction shall be
determined and stated taking the then outstanding amount of such Permitted Subordinate Debt into
account in lieu of such automatic reduction.



     (f) Borrowing Base Deficiency. If a Borrowing Base Deficiency exists after giving
effect to any Redetermination, the Borrower shall be obligated to eliminate such Borrowing Base
Deficiency by making mandatory prepayments of the Loans or by taking such other action required by
Section 2.04.



     (g) Initial Borrowing Base. Notwithstanding anything to the contrary contained
herein, the Borrowing Base in effect (x) during the period commencing on the Closing Date and
ending on the earlier of (i) the effective date of the first Redetermination after the Closing Date
and (ii) the Acquisition Closing Date shall be $650,000,000, and (y) during the period commencing
on the Acquisition Closing Date and ending on the effective date of the first Redetermination after
the Acquisition Closing Date shall be $950,000,000.



ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY




     3.01 Taxes.



     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the Borrower hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the
Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other
Taxes) from such payments, then (i) the sum payable shall be



48









 







increased as necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or L/C Issuer, 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
shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.



     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
subsection (a) above, the Borrower shall timely 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 the L/C Issuer, within 30 days after demand therefor, which demand shall
contain an invoice itemizing in reasonable detail the Taxes, Other Taxes and liability that is
subject to the Borrower’s indemnification according to this Section 3.01 for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to
the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be
conclusive absent manifest error.



     (d) Evidence of Payments. Within 30 days after any payment of Indemnified Taxes or
Other Taxes by the Borrower 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) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident
for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by
the Borrower or the Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.



     Without limiting the generality of the foregoing, in the event that the Borrower is resident
for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the
Administrative Agent (in such number of copies as shall be requested by the recipient) on or



49









 







prior
to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the Borrower or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is applicable:




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




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




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




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



     For any period with respect to which a Lender has failed to provide the Borrower and the
Administrative Agent with the appropriate form pursuant to Section 3.01(e) (unless such
failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which
a form originally was required to be provided), such Lender shall not be entitled to
indemnification under Section 3.01 with respect to Taxes imposed by the United States;
provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding Tax, become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist
such Lender to recover such Taxes.



     (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C
Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has
paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as
the case may be, and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that the Borrower, upon the request of the
Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the
Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such
Governmental Authority. This subsection shall not be construed to require the



50









 







Administrative
Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information
relating to its taxes that it deems confidential) to the Borrower or any other Person.



     3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending
Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates
based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative
Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base
Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the
Administrative Agent and the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand
from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all
Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest
Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to
such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate
Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the
amount so prepaid or converted.



     3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in
connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof
that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market
for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and
reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period
with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested
Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so
notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain
Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of
the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke
any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or,
failing that, will be deemed to have converted such request into a request for a Borrowing of Base
Rate Loans in the amount specified therein.



     3.04 Increased Costs; Reserves on Eurodollar Rate Loans.



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




     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any reserve requirement
contemplated by Section 3.04(e)) or the L/C Issuer;



51









 






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




     (iii) impose on any Lender or the L/C Issuer or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such
Lender or any Letter of Credit or participation therein;


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or
to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining
any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of
Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer
hereunder (whether of principal, interest or any other amount) then, upon delivery by such Lender
or the L/C Issuer of a certificate complying with Section 3.04(c), the Borrower will,
pursuant to Section 3.04(c), pay to such Lender or the L/C Issuer, as the case may be, such
additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be,
for such additional costs incurred or reduction suffered.




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



     (c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer
setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its
holding company, as the case may be, as specified in subsection (a) or (b) of this Section, and
containing an explanation in reasonable detail of the manner in which such amount or amounts were
determined, shall be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.



     (d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer
to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a



52









 







waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the
Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions suffered more than nine
months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect thereof).



     (e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long
as such Lender shall be required to maintain reserves with respect to liabilities or assets
consisting of or including eurocurrency funds or deposits (currently known as
“Eurocurrency liabilities”), additional interest on the unpaid principal amount of each
Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such
Lender (as determined by such Lender in good faith, which determination shall be conclusive), which
shall be due and payable on each date on which interest is payable on such Loan, provided the
Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative
Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days
prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10
days from receipt of such notice.



     3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative
Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:



     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate
Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise);



     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a
Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in
the amount notified by the Borrower; or



     (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Borrower pursuant to Section 10.13;


including any loss of anticipated profits and any loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing.



For purposes of calculating amounts payable by the Borrower to the Lenders under this Section
3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the
Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank
eurodollar market for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.




53









 








     3.06 Mitigation Obligations; Replacement of Lenders.



     (a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 3.04, or 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 3.01, or if
any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable
efforts to designate a different Lending Office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches or affiliates, if,
in the
judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or
eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or assignment.



     (b) Replacement of Lenders. If any Lender requests compensation under Section
3.04, 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 3.01, or if any
Lender gives a notice pursuant to Section 3.02, the Borrower may replace such Lender in
accordance with Section 10.13.



     3.07 Survival. All of the Borrower’s obligations under this Article III shall survive
termination of the Aggregate Commitments and repayment of all other Obligations hereunder.



ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS




     4.01 Conditions of Initial Credit Extension. The obligation of the L/C Issuer and each Lender
to make its initial Credit Extension hereunder is subject to satisfaction of the following
conditions precedent:



     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Credit Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date) and each in form and
substance satisfactory to the Administrative Agent and each of the Lenders:




     (i) executed counterparts of this Agreement and the Guaranty, sufficient in number for
distribution to the Administrative Agent, each Lender and the Borrower;




     (ii) a Note executed by the Borrower in favor of each Lender requesting a Note;




     (iii) the Pledge Agreement duly executed and delivered by the Borrower and each First
Tier Restricted Subsidiary, together with (A) to the extent the Equity Interests pledged
pursuant to the Pledge Agreement are certificated, all certificates (or other evidence
acceptable to the Administrative Agent) evidencing such Equity Interests, which certificates
shall be duly endorsed or accompanied by appropriate stock powers (as



54









 







applicable) executed
in blank, and (B) such other agreements and writings as may be reasonably requested by the
Administrative Agent, including, without limitation, UCC financing statements and/or
amendments to financing statements, in form and substance reasonably satisfactory to the
Administrative Agent;




     (iv) Mortgages covering Proved Mineral Interests that have a Recognized Value of not
less than the 80% of the Recognized Value of all Proved Mineral Interests owned by the
Credit Parties on the Closing Date and included in the Borrowing Base in effect on the
Closing Date, duly executed and delivered by the applicable Credit Parties, together with
such other assignments, conveyances, agreements and other writings as may be reasonably
requested by the Administrative Agent, including, without limitation, UCC financing
statements and/or amendments to financing statements, in form and substance reasonably
satisfactory to the Administrative Agent;




     (v) such certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Credit Party as the Administrative Agent
may reasonably require evidencing the identity, authority and capacity of each Responsible
Officer thereof authorized to act as a Responsible Officer in connection with this Agreement
and the other Loan Documents to which such Credit Party is a party;




     (vi) such documents and certifications as the Administrative Agent may reasonably
require to evidence that each Credit Party is duly organized or formed, validly existing, in
good standing and qualified to engage in business in each jurisdiction where its ownership,
lease or operation of properties or the conduct of its business requires such qualification,
except to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect;




     (vii) a favorable opinion of Baker Botts L.L.P., counsel to the Credit Parties,
addressed to the Administrative Agent and each Lender, substantially in the form of
Exhibit H;




     (viii) a favorable opinion of Holme Roberts & Owens, special Montana and Utah counsel
for the Administrative Agent, addressed to the Administrative Agent and each Lender, as to
the enforceability of the Mortgages in Montana and Utah and otherwise in form and substance
satisfactory to the Administrative Agent;




     (ix) a favorable opinion of Hinkle, Hensley, Shanor & Martin, L.L.P., special New
Mexico counsel for the Administrative Agent, addressed to the Administrative Agent and each
Lender, as to the enforceability of the Mortgages in New Mexico and otherwise in form and
substance satisfactory to the Administrative Agent;




     (x) a favorable opinion of Wold Johnson, P.C., special North Dakota counsel for the
Administrative Agent, addressed to the Administrative Agent and each Lender, as to the
enforceability of the Mortgages in North Dakota and otherwise in form and substance
satisfactory to the Administrative Agent;



55









 






     (xi) a favorable opinion of Conner & Winters, special Oklahoma counsel for the
Administrative Agent, addressed to the Administrative Agent and each Lender, as to the
enforceability of the Mortgages in Oklahoma and otherwise in form and substance satisfactory
to the Administrative Agent;




     (xii) such lien search reports as the Administrative Agent shall reasonably require,
conducted in such jurisdictions and reflecting such names as the Administrative Agent shall
request;




     (xiii) a certificate of a Responsible Officer of the Borrower either (A) attaching
copies of all consents, licenses and approvals (other than those related to the ordinary
conduct of its business) required in connection with the execution, delivery and performance
by each Credit Party and the validity against such Credit Party of the Loan Documents to
which it is a party, and such consents, licenses and approvals shall be in full force and
effect, or (B) stating that no such consents, licenses or approvals are so required;




     (xiv) a certificate signed by a Responsible Officer of the Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have been satisfied as
of the Closing Date, and (B) that there has been no event or circumstance since September
30, 2006 that has had or could be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect;




     (xv) a duly completed Compliance Certificate as of the last day of the Fiscal Quarter
of the Borrower most recently ended prior to the Closing Date for which financial statements
are available to the Borrower, signed by a Responsible Officer of the Borrower and
accompanied by the financial statements of the Borrower for such Fiscal Quarter complying
with the requirements of Section 6.01(a) or (b), as applicable;




     (xvi) evidence that all insurance required to be maintained pursuant to the Loan
Documents has been obtained and is in effect; and




     (xvii) evidence satisfactory to it that (A) all Loans (as defined in the Existing
Credit Agreement) of the Lenders (as defined in the Existing Credit Agreement) which will
not execute and deliver this Agreement (and will not have a Commitment hereunder)
(“Exiting Lenders”) shall have been or shall concurrently with the initial Credit
Extension hereunder be repaid in full, together with any accrued interest thereon and any
accrued fees payable to such Exiting Lenders under the Existing Credit Agreement to but
excluding the Closing Date, and (ii) the commitments under the Existing Credit Agreement of
such Exiting Lenders shall have been or shall concurrently with the initial Credit Extension
hereunder be terminated.



     (b) The Administrative Agent’s (or its counsel’s) completion of a review of title to Borrowing
Base Properties representing not less than 75% of the Recognized Value of all Borrowing Base
Properties on the Closing Date, which review shall not have revealed any condition or circumstance
that would reflect that the representations and warranties contained in Section 5.09 hereof
are inaccurate in any material respect.



56









 





     (c) The transactions contemplated by this Agreement shall be permitted by applicable Law and
regulation and shall not subject Administrative Agent, any Lender, or any Borrower-Related Party to
any Material Adverse Change.



     (d) No litigation, arbitration or similar proceeding shall be pending or threatened which
calls into question the validity or enforceability of this Agreement, the other Loan Documents or
the transactions contemplated hereby or thereby.



     (e) Any fees required to be paid on or before the Closing Date shall have been paid.



     (f) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges
and disbursements of counsel to the Administrative Agent required to be paid by the Borrower
hereunder to the extent invoiced prior to the Closing Date, plus such additional amounts of such
fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges
and disbursements incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude a final settling of accounts between the Borrower and
the Administrative Agent).



     Without limiting the generality of the provisions of Section 9.04, for purposes of
determining compliance with the conditions specified in this Section 4.01, each Lender that
has executed and delivered this Agreement 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 notice from such Lender prior to the proposed Closing Date specifying its objection
thereto.



     4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any Request
for Credit Extension (other than a Loan Notice requesting only a conversion of Loans to the other
Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:



     (a) The representations and warranties of the Borrower and each other Borrower-Related Party
contained in Article V or any other Loan Document, or which are contained in any document furnished
at any time under or in connection herewith or therewith, shall be true and correct in all material
respects on and as of the date of such Credit Extension, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they shall be
true and correct as of such earlier date, and except that for purposes of this Section
4.02, the representations and warranties contained in subsections (a) and (b) of Section
5.04 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a)
and (b), respectively, of Section 6.01.



     (b) No Default shall exist, or would result from such proposed Credit Extension or from the
application of the proceeds thereof.



     (c) The Administrative Agent and, if applicable, the L/C Issuer shall have received a Request
for Credit Extension in accordance with the requirements hereof.



57









 





     (d) After giving effect to such Credit Extension, the Total Outstandings shall not exceed the
Borrowing Base then in effect.



     Each Request for Credit Extension (other than a Loan Notice requesting only a conversion of
Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall
be deemed to be a representation and warranty that the conditions specified in Sections
4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit
Extension.



     4.03 Conditions to Acquisition Closing Date. The Borrowing Base shall automatically increase to
$950,000,000, without any determination or consent of the Lenders, upon satisfaction of the
following conditions precedent prior to June 1, 2007:



     (a) The acquisition of the Acquisition Properties, as contemplated by the Acquisition
Agreement, shall have been consummated in accordance in all material respects with the terms of the
Acquisition Agreement and applicable law.



     (b) No provision of the Acquisition Agreement or any material related agreements shall have
been altered, waived, amended, supplemented or otherwise modified in any respect materially adverse
to the Borrower or the Lenders, except with the prior consent of the Administrative Agent.



     (c) The Administrative Agent’s receipt of the following, each dated the Acquisition Closing
Date and each in form and substance reasonably satisfactory to the Administrative Agent and the
Borrower:




     (i) Mortgages covering a sufficient number of Acquisition Properties acquired under the
Acquisition Agreement so that, after giving effect to the acquisition of such Acquisition
Properties on the Acquisition Closing Date, Proved Mineral Interests representing not less
than 80% of the Recognized Value of all Proved Mineral Interests owned by the Credit Parties
or the Acquisition Properties SPE, as applicable, included in the then-current Borrowing
Base shall be subject to Mortgages, duly executed and delivered by the applicable Credit
Parties or the Acquisition Properties SPE, as applicable, together with such other
assignments, conveyances, agreements and other writings as may be reasonably requested by
the Administrative Agent, including, without limitation, UCC financing statements and/or
amendments to financing statements;




     (ii) documents of the type referred to in Section 4.01(a)(v) and (vi),
or supplements to the documents delivered pursuant to such sections, in connection with the
Mortgages delivered pursuant to this Section 4.03;




     (iii) a favorable opinion of Baker Botts L.L.P., counsel to the Credit Parties,
addressed to the Administrative Agent and each Lender, concerning each Credit Party that is
party to the Mortgages delivered pursuant to this Section 4.03 and covering such
matters as are addressed in the opinion of Baker Botts L.L.P. provided on the Closing Date
that are relevant to such Mortgages;



58









 






     (iv) a favorable opinion of Holme Roberts & Owens, special Montana counsel for the
Administrative Agent, addressed to the Administrative Agent and each Lender, as
to the enforceability of the Mortgages delivered pursuant to this Section in Montana
and otherwise in form and substance satisfactory to the Administrative Agent;




     (v) a favorable opinion of Wold Johnson, P.C., special North Dakota counsel for the
Administrative Agent, addressed to the Administrative Agent and each Lender, as to the
enforceability of the Mortgage delivered pursuant to this Section in North Dakota;




     (vi) such lien search reports as the Administrative Agent shall reasonable require,
conducted in such counties in Montana and North Dakota and reflecting such names as the
Administrative Agent shall request;




     (vii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have been satisfied as
of the Acquisition Closing Date, and (B) that there has been no event or circumstance since
December 31, 2006 that has had or could be reasonably expected to have, either individually
or in the aggregate, a Material Adverse Effect; and




     (viii) an environmental assessment report, in form, scope and detail reasonably
acceptable to the Administrative Agent from one or more environmental engineering firms
reasonably acceptable to the Administrative Agent, which report or reports shall set forth
the results of a Phase I environmental review of the Acquisition Properties.



     (d) In the event that the Borrower elects to cause the Acquisition Properties to be acquired
in a transaction that will qualify as an exchange of properties of “like kind” (the “Like-Kind
Exchange”) under Section 1031 of the Code, the Treasury Regulations promulgated thereunder
and/or IRS Revenue Procedure 2000-37 (the capitalized terms used in this Section 4.03(d) and not
otherwise defined in this Agreement shall have the meanings given in the Code and such Regulations
and Procedure), on or prior to the Acquisition Closing Date: (i) the Borrower, Operating, an
Exchange Accommodation Titleholder acceptable to the Administrative Agent and/or a special purpose
entity (the “Acquisition Properties SPE”) acceptable to the Administrative Agent
established for the purpose of acquiring title to the Acquisition Properties in connection with the
Like-Kind Exchange, shall have executed and delivered documents to provide for the acquisition of
the Acquisition Properties, to provide for the Like-Kind Exchange, to provide for a loan to the
Acquisition Properties SPE in an amount equal to the purchase price under the Acquisition Agreement
in order to finance such purchase price (the “EAT Loan”), to pledge to the Administrative
Agent the promissory note evidencing the Acquisition Properties SPE’s obligation to repay the EAT
Loan, as security for the Secured Obligations, to create Liens on the Acquisition Properties to
secure such EAT Loan or to directly secure the Secured Obligations, and such other agreements as
Administrative Agent may require or approve, in each case in form and substance acceptable to the
Administrative Agent, and (ii) the Borrower and Operating shall cause to be delivered to the
Administrative Agent such other documents, such certificates of public officials, such certificates
of officers of parties to the foregoing and such opinions of counsel, in each case regarding such
matters relating to the foregoing documents and the parties thereto as shall be required by the
Administrative Agent.



59









 





     (e) The Administrative Agent’s (or its counsel’s) completion of a review of title to a
sufficient number of Borrowing Base Properties (including Acquisition Properties acquired
under the Acquisition Agreement) so that, after giving effect to such review, the
Administrative Agent (or its counsel) shall have completed a review of title to Borrowing Base
Properties representing not less than 75% of the Recognized Value of all Borrowing Base Properties
on the Acquisition Closing Date (after giving effect to the acquisition of the Acquisition
Properties under the Acquisition Agreement), which review shall not have revealed any condition or
circumstance that would reflect that the representations and warranties contained in Section
5.09 hereof are inaccurate in any material respect.



     (f) The transactions contemplated by this Agreement shall be permitted by applicable Law and
regulation and shall not subject the Administrative Agent, any Lender, or any Borrower-Related
Party to any Material Adverse Change.



     (g) No litigation, arbitration or similar proceeding shall be pending or threatened which
calls into question the validity or enforceability of the Acquisition Agreement or the Mortgages
delivered pursuant to this Section or the transactions contemplated hereby or thereby.



     (h) Any fees required to be paid on or before the Acquisition Closing Date shall have been
paid.



     (i) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges
and disbursements of counsel to the Administrative Agent required to be paid by the Borrower
hereunder to the extent invoiced prior to the Acquisition Closing Date, plus such additional
amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such
fees, charges and disbursements incurred or to be incurred by it through the closing proceedings
(provided that such estimate shall not thereafter preclude a final settling of accounts between the
Borrower and the Administrative Agent).



ARTICLE V.

REPRESENTATIONS AND WARRANTIES




     The Borrower and Operating jointly and severally represent and warrant to the Administrative
Agent and each Lender that each of the following statements is true and correct on the date hereof,
and, subject to Section 4.02(a), will be true and correct in all material respects on the
occasion of each Borrowing and the issuance of each Letter of Credit:



     5.01 Existence and Power of Each Borrower-Related Party. Each Borrower-Related Party (a) is a
corporation, limited liability company or partnership duly incorporated or organized (as
applicable), validly existing and in good standing under the Laws of its jurisdiction of
incorporation or organization (as applicable), (b) has all corporate, limited liability company or
partnership power (as applicable) and all governmental licenses, authorizations, consents and
approvals required to carry on its businesses as now conducted and as proposed to be conducted,
except to the extent that failure to do so could not reasonably be expected to result in a Material
Adverse Effect, and (c) is duly qualified to transact business as a foreign corporation, foreign
limited liability company or foreign partnership (as applicable) in each jurisdiction where a



60









 







failure to be so qualified would not reasonably be expected to result in a Material Adverse Change.



     5.02 Credit Party and Governmental Authorization; Contravention. The execution, delivery and
performance of this Agreement and the other Loan Documents by each Credit Party (to the extent each
Credit Party is a party to this Agreement and such Loan Documents) are within such Credit Party’s
corporate, partnership or limited liability company powers (as applicable), when executed will be
duly authorized by all necessary corporate, partnership, or limited liability company action (as
applicable), require no action by or in respect of, or filing with, any Governmental Authority and
do not contravene, or constitute a default under, any provision of applicable Law (including,
without limitation, the Margin Regulations) or of the partnership agreement, the articles or
certificate of incorporation, bylaws, regulations or comparable charter or organizational documents
of such Credit Party or of any material agreement, judgment, injunction, order, decree or other
material instrument binding upon any Credit Party or result in the creation or imposition of any
Lien on any asset of any Credit Party other than the Liens securing the Secured Obligations.



     5.03 Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower
and Operating; the other Loan Documents when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of each Credit Party executing the same;
and each Loan Document is, or when executed and delivered, will be, enforceable against each Credit
Party which executes the same in accordance with its terms, except as (a) the enforceability
thereof may be limited by bankruptcy, insolvency or similar Laws affecting creditors rights
generally, and (b) the availability of equitable remedies may be limited by equitable principles of
general applicability.



     5.04 Financial Information.



     (a) The annual audited consolidated and consolidating balance sheet of the Borrower and the
related consolidated and consolidating statements of operations and cash flows most recently
delivered to the Administrative Agent pursuant to Section 4.01(a)(xv), if applicable, or
Section 6.01(a), fairly present in all material respects, in conformity with GAAP, the
consolidated financial position of the Borrower as of the date thereof and its consolidated results
of operations and cash flows for the period covered thereby.



     (b) The quarterly unaudited consolidated and consolidating balance sheet of the Borrower, and
the related unaudited consolidated statements of operations and cash flows most recently delivered
to the Administrative Agent pursuant to Section 4.01(a)(xv), if applicable, or Section
6.01(b), fairly present in all material respects, in conformity with GAAP applied on a basis
consistent with the financial statements referred to in Section 5.04(a) (subject to the
absence of footnotes and to normal year-end adjustments), the consolidated financial position of
the Borrower as of the date thereof and its consolidated results of operations and cash flows for
the period covered thereby.



     (c) Except as disclosed in writing to the Lenders prior to the execution and delivery of this
Agreement, since the date of the Borrower’s annual and quarterly consolidated balance
sheet and consolidated statements of operations and cash flow most recently delivered to the



61









 







Administrative Agent pursuant to Section 4.01 or Section 6.01, no Material Adverse
Change has occurred (including, without limitation, no Material Adverse Change with respect to any
facts or information regarding any Borrower-Related Party as represented to the Administrative
Agent or any Lender on or prior to the date hereof).



     (d) After giving effect to the transactions contemplated by this Agreement, (i) the Borrower
and its Subsidiaries, taken as a whole, and each Credit Party is Solvent, (ii) no Credit Party
intends to, and no Credit Party believes that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature, and (iii) no Credit Party is engaged in a
business or transaction, and no Credit Party is about to engage in business or a transaction, for
which such Credit Party’s property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Credit Party is engaged.



     5.05 Litigation. Except for matters disclosed on Schedule 5.05, there is no action,
suit or proceeding pending against, or to the knowledge of the Borrower or Operating, threatened
against or affecting any Borrower-Related Party before any Governmental Authority in which there is
a reasonable possibility of an adverse decision which would reasonably be expected to result in a
Material Adverse Change or which could in any manner draw into question the validity of the Loan
Documents.



     5.06 ERISA Compliance.



     (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws, except such noncompliance as could not reasonably
be expected to have a Material Adverse Effect. Each Plan that is intended to qualify under Section
401(a) of the Code is qualified in form and operation under such section and, to the best knowledge
of the Borrower, nothing has occurred which would prevent, or cause the loss of, such
qualification. Any Borrower-Related Party and each ERISA Affiliate have made all required
contributions to each Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.



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



     (c) (i) No ERISA Event has occurred or is reasonably expected to occur, except that, with
respect to an ERISA Event that arises in connection with the acquisition of a business by a
Borrower Related Party or an ERISA Affiliate and relates to a plan maintained by such acquired
business, no such ERISA Event has occurred or is reasonably expected to occur which could
reasonably be expected to result in a Material Adverse Effect; (ii) no Pension Plan has Unfunded
Pension Liability in excess of $15,000,000; (iii) neither any Borrower-Related Party nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither any Borrower-Related Party nor any ERISA Affiliate has



62









 







incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) neither any Borrower-Related Party nor any ERISA Affiliate
has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.



     5.07 Taxes and Filing of Tax Returns. Except to the extent being contested by appropriate
proceedings in accordance with Section 6.07 hereof, each Borrower-Related Party has filed
all tax returns required to have been filed and has paid all Taxes shown to be due and payable on
such returns, including interest and penalties, and all other Taxes which are payable by such
party, to the extent the same have become due and payable. Neither the Borrower nor Operating
knows of any proposed Tax assessment against any Borrower-Related Party that would, if made, have a
Material Adverse Effect, and all Tax liabilities of each Borrower-Related Party are adequately
provided for.



     5.08 Ownership of Properties Generally. Each Credit Party has good and defensible title to
all material properties and assets purported to be owned by it, including, without limitation, all
assets reflected in the balance sheets referred to in Section 5.04(a) and (b)
(except to the extent subject to a disposition permitted under Section 7.05 since the date
of such balance sheets) and all material assets which are necessary in the operation of their
respective businesses, and none of such properties or assets is subject to any Lien other than
Permitted Encumbrances and Immaterial Title Deficiencies.



     5.09 Mineral Interests. Except to the extent disposed of since the date of the most recently
delivered Reserve Report, each Credit Party has good and defensible title to all of its Borrowing
Base Properties evaluated in such Reserve Report, free and clear of all Liens except Permitted
Encumbrances and Immaterial Title Deficiencies. Subject only to Immaterial Title Deficiencies and
Permitted Encumbrances, all Borrowing Base Properties are valid, subsisting, and in full force and
effect, and all material rentals, royalties, and other amounts due and payable in respect thereof
have been duly paid, except for delay rentals with respect to which the applicable Credit Party has
determined in good faith that payment and discharge thereof is not in such Credit Party’s best
interest. Without regard to any consent or non-consent provisions of any joint operating agreement
covering any Proved Mineral Interests of any Credit Party, but subject to Immaterial Title
Deficiencies and Permitted Encumbrances, each Credit Party’s share of (a) the costs for each of its
Borrowing Base Properties evaluated in the most recently delivered Reserve Report (except to the
extent disposed of since the date of such Reserve Report) is not greater than the decimal fraction
set forth in such Reserve Report, before and after payout, as the case may be, and described
therein by the respective designations “working interests,” “WI,” “gross working
interest,” “GWI,” or similar terms, and (b) production from, allocated to, or attributed to
each of its Borrowing Base Properties evaluated in the most recently delivered Reserve Report
(except to the extent disposed of since the date of such Reserve Report) is not less than the
decimal fraction set forth in such Reserve Report, before and after payout, as the case may be, and
described therein by the designations “net revenue interest,” “NRI,” or similar terms. Each well
drilled in respect of each Borrowing Base Property evaluated in the most recently delivered Reserve
Report (except to the extent disposed of since the date of such Reserve Report) which is
categorized as proved developed producing reserves and described in such Reserve Report (i) is
capable of, and, with the exception of wells which are presently not



63









 







producing Hydrocarbons pending
the completion of workovers and repairs to such wells, is presently, producing Hydrocarbons in
commercially profitable quantities, and each Credit Party is receiving payments for its share of
production, and no material amount of funds in respect of any thereof are held in suspense, and
(ii) has been drilled, bottomed, completed, and operated in compliance with all applicable Laws in
all material respects and no such well which is currently producing Hydrocarbons is subject to any
penalty in production by reason of such well having produced in excess of its allowable production.
The breach of any representation or warranty set forth in Section 5.08 (as it relates to
Borrowing Base Properties) or this Section 5.09 shall not automatically cause an Event of
Default under Section 8.01(e) hereof. Instead, upon becoming aware that any Credit Party
has breached, or caused the breach of, any representation or warranty set forth in Section
5.08 (as it relates to Borrowing Base Properties) or this Section 5.09, the Required
Lenders may cause to be made a Special Redetermination of the Borrowing Base according to
Section 2.13(c) hereof, in which case that portion of the Borrowing Base Properties as to
which the representations and warranties of Section 5.08 (as it relates to Borrowing Base
Properties) or this Section 5.09 have been breached shall be excluded from the Mineral
Interests evaluated for purposes of the Borrowing Base; provided, however, an Event of Default
shall occur if, upon redetermination of the Borrowing Base, the Borrowing Base as so redetermined
has been reduced by more than twenty-five percent (25%) from the Borrowing Base in effect
immediately prior to such Redetermination or the Borrower fails to pay in full when due any
mandatory prepayment required by Section 2.04 hereof as a result of such Borrowing Base
Deficiency.



     5.10 Licenses, Permits, Etc. Each Borrower-Related Party possesses such valid franchises,
certificates of convenience and necessity, operating rights, licenses, permits, consents,
authorizations, exemptions and orders of Governmental Authorities, as are necessary to carry on its
business as now conducted and as proposed to be conducted, except to the extent a failure to obtain
any such item would not reasonably be expected to result in a Material Adverse Change.



     5.11 Compliance with Law. The business and operations of the Borrower-Related Parties have
been and are being conducted in accordance with all applicable Laws other than violations of Laws
which would not reasonably be expected to (either individually or collectively) result in a
Material Adverse Change.



     5.12 Full Disclosure . No statement or information contained in this Agreement, any other Loan Document, or any
other document, certificate or statement furnished by or on behalf of any Borrower-Related Party to
the Administrative Agent or the Lenders, or any of them, for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents, taken as a whole,
contained as of the date such statement, information, document or certificate was so furnished, any
untrue statement of a material fact or omitted to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under which they were made,
not misleading as of the date made or deemed made; provided, that with respect to the estimates,
projections and pro forma financial information contained in the materials referenced above, the
Borrower only represents that they are based upon good faith estimates and assumptions believed by
management of the Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be viewed as fact and that
actual results during the period or periods covered by



64









 







such financial information may differ from
the projected results set forth therein by a material amount. There is no fact known to any
Borrower-Related Party (other than the future impact of generally known industry-wide risks
normally associated with the type of business conducted by the Borrower and its Subsidiaries) that
could reasonably be expected to have a Material Adverse Effect that has not been expressly
disclosed herein, in the other Loan Documents or in any other documents, certificates and
statements furnished to the Administrative Agent and the Lenders for use in connection with the
transactions contemplated hereby and by the other Loan Documents.



     5.13 Organizational Structure; Nature of Business. The Borrower-Related Parties are engaged
principally in the business of acquiring, exploring, developing, operating and disposing of Mineral
Interests and the production, marketing, processing, gathering, storage and transporting of
Hydrocarbons therefrom. Schedule 5.13 hereto accurately reflects, as of the date hereof,
(a) the jurisdiction of incorporation or organization of each Borrower-Related Party, (b) each
jurisdiction in which each Borrower-Related Party is qualified to transact business as a foreign
corporation, foreign partnership or foreign limited liability company, (c) the authorized, issued
and outstanding Equity Interests of each Borrower-Related Party other than the Borrower (and the
record, and to the knowledge of the Borrower and Operating, beneficial owners of such Equity
Interests), and (d) all outstanding warrants, options, subscription rights, convertible securities
or other rights to purchase Equity Interests of each Borrower-Related Party.



     5.14 Environmental Matters. Except for matters disclosed on Schedule 5.14 hereto, no
operation conducted by any Borrower-Related Party and no real or personal property now or
previously owned or leased by any Borrower-Related Party (including, without limitation, any Credit
Party’s Mineral Interests) and no operations conducted thereon, and to the Borrower’s or
Operating’s knowledge, no operations of any prior owner, lessee or operator of any such properties,
is in violation of any Environmental Law other than violations which neither individually nor in
the aggregate would reasonably be expected to result in a Material Adverse Change. Except for
matters disclosed on Schedule 5.14 hereto, no Borrower-Related Party, nor any such property
or operation is the subject of any existing, pending or, to the Borrower’s or Operating’s
knowledge, threatened Environmental Complaint which would reasonably be expected to, individually
or in the
aggregate, result in Material Adverse Change. All notices, permits, licenses, and similar
authorizations required to be obtained or filed in connection with the ownership of each tract of
real property or operations of any Borrower-Related Party thereon and each item of personal
property owned, leased or operated by any Borrower-Related Party including, without limitation,
notices, licenses, permits and authorizations required in connection with any past or present
treatment, storage, disposal, or release of Hazardous Substances into the environment, have been
duly obtained or filed, except to the extent the failure to obtain or file such notices, licenses,
permits and authorizations would not reasonably be expected to result in a Material Adverse Change.
All Hazardous Substances generated at each tract of real property and by each item of personal
property owned, leased or operated by any Borrower-Related Party have been transported, treated,
and disposed of only by carriers or facilities maintaining valid permits under RCRA and all other
Environmental Laws for the conduct of such activities, except in such cases where the failure to
obtain such permits would not reasonably be expected to, individually or in the aggregate, result
in a Material Adverse Change. Except for matters disclosed on Schedule 5.14 hereto, there
have been no Hazardous Discharges which were not in compliance with Environmental Laws other than
Hazardous Discharges which would not reasonably be expected to, individually or in the aggregate,
result in a Material Adverse Change.



65









 







Except for matters disclosed on Schedule 5.14 hereto,
no Borrower-Related Party has any known contingent liability in connection with any Hazardous
Discharge which would reasonably be expected to result in a Material Adverse Change.



     5.15 Fiscal Year. The Borrower’s Fiscal Year is January 1 through December 31.



     5.16 No Default. Neither a Default nor an Event of Default has occurred or will exist after
giving effect to the transactions contemplated by this Agreement or the other Loan Documents.



     5.17 Government Regulation. No Credit Party is subject to regulation under the Federal Power
Act, the Interstate Commerce Act (as any of the preceding acts have been amended), the Investment
Company Act of 1940 or any other Law which regulates the incurring by such Credit Party of Debt,
including, but not limited to Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.



     5.18 Gas Balancing Agreements and Advance Payment Contracts. Except as set forth on
Schedule 5.18, on the date of this Agreement, on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to any of the Borrower’s and its Restricted
Subsidiaries’ Mineral Interests which would require the Borrower or any of its Restricted
Subsidiaries to deliver, in the aggregate, five percent (5%) or more of the monthly production of
Hydrocarbons produced from such Mineral Interests at some future time without then or thereafter
receiving full payment therefor.



     5.19 Insurance . The properties of each Borrower-Related Party are insured with financially sound and
reputable insurance companies not Affiliates of such Borrower-Related Party, in such amounts, with
such deductibles and covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where such Borrower-Related Party operates.



     5.20 Subsidiaries; Equity Interests.



     (a) As of the date of this Agreement, the Borrower has no Subsidiaries other than those
specifically disclosed in Part (a) of Schedule 5.20, and all of the outstanding Equity
Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by a Borrower-Related Party in the amounts specified in Part (a) of Schedule 5.20,
free and clear of all Liens (except as security for the Secured Obligations). Part (a) of
Schedule 5.20 list the Restricted Subsidiaries of the Borrower as of the date hereof and
the Unrestricted Subsidiaries of the Borrower as of the date hereof.



     (b) As of the date of this Agreement, the Borrower has no equity investments in any other
corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.20.
All of the outstanding Equity Interests in the Borrower have been validly issued, and are fully
paid and nonassessable.



66









 





ARTICLE VI.

AFFIRMATIVE COVENANTS




     The Borrower and Operating jointly and severally covenant and agree that, so long as there
remain any Outstanding Amounts or any Lender has any Commitment hereunder:



     6.01 Information. The Borrower and Operating will deliver, or cause to be delivered, to the
Administrative Agent:



     (a) as soon as available and in any event within ninety (90) days after the end of each Fiscal
Year, beginning with the Fiscal Year ended December 31, 2006, a consolidated and consolidating
balance sheet of the Borrower as of the end of such Fiscal Year and the related consolidated and
consolidating statements of income and statements of cash flow for such Fiscal Year, setting forth
in each case (as applicable), in comparative form the figures for the previous Fiscal Year, all
reported by the Borrower in accordance with GAAP and audited by Ernst & Young or another firm of
independent public accountants of nationally recognized standing and reasonably acceptable to the
Administrative Agent (it being understood that, to the extent the foregoing financial statements
are contained in the Borrower’s Annual Report on Form 10-K, the Borrower may satisfy the foregoing
requirement by delivering copies of its Annual Report on Form 10-K);



     (b) as soon as available and in any event within forty-five (45) days after the end of each of
the first three (3) Fiscal Quarters of each Fiscal Year, beginning with the Fiscal Quarter
ending March 31, 2007, unaudited consolidated and consolidating balance sheets of the Borrower
as of the end of such Fiscal Quarter and the related unaudited consolidated and consolidating
statements of income and statements of cash flow for such quarter and for the portion of the
Borrower’s Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case (as
applicable), in comparative form the figures for the corresponding quarter of the Borrower’s
previous Fiscal Year and the corresponding portion of the Borrower’s previous Fiscal Year (it being
understood that, to the extent the foregoing financial statements are contained in the Borrower’s
Quarterly Report on Form 10-Q, the Borrower may satisfy the foregoing requirement by delivering
copies of its Quarterly Report on Form 10-Q);



     (c) simultaneously with the delivery of each set of financial statements referred to in
Section 6.01(a) and Section 6.01(b), a Compliance Certificate of the Borrower, (i)
setting forth in reasonable detail the calculations required to establish whether the Borrower was
in compliance with the requirements of Section 7.13 on the date of such financial
statements, (ii) stating whether there exists on the date of such certificate any Default and, if
any Default then exists, setting forth the details thereof and the action which the Borrower and/or
Operating are taking or propose to take with respect thereto, (iii) stating whether or not such
financial statements fairly reflect in all material respects the results of operations and
financial condition of the Borrower-Related Parties as of the date of such financial statements and
for the period covered thereby, (iv) setting forth (A) whether as of the date of such certificate,
on a net basis there are any gas imbalances, take or pay or other prepayments with respect to any
of the Borrower’s and its Restricted Subsidiaries’ Mineral Interests which would require the
Borrower or any of its Restricted Subsidiaries to deliver, in the aggregate, five percent (5%) or
more of the monthly production of Hydrocarbons produced from such Mineral Interests at some future
time without



67









 







then or thereafter receiving full payment therefor and, if so, setting forth the
amount thereof and (v) a summary of the Hedge Transactions to which each Credit Party is a party on
the date of such certificate;



     (d) promptly upon the mailing thereof to the stockholders of the Borrower generally, copies of
all financial statements, material reports and proxy statements so mailed;



     (e) promptly upon the filing thereof, copies of all final registration statements,
post-effective amendments thereto and annual, quarterly or special reports which any
Borrower-Related Party shall have filed with the Securities and Exchange Commission; provided, that
the Borrower and Operating must deliver, or cause to be delivered, any annual reports which any
Borrower-Related Party shall have filed with the Securities and Exchange Commission within ninety
(90) days after the end of each Fiscal Year of such Borrower-Related Party, and any quarterly
reports which any Borrower-Related Party shall have filed with the Securities and Exchange
Commission within forty-five (45) days after the end of each of the first three (3) Fiscal Quarters
of each Fiscal Year of such Borrower-Related Party;



     (f) promptly upon receipt of same, any notice or other information received by any
Borrower-Related Party indicating (i) any potential, actual or alleged non-compliance with or
violation of the requirements of any Environmental Law which could reasonably be expected to result
in liability to any Borrower-Related Party for fines, clean up or any other remediation obligations
or any other liability in excess of $10,000,000 in the aggregate; (ii) any potential, actual,
alleged or threatened Hazardous Discharge, which Hazardous Discharge would impose
on any Borrower-Related Party a duty to report to a Governmental Authority or to pay cleanup
costs or to take remedial action under any Environmental Law which could reasonably be expected to
result in liability to any Borrower-Related Party for fines, clean up and other remediation
obligations or any other liability in excess of $10,000,000 in the aggregate; or (iii) the
existence of any Lien arising under any Environmental Law securing any obligation to pay fines,
clean up or other remediation costs or any other liability in excess of $10,000,000 in the
aggregate. Without limiting the foregoing, the Borrower and Operating shall provide, and cause
each other Borrower-Related Party to provide, to the Administrative Agent promptly upon receipt of
same by any Borrower-Related Party copies of all reports of environmental consultants or engineers
received by any Borrower-Related Party which would render the representations and warranties
contained in Section 5.14 untrue or inaccurate in any respect;



     (g) in the event any notification is provided to any Lender or the Administrative Agent
pursuant to Section 6.01(f) hereof or the Administrative Agent or any Lender otherwise
learns of any event or condition under which any such notice would be required, then, upon request
of the Required Lenders, the Borrower and Operating shall, as soon as practicable after such
request, cause to be furnished to the Administrative Agent and each Lender a report by an
environmental consulting firm reasonably acceptable to the Administrative Agent, stating that a
review of such event, condition or circumstance has been undertaken (the scope of which shall be
reasonably acceptable to the Administrative Agent) and detailing the findings, conclusions and
recommendations of such consultant. The Borrower and Operating shall bear all expenses and costs
associated with such review and updates thereof;



68









 





     (h) promptly upon any Responsible Officer of any Credit Party becoming aware of (i) the
occurrence of any Default, or (ii) the breach of any material representation or warranty set forth
herein or in any other Loan Document, a certificate of an Responsible Officer of the Borrower or
Operating setting forth the details thereof and (as applicable) the action which the Borrower
and/or Operating are taking or propose to take with respect thereto;



     (i) no later than February 28 and August 31 of each year, reports of production, volumes,
revenue, expenses and product prices for all Mineral Interests owned by any Credit Party or, if
applicable, the Acquisition Properties SPE for the periods of six (6) months ending the preceding
December 31 and June 30, respectively. Such reports shall be prepared on an accrual basis and
shall be reported on an accounting key code basis;



     (j) prompt notice of any Material Adverse Change affecting any Borrower-Related Party and of
any matter that could reasonably be expected to cause a Material Adverse Change;



     (k) prompt notice of any material change in accounting policies or financial reporting
practices by any Borrower-Related Party;



     (l) promptly upon the closing and consummation of the issuance of any Permitted Subordinate
Debt, a true and correct copy of each document, instrument and agreement evidencing or otherwise
pertaining to such Permitted Subordinate Debt; and



     (m) from time to time such additional information regarding the financial position or business
of any Borrower-Related Party as the Administrative Agent, at the request of any Lender, may
reasonably request.


Information required to be delivered pursuant to paragraphs (a), (b), (d) and (e) of this Section
shall be deemed to have been delivered if such information, or one or more annual or quarterly
reports containing such information, shall have been posted by the Administrative Agent on an
Internet or intranet website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial third-party website or whether sponsored by the Administrative Agent) or
shall be available on the website of the Securities and Exchange Commission at http://www.sec.gov
or the website of the Borrower at the website address listed on Schedule 10.02 and a confirming
notice of such posting or availability shall have been delivered or caused to be delivered to the
Administrative Agent; provided that (i) such notice may be included in a Compliance Certificate
delivered pursuant to paragraph (c) of this Section and (ii) the Borrower shall deliver paper
copies of the information referred to in paragraphs (a), (b), (d) and (e) of this Section to any
Lender that requests such delivery. Information required to be delivered pursuant to this Section
may also be delivered by electronic communications pursuant to procedures approved by the
Administrative Agent.



The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make
available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf
of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower
Materials on IntraLinks or another similar electronic system (the “Platform”) and (b)
certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive
material non-public information with respect to the Borrower or its securities) (each, a
“Public Lender”). The


69









 






Borrower hereby agrees that (w) all Borrower Materials that are to
be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x)
by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the
Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials
as not containing any material non-public information with respect to the Borrower or its
securities for purposes of United States Federal and state securities laws (provided,
however, that to the extent such Borrower Materials constitute Information, they shall be
treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are
permitted to be made available through a portion of the Platform designated “Public Investor;” and
(z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials
that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not
designated “Public Investor.”




     6.02 Business of the Borrower-Related Parties. The principal business of the Borrower-Related
Parties shall continue to be the acquisition, exploration, development, operation and disposition
of Mineral Interests and the production, marketing, processing, gathering, storage and
transportation of Hydrocarbons therefrom.



     6.03 Maintenance of Existence . Each of the Borrower and Operating shall at all times (a) maintain its corporate,
partnership or limited liability company existence in its state of incorporation or organization
(except for a merger or consolidation of Operating permitted under Section 7.04), and (b)
maintain, and cause each other Borrower-Related Party to maintain, its good standing and
qualification to transact business in all jurisdictions where the failure to maintain such good
standing or qualification to transact business could reasonably be expected to result in a Material
Adverse Change.



     6.04 Title Data. The Borrower and Operating shall, upon request of Required Lenders, and in
addition to the title information required to be delivered pursuant to Section 4.01(b) and
Section 6.15, cause to be delivered to the Administrative Agent such title opinions and
other information regarding title to Mineral Interests owned by any Credit Party or, if applicable,
the Acquisition Properties SPE that are included in the Borrowing Base to allow the Administrative
Agent to complete a review of title to such Mineral Interests so that, after giving effect to such
review, the Administrative Agent (or its counsel) shall have completed a review of title to
Borrowing Base Properties representing not less than 75% of the Recognized Value of all Borrowing
Base Properties at such time.



     6.05 Books and Records; Right of Inspection.



     (a) The Borrower and Operating will, and will cause each other Borrower-Related Party to,
maintain proper books of record and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial transactions and matters involving
the assets and business of such Borrower-Related Party.



     (b) The Borrower and Operating will permit, and will cause each other Borrower-Related Party
to permit, any officer, employee or agent of Administrative Agent or of any Lender, at their own
risk, to visit and inspect any of the assets of any Borrower-Related Party,



70









 







examine each
Borrower-Related Party’s books of record and accounts, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of each Borrower-Related Party with such
Borrower-Related Party’s officers, accountants and auditors, all at such reasonable times and as
often as the Administrative Agent or any Lender may reasonably request, all at the expense of the
Borrower; provided however, that with respect to discussions with the Borrower’s independent
accountants, the Borrower shall be given the opportunity to have a representative present during
such discussions.



     6.06 Maintenance of Insurance. The Borrower and Operating will, and will cause each other
Borrower-Related Party to, at all times maintain or cause to be maintained insurance covering such
risks as are customarily carried by businesses similarly situated. All loss payable clauses or
provisions in all policies of insurance maintained by the Credit Parties pursuant to this
Section 6.06 insuring Collateral shall be endorsed in favor of and made payable to the
Administrative Agent for the ratable benefit of the holders of the Secured Obligations, as their
interests may appear.



     6.07 Payment of Taxes and Claims. The Borrower and Operating will, and will cause each other
Borrower-Related Party to, pay (a) all Taxes imposed upon it or any of its assets or with respect
to any of its franchises, business, income or profits before any material penalty or interest
accrues thereon, and (b) all claims in excess of $10,000,000 (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and payable and which
by Law have or might become a Lien (other than a Permitted Encumbrance) on any of its assets;
provided, however, no payment of Taxes or claims shall be required if (i) the amount, applicability
or validity thereof is currently being contested in good faith by appropriate action promptly
initiated and diligently conducted in accordance with good business practices and no material part
of the property or assets of any Borrower-Related Party is subject to any pending levy or
execution, and (ii) the Borrower-Related Parties, as and to the extent required in accordance with
GAAP, shall have set aside on their books reserves (segregated to the extent required by GAAP)
deemed by them to be adequate with respect thereto.



     6.08 Compliance with Laws and Documents. The Borrower and Operating will, and will cause each
other Borrower-Related Party to, comply with all Laws, their respective partnership agreements,
regulations, certificates of limited partnership, articles of organization, certificates (or
articles) of incorporation, bylaws, and similar organizational documents, and all Material
Agreements to which any Borrower-Related Party is a party, unless a violation thereof, alone or
when combined with all other such violations, could not reasonably be expected to result in a
Material Adverse Change.



     6.09 Operation of Properties and Equipment.



     (a) The Borrower and Operating will, and will cause each other Credit Party to, maintain,
develop and operate (or cause the operator to maintain and operate to the extent any such Credit
Party is not the operator) its Mineral Interests in a good and workmanlike manner, and observe and
comply with all of the terms and provisions, express or implied, of all oil and gas leases relating
to such Mineral Interests so long as such Mineral Interests are capable of



71









 







producing Hydrocarbons
and accompanying elements in paying quantities, except to the extent the failure to so comply would
not reasonably be expected to have a Material Adverse Change.



     (b) The Borrower and Operating will, and will cause each other Credit Party to, comply with
all contracts and agreements applicable to or relating to its Mineral Interests or the production
and sale of Hydrocarbons and accompanying elements therefrom, except to the extent the failure to
so comply would not reasonably be expected to have a Material Adverse Effect.



     (c) The Borrower and Operating will, and will cause each other Credit Party to, at all times
maintain, preserve and keep all operating equipment material to the conduct of its business in
proper repair, working order and condition, ordinary wear and tear excepted, and make all necessary
or appropriate repairs, renewals, replacements, additions and improvements thereto so that the
efficiency of such operating equipment shall at all times be properly preserved and maintained;
provided, that, no item of operating equipment need be so repaired, renewed,
replaced, added to or improved if the Borrower or Operating, as applicable, shall in good
faith determine that such action is not necessary or desirable for the continued efficient and
profitable operation of the business of such Credit Party.



     6.10 Environmental Law Compliance. The Borrower and Operating will, and will cause each other
Borrower-Related Party to, comply with all Environmental Laws (including, without limitation, (a)
all licensing, permitting, notification and similar requirements of Environmental Laws, and (b) all
provisions of all Environmental Laws regarding storage, discharge, release, transportation,
treatment and disposal of Hazardous Substances) a violation of which would result in a Material
Adverse Change. The Borrower and Operating will, and will cause each other Borrower-Related Party
to, promptly pay and discharge when due all legal debts, claims, liabilities and obligations with
respect to any clean-up or remediation measures necessary to comply with Environmental Laws, except
to the extent the failure to so pay and discharge such items would not reasonably be expected to
have a Material Adverse Effect; provided, however, no payment of such debts,
claims, liabilities and obligations shall be required if (i) the amount, applicability or validity
thereof is currently being contested in good faith by appropriate proceedings and no material part
of the property or assets of any Borrower-Related Party is subject to any pending levy or
execution, and (ii) the Borrower-Related Parties, as and to the extent required in accordance with
GAAP, shall have set aside on their books reserves (segregated to the extent required by GAAP)
deemed by them to be adequate with respect thereto.



     6.11 ERISA Reporting Requirements. The Borrower and Operating shall furnish, or cause to be
furnished, to the Administrative Agent:



     (a) promptly, and in any event (i) within thirty (30) days after any Borrower-Related Party or
any ERISA Affiliate knows or has reason to know that any ERISA Event described in clause (a) of the
definition of ERISA Event or any event described in Section 4063(a) of ERISA with respect to any
Plan of any Borrower-Related Party or any ERISA Affiliate has occurred, and (ii) within fifteen
(15) days after any Borrower-Related Party or any ERISA Affiliate knows or has reason to know that
any other ERISA Event with respect to any Plan of any Borrower-Related Party or any ERISA Affiliate
has occurred or a request for minimum funding waiver under Section 412 of the Code with respect to
any Plan of any Borrower-Related Party or any



72









 







ERISA Affiliate has been made, a written notice
describing such event and describing what action is being taken or is proposed to be taken with
respect thereto, together with a copy of any notice of event that is given to the PBGC;



     (b) promptly, and in any event within five (5) Business Days after receipt thereof by any
Borrower-Related Party or any ERISA Affiliate from the PBGC, copies of each notice received by any
Borrower-Related Party or any ERISA Affiliate of the PBGC’s intention to terminate any Plan or to
have a trustee appointed to administer any Plan;



     (c) promptly, and in any event within thirty (30) days after the receipt by any
Borrower-Related Party of a request therefor by a Lender, copies of any annual and other report
(including Schedule B thereto) with respect to a Plan filed by any Borrower-Related Party or
any ERISA Affiliate with the United States Department of Labor, the Internal Revenue Service or the
PBGC;



     (d) promptly, and in any event within ten (10) Business Days after receipt thereof, a copy of
any correspondence any Borrower-Related Party or any ERISA Affiliate receives from the Plan Sponsor
(as defined in Section 4001(a)(10) of ERISA) of any Plan asserting withdrawal liability pursuant to
Section 4219 or 4202 of ERISA upon any Borrower-Related Party or any ERISA Affiliate, and a
statement from the chief financial officer of such Borrower-Related Party or such ERISA Affiliate
setting forth details as to the events giving rise to such withdrawal liability and the action
which such Borrower-Related Party or such ERISA Affiliate is taking or proposes to take with
respect thereto; and



     (e) notification within five (5) Business Days after any Borrower-Related Party or any ERISA
Affiliate knows or has reason to know that any such Borrower-Related Party or any such ERISA
Affiliate has or intends to file a notice of intent to terminate any Plan under a distress
termination within the meaning of Section 4041(c) of ERISA and a copy of such notice.



     6.12 Additional Documents. The Borrower and Operating will, and will cause each other Credit
Party (to the extent each is party thereto) to, cure promptly any defects in the creation and
issuance of each Note, and the execution and delivery of this Agreement and the other Loan
Documents and, at the Borrower’s and Operating’s expense, the Borrower and Operating shall promptly
and duly execute and deliver to each Lender, and cause each other Credit Party to promptly and duly
execute and deliver to each Lender, upon reasonable request, all such other and further documents,
agreements and instruments in compliance with or accomplishment of the covenants and agreements of
the Credit Parties in this Agreement and the other Loan Documents as may be reasonably necessary or
appropriate in connection therewith.



     6.13 Environmental Review. In connection with any acquisition by any Borrower-Related Party,
if such acquisition or a series of related acquisitions involves assets valued at greater than an
amount equal to 5% of the then-current Borrowing Base, other than (a) undeveloped Mineral
Interests, (b) an acquisition of additional interests in assets in which any Borrower-Related Party
previously held an interest, or (c) the acquisition by Operating of the Acquisition Properties from
(directly or indirectly) the Acquisition Properties SPE in connection with the Like-Kind Exchange,
the Borrower or Operating shall (x) notify the Administrative Agent of such acquisition, and (y) if
requested by the Administrative Agent within thirty (30)



73









 







days of such notice, provide to the
Administrative Agent a report or reports in form, scope and detail reasonably acceptable to the
Administrative Agent from environmental engineering firms reasonably acceptable to the
Administrative Agent, which report or reports shall set forth the results of a Phase I
environmental review of such assets.



     6.14 Security.



     (a) The Secured Obligations shall be secured by first and prior Liens (subject only to
Permitted Encumbrances and Immaterial Title Deficiencies) covering and encumbering (i) Mineral
Interests owned by the Credit Parties and, if applicable, the Acquisition Properties SPE
constituting not less than 80% of the Recognized Value of all Proved Mineral Interests then owned
by the Credit Parties included in the then-current Borrowing Base, (ii) all of the issued and
outstanding Equity Interests directly owned by the Borrower in each existing and future (x)
Domestic Restricted Subsidiary of the Borrower and (y) to the extent no material adverse tax
consequences would result, Foreign Restricted Subsidiary of the Borrower, and (iii) all of the
issued and outstanding Equity Interests directly owned by each First Tier Restricted Subsidiary in
each existing and future (x) Domestic Restricted Subsidiary of such First Tier Restricted
Subsidiary and (y) to the extent no material adverse tax consequences would result, Foreign
Restricted Subsidiary of such First Tier Restricted Subsidiary. The Borrower and Operating hereby
consent and authorize Administrative Agent, and its agents, to file any and all necessary financing
statements under the Uniform Commercial Code (as in effect in the State of Texas from time to
time), assignments or continuation statements as necessary from time to time (in Administrative
Agent’s discretion) to perfect (or continue perfection of) the Liens granted pursuant to the Loan
Documents.



     (b) On the Closing Date and on or before each Redetermination Date after the Closing Date, and
at such other times as the Administrative Agent or the Required Lenders shall reasonably request,
the Borrower and Operating shall, and shall cause each other Credit Party that owns Borrowing Base
Properties and, if applicable, the Acquisition Properties SPE to, deliver to the Administrative
Agent, for the ratable benefit of each Lender, Mortgages duly executed by such Credit Party or the
Acquisition Properties SPE, as applicable, together with such other assignments, conveyances,
agreements and other writings as may be reasonably requested by the Administrative Agent or the
Required Leaders, including, without limitation, UCC financing statements and/or amendments to
financing statements as the Administrative Agent shall deem necessary or appropriate to grant,
evidence and perfect the Liens required by Section 6.14(a) with respect to Mineral
Interests then held by such Credit Party or the Acquisition Properties SPE, as applicable, which
are not the subject of existing first and prior, perfected Liens securing the Secured Obligations
as required by Section 6.14(a).



     (c) Promptly upon (i) the creation or acquisition by the Borrower of any Restricted
Subsidiary, (ii) the creation or acquisition by any First Tier Restricted Subsidiary of any
Restricted Subsidiary, or (iii) any Unrestricted Subsidiary becoming a Restricted Subsidiary, the
Borrower or such First Tier Restricted Subsidiary (as applicable) shall execute and deliver to the
Administrative Agent an addendum to the Pledge Agreement pursuant to which the Equity Interests
owned by the Borrower or such First Tier Restricted Subsidiary in such Restricted Subsidiary shall
be pledged to the Administrative Agent (to the extent no material adverse tax consequences would
result therefrom), together with (i) to the extent such Equity Interests are



74









 







certificated, all
certificates (or other evidence acceptable to the Administrative Agent) evidencing such Equity
Interests, which shall be duly endorsed or accompanied by stock powers executed in blank (as
applicable), and/or (ii) such UCC financing statements and/or amendments to financing statements as
the Administrative Agent shall deem necessary or appropriate to grant, evidence and perfect the
Liens required by Section 6.14(a) in such Equity Interests.



     6.15 Title Opinions . At any time any Credit Party or the Acquisition Properties SPE, as applicable, is required
to execute and deliver Mortgages to the Administrative Agent pursuant to Section 6.14(a),
to the extent requested by the Administrative Agent, the Borrower shall also deliver to the
Administrative Agent (a) such evidence of title with respect to the Borrowing Base Properties
subject to such Mortgages as the Administrative Agent shall reasonably deem necessary or
appropriate to complete a review of title to such Borrowing Base Properties so that, after giving
effect to such review, the Administrative Agent (or its counsel) shall have completed a review of
title to Borrowing Base Properties representing not less than 75% of the Recognized Value of all
Borrowing Base Properties at such time, and (b) opinions of counsel regarding the validity and
perfection of the Liens created by such Mortgages.



     6.16 Guarantees. Payment and performance of the Secured Obligations shall be fully guaranteed
by Operating and (i) each other existing or hereafter created or acquired Domestic Restricted
Subsidiary of the Borrower and each Unrestricted Subsidiary that becomes a Domestic Restricted
Subsidiary of the Borrower and (ii) to the extent no material adverse consequences would result,
each existing or hereafter created or acquired Foreign Restricted Subsidiary of the Borrower and
each Unrestricted Subsidiary that becomes a Foreign Restricted Subsidiary of the Borrower, in each
case pursuant to the Guaranty. Promptly upon the date of creation or acquisition by the Borrower
or any of its Subsidiaries of any Domestic Restricted Subsidiary, or promptly upon any Unrestricted
Subsidiary becoming a Domestic Restricted Subsidiary, the Borrower shall cause such Domestic
Restricted Subsidiary to execute and deliver to the Administrative Agent a supplement to the
Guaranty, whereby it shall become a Guarantor thereunder. Promptly upon the date of creation or
acquisition by the Borrower or any of its Subsidiaries of any Foreign Restricted Subsidiary, or
promptly upon any Unrestricted Subsidiary becoming a Foreign Restricted Subsidiary, to the extent
no material adverse tax consequences would result, the Borrower shall cause such Foreign Restricted
Subsidiary to execute and deliver to the Administrative Agent a supplement to the Guaranty, whereby
it shall become a Guarantor thereunder.



ARTICLE VII.

NEGATIVE COVENANTS




     The Borrower and Operating agree that, so long as there remain any Outstanding Amounts, or any
Lender has any Commitment hereunder:



     7.01 Incurrence of Debt. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, incur, become or remain liable for any Debt other than:



     (a) the Secured Obligations (including, without limitation, Debt pursuant to any Hedge
Transaction entered into by a Credit Party with a Lender or any Affiliate of any Lender);



75









 





     (b) Permitted Subordinate Debt;



     (c) other Debt under Hedge Transactions, provided, that such Hedge Transactions comply with
the terms and provisions of this Agreement, including, without limitation, Section 7.10;



     (d) Debt incurred to finance the purchase of assets (including capital lease obligations)
secured by Liens permitted by clause (g) of the definition of “Permitted Encumbrances” contained
herein; provided that the aggregate principal amount outstanding at any time of all Debt incurred
pursuant to this clause (d) and all Debt incurred pursuant to clause (e) below shall not exceed
$25,000,000;



     (e) Debt of a Person that is merged or consolidated with or into the Borrower or a Subsidiary
or becomes a Subsidiary (and not incurred in anticipation of or in connection with such
transaction); provided that the aggregate principal amount outstanding at any time of all Debt
incurred pursuant to this clause (e) and all Debt incurred pursuant to clause (d) above shall not
exceed $25,000,000;



     (f) intercompany Debt between Credit Parties; and



     (g) Debt not otherwise permitted under this Section 7.01 in an aggregate principal
amount outstanding at any time not to exceed $50,000,000.



     7.02 Restricted Payments. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, directly or indirectly, declare or pay, or incur any
liability to declare or pay, any Restricted Payment, except that, so long as no Default shall have
occurred and be continuing at the time of any action described below or would result therefrom and
no Borrowing Base Deficiency exists, a Restricted Payment may be made if the amount of such
Restricted Payment would not exceed the amount then available under Section 4.04(a)(3) or
4.09(a)(3), as applicable, of each of the Permitted Subordinate Debt Indentures for “Restricted
Payments,” as defined in such Permitted Subordinate Debt Indentures.



The preceding provisions will not prohibit:




     (a) any Restricted Payment made out of the net cash proceeds of the substantially concurrent
issuance or sale of, or made by conversion into or exchange for, common Equity Interests of the
Borrower (other than Equity Interests issued or sold to a Borrower-Related Party or an employee
stock ownership plan or to a trust established by any Borrower-Related Party for the benefit of
their employees) or a substantially concurrent cash capital contribution received by the Borrower
from one or more of its shareholders; provided, however, that (A) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments under such Sections 4.04(a)(3) and
4.09(a)(3) and (B) the Net Cash Proceeds from such sale or such cash capital contribution (to the
extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under
such Sections 4.04(a)(3)(B) and 4.09(a)(3)(B);



     (b) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for
value of Disqualified Stock of the Borrower or a Restricted Subsidiary made by conversion into or
exchange for, or out of the proceeds of the substantially concurrent issuance



76









 







or sale (other than to a Borrower-Related Party or an employee stock ownership plan or to a
trust established by any Borrower-Related Party for the benefit of their employees) of,
Disqualified Stock of the Borrower; provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments under such Sections 4.04(a)(3) and 4.09(a)(3);



     (c) dividends paid within 60 days after the date of declaration thereof if at such date of
declaration such dividend would have complied with this Section 7.02; provided, however, that at
the time of payment of such dividend, no other Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments under such Sections 4.04(a)(3) and 4.09(a)(3) at
the time of payment;



     (d) so long as no Default has occurred and is continuing, the purchase, redemption or other
acquisition or retirement for value of shares of capital stock of the Borrower or any of its
Subsidiaries from employees, former employees, directors or former directors of the Borrower or any
of its Subsidiaries (or the respective heirs, estates or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved by the Board of
Directors of the Borrower under which such individuals purchase or sell or are granted the option
to purchase or sell, shares of such capital stock; provided, however, that the aggregate amount of
such purchases, redemptions and other acquisitions and retirements (excluding amounts representing
cancellation of Indebtedness) shall not exceed $2.0 million in any calendar year; provided further,
however, that such purchases, redemptions and other acquisitions and retirements shall be excluded
in the calculation of the amount of Restricted Payments under such Sections 4.04(a)(3) and
4.09(a)(3);



     (e) repurchases, acquisitions or retirements of shares of common stock of the Borrower deemed
to occur upon the exercise of stock options or similar rights issued under employee benefit plans
when shares are surrendered to pay all or a portion of the exercise price or to satisfy any federal
income tax obligations; provided, however, that such repurchases, acquisitions or retirements shall
be excluded in the calculation of the amount of Restricted Payments under such Sections 4.04(a)(3)
and 4.09(a)(3);



     (f) the payment of cash in lieu of fractional shares of capital stock in connection with any
transaction otherwise permitted under this Section 7.02; provided, however, that such payment will
be excluded in the calculation of the amount of Restricted Payments under such Sections 4.04(a)(3)
and 4.09(a)(3); or



     (g) payments to dissenting stockholders (x) pursuant to applicable law or (y) in connection
with the settlement or other satisfaction of legal claims made pursuant to or in connection with a
consolidation, merger or transfer of assets in connection with a transaction that is not prohibited
by this Agreement; provided, however, that such payments will be included in the calculation of the
amount of Restricted Payments under such Sections 4.04(a)(3) and 4.09(a)(3).



77









 





     7.03 Negative Pledge. The Borrower and Operating will not, nor will the Borrower and/or Operating permit any
other Credit Party to, create, assume or suffer to exist any Lien on any asset of any Credit Party
other than Permitted Encumbrances and Immaterial Title Deficiencies.



     7.04 Consolidations and Mergers. The Borrower and Operating will not, nor will the Borrower
and/or Operating permit any other Credit Party to, consolidate or merge with or into any other
Person; provided that, so long as no Default or Event of Default exists or will result and all
representations and warranties will be true and correct after giving effect thereto, (a) the
Borrower may merge or consolidate with another Person so long as the Borrower is the surviving
entity, and (b) any wholly owned Restricted Subsidiary of the Borrower may merge or consolidate
with or into any other Person so long as the Borrower or a wholly owned Restricted Subsidiary of
the Borrower is the surviving entity.



     7.05 Dispositions. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, sell, lease, transfer, abandon or otherwise dispose of
any asset, other than:



     (a) dispositions of obsolete or worn out property or property that is no longer necessary or
useful to the proper conduct of its business, whether now owned or hereafter acquired, in the
ordinary course of business;



     (b) dispositions of equipment to the extent that (i) such equipment is exchanged for credit
against the purchase price of similar replacement equipment or (ii) within 180 days after such
disposition the proceeds of such disposition are applied to the purchase price of such replacement
equipment;



     (c) the sale in the ordinary course of business of Hydrocarbons produced from the Credit
Parties’ Mineral Interests;



     (d) Asset Dispositions and other dispositions of Mineral Interests; provided, that all
mandatory prepayments required by Section 2.04 in connection with such Asset Disposition
(after giving effect to any adjustment pursuant to Section 2.13(d) for such Asset
Disposition) are made within one Business Day of the closing thereof;



     (e) a disposition between Credit Parties;



     (f) dispositions of Equity Interests in Unrestricted Subsidiaries;



     (g) the creation of a Permitted Encumbrance;



     (h) the surrender or waiver of contract rights or the disposition, settlement, release or
surrender of contract, tort or other claims of any kind;



     (i) any disposition of defaulted receivables that arose in the ordinary course of business for
collection;



78









 





     (j) during any period of twelve consecutive months, dispositions of assets with an aggregate
fair market value of less than $10,000,000;



     (k) a Restricted Payment permitted by Section 7.02;



     (l) dispositions permitted by Section 7.04; and



     (m) an Investment permitted by Section 7.08.



     In no event will any Credit Party (other than the Borrower) sell, transfer or dispose of, or
permit any other Credit Party (other than the Borrower) to sell, transfer or dispose of any capital
stock of, or other equity interest in, any Restricted Subsidiary of the Borrower nor will the
Borrower or Operating permit any other Credit Party (other than the Borrower) to issue or sell any
Equity Interest of a Credit Party (other than the Borrower) to any Person other than a Credit Party
unless (i) in the case of a disposition, such disposition is otherwise permitted by this
Section 7.05 and (ii) the remaining ownership in such Person, if any, would be an
Investment permitted by Section 7.08.



     7.06 Amendments to Organization Documents; Other Material Agreements. The Borrower and
Operating will not, nor will the Borrower and/or Operating permit any other Credit Party to, enter
into or permit any material modification or amendment of, or waive any material right or obligation
of any Person under, (a) its Organization Documents if such modification, amendment or waiver could
reasonably be expected to have a Material Adverse Effect, or (b) the documents, instruments and
agreements evidencing or otherwise pertaining to the Permitted Subordinate Debt if such
modification, amendment or waiver would result in such Permitted Subordinate Debt not meeting the
criteria of clauses (1), (2) and (3) of item (d) of the definition of Permitted Subordinate Debt.



     7.07 Use of Proceeds. The proceeds of Borrowings will not be used for any purpose other than
(a) to make intercompany advances from the Borrower to another Credit Party, (b) to refinance the
obligations outstanding under the Existing Credit Agreement (including by means of making the loan
described in Section 7.08(k)), (c) to finance the purchase price under the Acquisition
Agreement, (d) working capital, (e) to finance the acquisition, exploration, development and
operation of Mineral Interests and the production, marketing, processing and transportation of
Hydrocarbons therefrom, and related capital assets, and (f) for general corporate purposes
(including the making of Investments permitted by this Agreement and the payment of costs and
expenses associated with the transactions contemplated by this Agreement and the Acquisition
Agreement). None of such proceeds (including, without limitation, proceeds of Letters of Credit
issued hereunder) will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, and none of such proceeds will
be used in violation of applicable Law (including, without limitation, the Margin Regulations).
Letters of Credit will be issued hereunder only for general corporate purposes of
the Borrower and its Restricted Subsidiaries. Without limiting the foregoing, no Letter of
Credit will be issued hereunder to secure any Credit Party’s obligations with respect to Hedge
Transactions other than (i) Hedge Transactions with a Lender or an Affiliate of any Lender, or (ii)
Hedge Transactions with a counterparty other than a Lender or an Affiliate of a Lender



79









 







provided
that such Hedge Transactions otherwise comply with the terms and provisions of this Agreement,
including, without limitation, Section 7.01 and Section 7.10.



     7.08 Investments. The Borrower and Operating will not, nor will the Borrower and/or Operating
permit any other Credit Party to make or have outstanding any Investment other than:



     (a) Permitted Cash Equivalent Investments;



     (b) Investments in a Restricted Subsidiary that has provided a Guaranty and the Equity
Interests of which have been pledged to the Administrative Agent to the extent required by
Sections 6.14 and 6.16, or investments in a Person that will, upon the making of
such Investment, become a wholly-owned Restricted Subsidiary or be merged or consolidated with or
into, or transfer or convey all or substantially all of its assets or a business unit to, the
Borrower or any wholly-owned Restricted Subsidiary, provided that (i) the Borrower shall comply
with Sections 6.14, 6.15 and 6.16, as applicable, (ii) no Default exists or
will result therefrom, (iii) no Borrowing Base Deficiency exists, (iv) the representations and
warranties set forth in Article V will be true and correct in all material respects after
giving effect thereto, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they shall be true and correct as of such earlier date, and
(v) the primary business of such Person is a business described in Section 5.13;



     (c) Investments in the Borrower or any Restricted Subsidiary to the extent constituting a
Guarantee permitted by Section 7.01;



     (d) receivables owing to the Borrower or any Restricted Subsidiary if created or acquired in
the ordinary course of business and payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include such concessionary trade terms as the
Borrower or any such Restricted Subsidiary deems reasonable under the circumstances;



     (e) payroll, travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and that are made in the
ordinary course of business;



     (f) loans or advances to officers, directors and employees of the Borrower or any Restricted
Subsidiary made in the ordinary course of business consistent with past practices of the Borrower
or such Restricted Subsidiary;



     (g) Investments in stock, obligations or securities received in settlement of debts created in
the ordinary course of business and owing to the Borrower or its Restricted Subsidiaries; provided
that the Borrower shall give the Administrative Agent prompt written
notice in the event that the aggregate amount of all Investments held at any time under this
Section 7.08(g) exceeds $1,000,000;



     (h) Investments in any Person where such Investment was acquired by the Borrower or any of its
Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the
Borrower or any such Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other



80









 







Investment or accounts
receivable or (b) as a result of a foreclosure by the Borrower or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of title with respect to any
secured Investment in default;



     (i) any acquisitions of Equity Interests solely in exchange for, or with the net cash proceeds
received from, Equity Interests (other than Disqualified Stock) of the Borrower; provided, however,
that the fair market value of such acquired Equity Interest, when taken together with all other
Equity Interests acquired pursuant to this clause (i) and at the time owned by the Borrower or its
Restricted Subsidiaries, does not exceed $10.0 million;



     (j) any other Investment reflected in the unaudited consolidated balance sheet of the Borrower
as of September 30, 2006, or on Schedule 7.08(j) hereto to the extent such Investment is a
“Permitted Investment” within the meaning given such term in the Permitted Subordinated Debt
Indentures;



     (k) a loan made by the Borrower or Operating to the Acquisition Properties SPE in order to
finance the purchase price under the Acquisition Agreement pursuant to documentation acceptable to
the Administrative Agent pursuant to Section 4.03(d); and



     (l) Restricted Investments to the extent permitted as a Restricted Payment under Section
7.02.



     7.09 Transactions with Affiliates. The Borrower and Operating will not, nor will the Borrower
and/or Operating permit any other Credit Party to, engage in any transaction with an Affiliate
unless such transaction is as favorable to such party as could be obtained in an arm’s length
transaction with an unaffiliated Person; provided that this Section shall not apply to (i)
transactions among Credit Parties, (ii) Restricted Investments permitted by Section 7.08(l)
and Investments of the type described in clauses (e) and (f) of Section 7.08, and (iii)
customary arrangements between any Credit Party and any Unrestricted Subsidiary relating to
providing administrative or management services to such Unrestricted Subsidiary.



     7.10 Hedge Transactions. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, enter into any Hedge Transactions other than (i) Oil
and Gas Hedge Transactions that would not cause the volume of Hydrocarbons with respect to which a
settlement payment is calculated under such Oil and Gas Hedge Transactions to exceed seventy-five
percent (75%) of the Credit Parties’ anticipated production from Proved Producing Mineral Interests
during the period from the immediately preceding settlement date (or the
commencement of such Hedge Transaction if there is no prior settlement date) to such
settlement date, (ii) the purchase of a floor or put that has the effect of setting a minimum
commodity price for up to one hundred percent (100%) of such anticipated production from Proved
Producing Mineral Interests (inclusive of any floor or put included in clause (i) of this
Section 7.10), (iii) Hedge Transactions effectively converting interest rates from fixed to
floating, the notional amounts of which (when aggregated with all other Hedge Transactions of the
Borrower and its Restricted Subsidiaries then in effect effectively converting interest rates from
fixed to floating) do not exceed 100% of the then outstanding principal amount of the Borrower’s
Debt for borrowed money which bears interest at a fixed rate and (iv) Hedge Transactions
effectively converting interest rates from floating to fixed, the notional amounts of



81









 







which (when
aggregated with all other Hedge Transactions of the Borrower and its Restricted Subsidiaries then
in effect effectively converting interest rates from floating to fixed) do not exceed 100% of the
then outstanding principal amount of the Borrower’s Debt for borrowed money which bears interest at
a floating rate.



     7.11 Fiscal Year. The Borrower will not change its Fiscal Year.



     7.12 Change in Business. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, be engaged, as its principal business, in any business
other than the businesses described in Section 5.13 hereof.



     7.13 Financial Covenants.



     (a) The Borrower will not permit its ratio of Consolidated Current Assets to Consolidated
Current Liabilities to be less than 1.0 to 1.0 at the last day of each Fiscal Quarter, commencing
March 31, 2007.



     (b) At the last day of each Fiscal Quarter, commencing March 31, 2007, the Borrower will not
permit its ratio of (i) Consolidated EBITDA (for the four (4) Fiscal Quarters ending on such date)
to (ii) the sum of (A) Consolidated Net Interest Expense (for the four (4) Fiscal Quarters ending
on such date) plus (B) Letter of Credit Fees (accruing during the Fiscal Quarter ending on such
date) to be less than 2.5 to 1.



     7.14 Burdensome Agreements. The Borrower and Operating will not, nor will the Borrower and/or
Operating permit any other Credit Party to, enter into any Material Agreement (other than this
Agreement or any other Loan Document) that (a) limits the ability (i) of any Restricted Subsidiary
to make Restricted Payments to the Borrower or any Guarantor or otherwise to transfer property to
the Borrower or any Guarantor, (ii) of any Restricted Subsidiary to Guarantee the Debt of the
Borrower or (iii) of the Borrower or any Restricted Subsidiary to create, incur, assume or suffer
to exist Liens on property of such Person; or (b) requires the grant of a Lien to secure an
obligation of such Person if a Lien is granted to secure another obligation of such Person, except:



     (1) (A) provisions of the type described in clauses (a) and (b) contained in documents
governing Permitted Subordinate Debt that, taken as a whole, are no more restrictive than those
contained in the Original Issuance;



     (B) provisions of the type described in clauses (a) and (b) contained in documents governing
any other Debt permitted by Section 7.01(c) and (d) that, taken as a whole, are no
more restrictive than those contained in the Loan Documents; and



     (C) any customary encumbrance or restriction with respect to a Restricted Subsidiary imposed
pursuant to a merger agreement or an agreement entered into for the sale or disposition of all or
substantially all the capital stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition; and



     (2) with respect to clause (a)(iii) only,



82









 





     (A) any such encumbrance or restriction consisting of customary nonassignment provisions
(including provisions forbidding subletting or sublicensing) in leases governing leasehold
interests and licenses to the extent such provisions restrict the transfer of the lease or license
or the property leased, or licensed thereunder;



     (B) customary restrictions contained in asset sale agreements limiting the transfer of such
assets pending the closing of such sale; and



     (C) restrictions in the instruments creating a Permitted Encumbrance described in clause (g),
(i), (j), (l) or (n) of the definition of Permitted Encumbrances, limiting Liens on the property
subject to such Permitted Encumbrance.



     7.15 Designation of Unrestricted Subsidiaries.



     (a) The Borrower will not designate any Subsidiary as an Unrestricted Subsidiary, unless:




     (i) such Subsidiary has been designated as an “Unrestricted Subsidiary” as that term is
used in the Permitted Subordinate Debt Indentures and under each other Indenture or other
agreement governing Permitted Subordinate Debt issued after the date hereof (to the extent
such agreement provides for such a designation);




     (ii) neither such Subsidiary nor any of its Subsidiaries has any Debt except
Non-Recourse Debt;




     (iii) neither such Subsidiary nor any of its Subsidiaries is a party to any agreement,
arrangement, understanding or other transaction with the Borrower or any Restricted
Subsidiary not permitted under Section 7.09;




     (iv) neither such Subsidiary nor any of its Subsidiaries is a Guarantor or has any
outstanding Letter of Credit issued for its account;




     (v) neither such Subsidiary nor any of its Subsidiaries owns any Mineral Interests
included in the Borrowing Base in effect at the time of such designation;




     (vi) at the time of such designation and immediately after giving effect thereto, no
Borrowing Base Deficiency shall exist and no Default shall have occurred and be continuing;




     (vii) at the time of such designation and immediately after giving effect thereto, the
Borrower would have been in compliance with Section 7.13(b) on the last day of the
most recently ended Fiscal Quarter of the Borrower had such Subsidiary been an Unrestricted
Subsidiary on such day;




     (viii) neither such Subsidiary nor any of its Subsidiaries owns any Debt or Equity
Interest of, or is the beneficiary of any Lien on any property of, the Borrower or any
Restricted Subsidiary;



83









 






     (ix) in the case of the designation of any Unrestricted Subsidiary other than any MLP
Unrestricted Subsidiary, promptly upon such designation, the Borrower delivers a certificate
to the Administrative Agent certifying (A) the names of such Subsidiary and all of its
Subsidiaries, and (B) that all applicable requirements of this Section 7.15 have
been met for such designation; and




     (x) the Investment represented by such designation is permitted under Section
7.08(l).



     (b) If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Agreement and any Debt of such Subsidiary shall be deemed to be incurred as of
such date.



     (c) The Borrower will not permit any Unrestricted Subsidiary to acquire or create any
Subsidiary of such Unrestricted Subsidiary unless such Subsidiary is designated as an Unrestricted
Subsidiary in accordance with this Section 7.15; provided that clauses (vii) and (x) of
Section 7.15(a) shall not be conditions to such designation.



     (d) In the case of any designation by the Borrower of a Person as an Unrestricted Subsidiary
on the first day that such Person is a Subsidiary of the Borrower in accordance with the provisions
of this Agreement, such designation shall be deemed to have occurred for all purposes of this
Agreement simultaneously with, and automatically upon, such person becoming a Subsidiary of the
Borrower.



          (e) The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if
after giving effect to such designation, (i) the representations and warranties of the Borrower and
its Restricted Subsidiaries contained in each of the Loan Documents are true and correct in all
material respects on and as of such date, except to the
extent that such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of such earlier date, (ii) no Default would exist,
(iii) at the time of such designation and immediately after giving effect thereto, the Borrower
would have been in compliance with Section 7.13(b) on the last day of the most recently
ended Fiscal Quarter of the Borrower had such Subsidiary been an Restricted Subsidiary on such day
and (iv) the Borrower complies with the requirements of Sections 6.14, 6.15 and
6.16.



84









 





     7.16 Retirement of Permitted Subordinate Debt or Other Debt. The Borrower and Operating will
not, nor will the Borrower and/or Operating permit any other Credit Party to (a) retire, redeem or
pay any part of the principal of any Permitted Subordinate Debt of any Credit Party at any time
prior to the scheduled maturity of such Permitted Subordinate Debt (other than in connection with a
Permitted Refinancing of Permitted Subordinated Debt or in connection with a Special Mandatory
Redemption), or (b) retire, redeem or pay any part of the principal of any other Debt of any Credit
Party (other than the Obligations and intercompany Debt between Credit Parties) at any time prior
to the scheduled maturity, scheduled repayment or scheduled sinking fund payment, as applicable, of
such Debt (other than in connection with an Permitted Refinancing of such other Debt), unless (i)
at the time of such action in clause (a) or (b), no Default shall have occurred and be continuing
or would result therefrom and no Borrowing Base Deficiency exists and (ii) with respect to such
action in clause (a), on a pro forma basis after giving effect to such action, the Consolidated
Leverage Ratio does not exceed 3.5 to 1.0.



     7.17 Like-Kind Exchange. The Borrower and Operator will not, and will not permit any other
Credit Party to, amend, modify, waive or impair any document or agreement delivered pursuant to
Section 4.03(d) or otherwise executed in connection with or anticipation of the Like-Kind
Exchange or any rights thereunder except with the prior written consent of the Administrative
Agent. Not later than 180 days following the purchase by the Acquisition Properties SPE of the
Acquisition Properties, the Borrower and/or Operating shall acquire full title to all of the
Acquisition Properties by (i) the disposition of certain of its other properties (the
“Disposition Properties”) in a transaction that will result in the consummation of the
Like-Kind Exchange for the Acquisition Properties and/or (ii) the acquisition of the remaining
Acquisition Properties from the Acquisition Properties SPE in exchange for cancellation of the
remaining outstanding balance of the EAT Loan referred to in Section 4.03(d). For the
avoidance of doubt, the disposition of the Disposition Properties shall be subject to compliance
with Sections 2.04(d), 2.13(d) and 7.05 as if such disposition had not been
made in exchange for the Acquisition Properties.



ARTICLE VIII.

DEFAULTS




     8.01 Events of Default. If one or more of the following events (collectively “Events of
Default” and individually an “Event of Default”) shall have occurred and be continuing:



     (a) the Borrower shall fail to pay when due any principal on any Loan or any L/C Obligation;



     (b) (i) the Borrower shall fail to pay when due accrued interest on any Loan or any fees
payable hereunder and such failure shall continue for a period of three (3) days following the due
date or (ii) the Borrower shall fail to pay when due any other amount payable hereunder and such
failure shall continue for a period of five (5) days following the due date;



     (c) the Borrower and/or Operating shall fail to observe or perform any covenant or agreement
contained in Article VII of this Agreement;



85









 





     (d) any Credit Party shall fail to observe or perform any covenant or agreement contained in
this Agreement or any other Loan Documents (other than those referenced in Sections
8.01(a), 8.01(b) or 8.01(c)) and such failure continues for a period of thirty
(30) days after the earlier of (i) the date any Responsible Officer of any Credit Party acquires
knowledge of such failure, or (ii) written notice of such failure has been given to any Credit
Party by the Administrative Agent (which notice will be given at the request of any Lender);



     (e) any representation, warranty, certification or statement made or deemed to have been made
by any Credit Party in any certificate, financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any material respect when made or confirmed;



     (f) any Credit Party shall fail to make any payment when due on any Debt of such Person in a
principal amount equal to or greater than $15,000,000 or any other event or condition (other than a
Special Mandatory Redemption) shall occur which (i) results in the acceleration of the maturity of
any such Debt, or (ii) entitles the holder of such Debt to accelerate the maturity thereof;
provided that this clause (f) shall not apply to secured Debt that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such Debt;



     (g) any Credit Party shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate, partnership or limited liability company action to authorize any of the
foregoing;



     (h) an involuntary case or other proceeding shall be commenced against any Credit Party
seeking liquidation, reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar Law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty (60) days; or an order for relief shall be entered against any
Credit Party under the federal bankruptcy Laws as now or hereafter in effect;



     (i) one (1) or more final judgments or orders for the payment of money aggregating in excess
of $15,000,000 (to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) shall be rendered against any Credit Party and such judgment or
order shall continue unsatisfied and unstayed for thirty (30) days;



     (j) (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably be expected to result in liability of any Borrower-Related Party under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $15,000,000, or (ii) any Borrower-Related Party or any ERISA Affiliate fails to pay when
due, after the expiration of any applicable grace period, any



86









 







installment payment with respect to
its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $15,000,000;



     (k) this Agreement or any other Loan Document shall, except to the extent permitted by the
terms hereof or thereof, cease to be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or challenged by any Credit Party, or any
Credit Party shall deny that it has any further liability or obligation under any of the Loan
Documents to which it is a party, or any Lien created by the Loan Documents shall for any reason
(other than the release thereof in accordance with the Loan Documents) cease to be a valid, first
priority, perfected Lien (subject to Liens permitted by Section 7.03) upon any of the
collateral purported to be covered thereby; provided that no Event of Default shall occur under
this clause (k) if any Lien created under a Mortgage ceases to be a valid, first priority,
perfected Lien on any Mineral Interests covered thereby so long as, after giving effect thereto,
the Secured Obligations are secured by valid, first priority, perfected Liens (subject to Liens
permitted by Section 7.03) covering and encumbrancing Mineral Interests owned by the Credit Parties
representing not less than 80% of the Recognized Value of all Proved Mineral Interests then owned
by the Credit Parties included in the then-current Borrowing Base; or



     (l) a Change of Control shall occur.



     8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders,
take any or all of the following actions:



     (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer
to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be
terminated;



     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower;



     (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to
the then Outstanding Amount thereof); and



     (d) exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies
available to it, the Lenders and the L/C Issuer under the Loan Documents;


provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the
obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and
all interest and other amounts as aforesaid shall automatically become due and payable, and the
obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the Administrative Agent or any
Lender.




87









 








     8.03 Application of Funds. After the exercise of remedies provided for in Section
8.02 (or after the Loans have automatically become immediately due and payable and the L/C
Obligations have automatically been required to be Cash Collateralized as set forth in the proviso
to Section 8.02), any amounts received on account of the Secured Obligations shall be
applied by the Administrative Agent in the following order:



     First, to payment of that portion of the Secured Obligations constituting fees,
indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to
the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent
in its capacity as such;



     Second, to payment of that portion of the Secured Obligations constituting fees,
indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to
the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be
employees of any Lender or the L/C Issuer) and amounts payable under Article III), ratably among
them in proportion to the amounts described in this clause Second payable to them;



     Third, to payment of that portion of the Secured Obligations constituting accrued and
unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations,
ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in
this clause Third payable to them;



     Fourth, to payment of that portion of the Secured Obligations constituting unpaid
principal of the Loans, L/C Borrowings and amounts owing in respect of any Secured Hedge
Obligations ratably among the Lenders, the L/C Issuer and the counterparties to the Hedge
Transactions giving rise to such Secured Hedge Obligations in proportion to the respective amounts
described in this clause Fourth held by them;



     Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash
Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters
of Credit; and
Last, the balance, if any, after all of the Secured Obligations have been indefeasibly paid in
full (other than contingent indemnification obligations), to the Borrower or as otherwise required
by Law.



     Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn
amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy
drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired, such remaining
amount shall be applied to the other Secured Obligations, if any, in the order set forth above.



ARTICLE IX.

ADMINISTRATIVE AGENT




     9.01 Appointment and Authority. Each of the Lenders and the L/C Issuer hereby irrevocably
appoints Bank of America to act on its behalf as the Administrative Agent hereunder



88









 







and under the
other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and
the L/C Issuer, and neither the Borrower nor Operating shall have rights as a third party
beneficiary of any of such provisions.



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



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



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



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



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



     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii)
in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice describing such Default is
given to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.



89









 





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



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



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



     9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give
notice of its resignation to the Lenders, the L/C Issuer and the Borrower. Upon receipt of any
such notice of resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States. If no such successor shall have
been so appointed by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor
Administrative Agent meeting the qualifications set forth above; provided that if the
Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has



90









 







accepted such appointment, then such resignation shall nonetheless become effective in accordance
with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the case of any collateral
security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of
the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral
security until such time as a successor Administrative Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the Administrative Agent
shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the
Required Lenders appoint a successor Administrative Agent as provided for above in this Section.
Upon the acceptance of a successor’s appointment as the Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers, privileges and duties
of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be
discharged from all of its duties and obligations hereunder or under the other Loan Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the retiring Administrative
Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article
and Section 10.04 shall continue in effect for the benefit of such retiring Administrative
Agent, its sub agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as the
Administrative Agent.



     Any resignation by Bank of America as the Administrative Agent pursuant to this Section shall
also constitute its resignation as L/C Issuer. Upon the acceptance of a successor’s
appointment as the Administrative Agent hereunder, (a) such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer, (b)
the retiring L/C Issuer shall be discharged from all of its duties and obligations hereunder or
under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit, if any, outstanding at the time of such succession or make
other arrangement satisfactory to the retiring L/C Issuer to effectively assume the obligations of
the retiring L/C Issuer with respect to such Letters of Credit.



     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the L/C Issuer
acknowledges that it has, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender or any of their Related Parties and based on such
documents and information as it shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or thereunder.



     9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the
Bookrunners, Arrangers, Syndication Agents or Documentation Agents listed on the cover page hereof
shall have any powers, duties or responsibilities under this Agreement or any of the



91









 







other Loan
Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender and/or the
L/C Issuer hereunder.



     9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding
under any Debtor Relief Law or any other judicial proceeding relative to any Credit Party, the
Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation 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, L/C Obligations and all other Obligations 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, the L/C Issuer and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the
Administrative Agent and their respective agents and counsel and all other amounts due the Lenders,
the L/C Issuer and the Administrative Agent under Sections 2.03(i) and 2.03(j),
2.08 and 10.04) 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 and the L/C Issuer 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 and the L/C Issuer, 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 Sections 2.09 and 10.04.




     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 or the L/C Issuer any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations 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.



     9.10 Collateral and Guaranty Matters. The Lenders and the L/C Issuer irrevocably authorize
the Administrative Agent, at its option and in its discretion,



     (a) to release any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all
Secured Obligations (other than contingent indemnification obligations) and the expiration or
termination of all Letters of Credit (other than Letters of Credit that have been cash
collateralized to the satisfaction of the Administrative Agent), (ii) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any other Loan Document, or
(iii) subject to Section 10.01, if approved, authorized or ratified in writing by the
Required Lenders; and



92









 





     (b) to release any Guarantor from its obligations under the Guaranty if such Person ceases to
be a Restricted Subsidiary as a result of a transaction permitted hereunder.



     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its interest in particular
types or items of property, or to release any Guarantor from its obligations under the Guaranty
pursuant to this Section 9.10.



     In connection with any release of any Lien or any Guarantor pursuant to this Section
9.10, the Administrative Agent shall execute and deliver all such documents and instruments as
the applicable Credit Party shall reasonably request to evidence such release.



ARTICLE X.

MISCELLANEOUS




     10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent to any departure by the Borrower or any other Credit Party therefrom,
shall be effective unless in writing signed by the Required Lenders and the Borrower or the
applicable Credit Party, as the case may be, and acknowledged by the Administrative Agent, and
each such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment, waiver or consent shall:



     (a) waive any condition set forth in Section 4.01(a) without the written consent of
each Lender;



     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without the written consent of such Lender;



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



     (d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or (subject to clause (iii) of the second proviso to this Section 10.01) any
fees or other amounts payable hereunder or under any other Loan Document without the written
consent of each Lender directly affected thereby; provided, however, that only the consent of the
Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any
obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to
amend any financial covenant hereunder (or any defined term used therein) even if the effect of
such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce
any fee payable hereunder;



     (e) change Section 2.12 or Section 8.03 in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each Lender;



93









 





     (f) change any provision of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders required to amend, waive
or otherwise modify any rights hereunder or make any determination (including Required Lenders or
all Lenders, as applicable, for a Redetermination of the Borrowing Base) or grant any consent
hereunder, without the written consent of each Lender;



     (g) release all or substantially all of the Guarantors from the Guaranty without the written
consent of each Lender; or



     (h) release all or substantially all of the Collateral in any transaction or series of related
transactions without the written consent of each Lender;


and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights
or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of
Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent in addition to the Lenders required above, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iii)
the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed
only by the parties thereto. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent
hereunder, except that the Commitment of such Lender may not be increased or extended without the
consent of such Lender.




     10.02 Notices; Effectiveness; Electronic Communication.



     (a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone or e-mail shall be made to the applicable telephone number or e-mail address, as follows:




     (i) if to the Borrower, Operating, the Administrative Agent or the L/C Issuer, to the
address, telecopier number, electronic mail address or telephone number specified for such
Person on Schedule 10.02; and




     (ii) if to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.


Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).




94









 








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



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



     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE
ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE
BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its
Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any
Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the
Administrative Agent’s transmission of the Borrower Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are determined by a court of
competent jurisdiction by a final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any
Agent Party have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for
indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual
damages).



     (d) Change of Address, Etc. Each of the Borrower, Operating, the Administrative Agent
and the L/C Issuer may change its address, telecopier or telephone number or e-mail address for
notices and other communications hereunder by notice to the other parties hereto. Each other
Lender may change its address, telecopier or telephone number or e-mail address for



95









 







notices and
other communications hereunder by notice to the Borrower, the Administrative Agent and the L/C
Issuer. In addition, each Lender agrees to notify the Administrative Agent from time to time to
ensure that the Administrative Agent has on record (i) an effective address, contact name,
telephone number, telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each
Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at
all times have selected the “Private Side Information” or similar designation on the content
declaration screen of the Platform in order to enable such Public Lender or its delegate, in
accordance with such Public Lender’s compliance procedures and applicable Law, including United
States Federal and state securities Laws, to make reference to Borrower Materials that are not made
available through the “Public Side Information” portion of the Platform and that may contain
material non-public information with respect to the Borrower or its securities for purposes of
United States Federal or state securities laws.



     (e) Reliance by the Administrative Agent, L/C Issuer and Lenders. The Administrative
Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including
telephonic Loan Notices) purportedly given by or on behalf of the Borrower or Operating even if (i)
such notices were not made in a manner specified herein, were incomplete
or were not preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower
shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of
each of them from all losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to
and other telephonic communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such recording.



     10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the L/C Issuer or the
Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.



     10.04 Expenses; Indemnity; Damage Waiver.



     (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out of pocket
expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees,
charges and disbursements of counsel for the Administrative Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses
incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all out of pocket expenses incurred
by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and
disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall
pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any
Lender or



96









 







the L/C Issuer, in connection with the enforcement or protection of its rights (A) in
connection with this Agreement and the other Loan Documents, including its rights under this
Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including
all such out of pocket expenses incurred during any workout, restructuring or negotiations in
respect of such Loans or Letters of Credit.



     (b) Indemnification by the Borrower. The Borrower shall indemnify each Agent (and any
sub-agent thereof), each Lender and the L/C Issuer, 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), and shall indemnify and hold
harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be
employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any
third party or by the Borrower or any other Credit Party arising
out of, in connection with, or as a result of (i) the execution or delivery of this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit
or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to
honor a demand for payment under a Letter of Credit if the documents presented in connection with
such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or
alleged presence or release of Hazardous Substances on or from any property owned or operated by
the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by the Borrower or any other Credit Party,
and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by
or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnitee or (y) result from a claim brought by the Borrower or any other Credit Party
against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under
any other Loan Document, if the Borrower or such Credit Party has obtained a final and
nonappealable judgment in its favor on such claim as determined by a court of competent
jurisdiction.



     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it
to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any
of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), the L/C Issuer or such Related Party, 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 the Administrative Agent (or any such sub-agent) or the L/C Issuer in its



97









 







capacity as such,
or against any Related Party of any of the foregoing acting for the Administrative Agent (or any
such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders
under this subsection (c) are subject to the provisions of Section 2.11(d).



     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, the parties hereto shall not assert, and each hereby waives, any claim against any
other party hereto, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the
proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any
damages arising from the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby.



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



     (f) Survival. The agreements in this Section shall survive the resignation of the
Administrative Agent and the L/C Issuer, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.



     10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is
made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the
L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such
setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the Administrative
Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a)
to the extent of such recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had not been made or
such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the
Administrative Agent upon demand its applicable share (without duplication) of any amount so
recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such
demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the
preceding sentence shall survive the payment in full of the Obligations and the termination of this
Agreement.



     10.06 Successors and Assigns.



     (a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Borrower nor Operating may assign or



98









 







otherwise
transfer any of its rights or obligations hereunder without the prior written consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an eligible assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the
provisions of subsection (d) of this Section, (iii) by way of pledge or assignment of a security
interest subject to the restrictions of subsection (f) of this Section, or (iv) to an SPC in
accordance with the provisions of subsection (h) of this Section (and any other attempted
assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.



     (b) Assignments by Lenders. Any Lender may at any time assign to one or more eligible
assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans (including for purposes of this subsection (b),
participations in L/C Obligations) at the time owing to it); provided that any such assignment
shall be subject to the following conditions:




     (i) Minimum Amounts.




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




     (B) in any case not described in subsection (b)(i)(A) of this Section, the
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with respect to
such assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date, shall not be less
than $5,000,000 unless each of the Administrative Agent and, so long as no Event of
Default has occurred and is continuing, the Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met.




     (ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and obligations
under this Agreement with respect to the Loans or the Commitment assigned;



99









 






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




     (A) the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required unless (1) an Event of Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund;




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




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




     (iv) Assignment and Assumption. The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee in the amount of $3,500; provided, however,
that the Administrative Agent may, in its sole discretion, elect to waive such processing
and recordation fee in the case of any assignment. The assignee, if it is not a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.




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


Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this Section, from and after the effective date specified in each Assignment and Assumption, the
assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be
entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04
with respect to facts and circumstances occurring prior to the effective date of such assignment.
Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee
Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that
does not comply with this subsection 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 subsection (d) of
this Section.




     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment



100









 







and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations 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 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, the L/C Issuer and any Lender at any reasonable
time and from time to time upon reasonable prior notice.



     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Lenders and the L/C Issuer 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, waiver or other modification described in the first proviso to Section
10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower
agrees that each Participant shall be entitled to the benefits of Sections 3.01,
3.04 and 3.05 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 10.08 as though it were
a Lender, provided such Participant agrees to be subject to Section 2.12 as though it were
a Lender.



     (e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.01 or 3.04 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 3.01 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 3.01(e) as though it were a Lender.



     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note, if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any
of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.



101









 





     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as provided for in any
applicable law, including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.



     (h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding
vehicle identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrower (an “SPC”) the option to provide all or any part of
any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and
(ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of
such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof
or, if it fails to do so, to make such payment to the Administrative Agent as is required under
Section 2.11(b)(ii). Each party hereto hereby agrees that (i) neither the grant to any SPC
nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise
increase or change the obligations of the Borrower under this Agreement (including its obligations
under Section 3.04), (ii) no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender
shall for all purposes, including the approval of any amendment, waiver or other modification of
any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by
an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding commercial paper or
other senior debt of any SPC, it will not institute against, or join any other Person in
instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding
anything to the contrary contained herein, any SPC may (i) with notice to, but without prior
consent of the Borrower and the Administrative Agent and without paying any processing fee
therefor, assign all or any portion of its right to receive payment with respect to any Loan to the
Granting Lender and (ii) disclose on a confidential basis any non-public information relating to
its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or
Guarantee or credit or liquidity enhancement to such SPC.



     (i) Resignation as L/C Issuer after Assignment. Notwithstanding anything to the
contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans
pursuant to subsection (b) above, Bank of America may, upon 30 days’ notice to the Borrower and the
Lenders, resign as L/C Issuer. In the event of any such resignation as L/C Issuer, the Borrower
shall be entitled to appoint from among the Lenders a successor L/C Issuer hereunder;
provided, however, that no failure by the Borrower to appoint any such successor
shall affect the resignation of Bank of America as L/C Issuer. If Bank of America resigns as L/C
Issuer, it shall retain all the rights and obligations of the L/C Issuer hereunder with respect to
all



102









 







Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all
L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate
Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).
Upon the appointment of a successor L/C Issuer, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer, and (b)
the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit,
if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank
of America to effectively assume the obligations of Bank of America with respect to such Letters of
Credit.



     10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent,
the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the same as those of
this Section, to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (x) becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their
respective Affiliates on a nonconfidential basis from a source other than the Borrower.



     For purposes of this Section, “Information” means all information received from the
Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective
businesses, other than any such information that is available to the Administrative Agent, any
Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower or any
Subsidiary, provided that, in the case of information received from the Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.



     10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each
Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and
from time to time, to the fullest extent permitted by applicable law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final, in whatever currency) at
any time held and other obligations (in whatever currency) at any time owing by



103









 







such Lender, the
L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or Operating
against any and all of the obligations of the Borrower or Operating now or hereafter existing under
this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether
or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other
Loan Document and although such obligations of the Borrower or Operating may be contingent or
unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the
branch or office holding such deposit or obligated on such indebtedness. The
rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are
in addition to other rights and remedies (including other rights of setoff) that such Lender, the
L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to
notify the Borrower and the Administrative Agent promptly after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of such setoff and
application.



     10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any
Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the
maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If
the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum
Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrower. In determining whether the interest contracted for,
charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal
as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations hereunder.



     10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, 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
that, when taken together, bear the signatures of each of the other parties hereto. 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.



     10.11 Survival of Representations and Warranties. All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or
in connection herewith or therewith shall survive the execution and delivery hereof and thereof.
Such representations and warranties have been or will be relied upon by the Administrative Agent
and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or
on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice
or knowledge of any Default at the time of any Credit Extension, and shall continue in full force
and effect as long as any Loan or



104









 







any other Obligation hereunder shall remain unpaid or unsatisfied
or any Letter of Credit shall remain outstanding.



     10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to
be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.



     10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04,
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 3.01, or if any Lender gives a
notice pursuant to Section 3.02, or if any Lender fails to consent to any increase in the
Borrowing Base proposed by the Administrative Agent, or if any Lender is a Defaulting Lender or if,
in connection with any consent or approval of any proposed amendment, modification, waiver, or
consent that requires consent of each Lender, the consent of Required Lenders shall have been
obtained but any Lender has not so consented or approved, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 10.06), all of its interests, rights and obligations
under this Agreement and the related Loan Documents to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided
that:



     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in
Section 10.06(b);



     (b) such Lender shall have received payment of an amount equal to the outstanding principal of
its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Loan Documents (including any amounts under Section 3.05)
from the assignee (to the extent of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts);



     (c) in the case of any such assignment resulting from a claim for compensation under
Section 3.04 or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments thereafter; and



     (d) such assignment does not conflict with applicable Laws.



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



105









 





     10.14 Governing Law; Jurisdiction; Etc.



     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.



     (b) SUBMISSION TO JURISDICTION. EACH OF THE BORROWER AND OPERATING IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT
OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR OPERATING
OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.



     (c) WAIVER OF VENUE. EACH OF THE BORROWER AND OPERATING IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF
THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.



     (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.



     10.15 Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY



106









 







OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



     10.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined)
and the Administrative Agent (for itself and not on behalf of any 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 or the Administrative Agent, as
applicable, to identify the Borrower in accordance with the Act.



     10.17 Time of the Essence. Time is of the essence of the Loan Documents.



     10.18 Special Provisions.



     (a) From and after the Closing Date, (i) each Exiting Lender shall cease to be a party to this
Agreement, (ii) no Exiting Lender shall have any obligations or liabilities under this Agreement
with respect to the period from and after the Closing Date and, without limiting the foregoing, no
Exiting Lender shall have any Commitment under this Agreement or any L/C Obligations outstanding
hereunder, (iii) all Existing Letters of Credit will be deemed issued and outstanding under this
Agreement and will be governed as if issued under this Agreement and (iv) no Exiting Lender shall
have any rights under the Existing Credit Agreement, this Agreement or any other Loan Document
(other than rights under the Existing Credit Agreement expressly stated to survive the termination
of the Existing Credit Agreement and the repayment of amounts outstanding thereunder).



     (b) The Lenders that are Lenders under the Existing Credit Agreement hereby waive any
requirements for notice of prepayment, minimum amounts of prepayments of Loans (as defined in the
Existing Credit Agreement), ratable reductions of the commitments of the Lenders under the Existing
Credit Agreement and ratable payments on account of the principal or interest of any Loan (as
defined in the Existing Credit Agreement) under the Existing Credit Agreement
to the extent such prepayment, reductions or payments are required under the Existing Credit
Agreement.



     (c) The Lenders hereby authorize the Administrative Agent and the Borrower to request
borrowings from the Lenders, to make prepayments of Loans (as defined in the Existing Credit
Agreement) and to reduce commitments under the Existing Credit Agreement among the Lenders (as
defined in the Existing Credit Agreement) in order to ensure that, upon the effectiveness of this
Agreement, the Loans of the Lenders shall be outstanding on a ratable basis



107









 







in accordance with
their respective Applicable Percentages and that the Commitments shall be as set forth on
Schedule 2.01 hereto and no such borrowing, prepayment or reduction shall violate any
provisions of the Existing Credit Agreement or this Agreement. The Lenders hereby confirm that,
from and after the Closing Date, all participations of the Lenders in respect of Letters of Credit
outstanding hereunder pursuant to Section 2.03(c) shall be based upon the Applicable
Percentages of the Lenders (after giving effect to this Agreement).



     (d) The Lenders that are Lenders under the Existing Credit Agreement hereby ratify and
confirm:




     (i) the amendment of that certain Amended and Restated Mortgage-Short Term Mortgage
Redemption, Collateral Real Estate Mortgage, Line of Credit Mortgage, Deed of Trust, Trust
Deed, Security Agreement, Financing Statement and Assignment of Production dated as of
August 19, 2004 from Operating, as Mortgagor, to Bank of America, N.A., as the
administrative agent, as Mortgagee (“Prior Mortgagee”), or to Prlap, Inc. or to
GeoScout Land & Title Company, Inc., as Trustee, which amendment is made pursuant to that
certain First Amendment to Amended and Restated Mortgage-Short Term Mortgage Redemption,
Collateral Real Estate Mortgage, Line of Credit Mortgage, Deed of Trust, Trust Deed,
Security Agreement, Financing Statement and Assignment of Production dated as of the date
hereof entered into by and among Prior Mortgagee, the Borrower and Operating;




     (ii) the amendment and restatement of that certain Pledge Agreement dated as of August
19, 2004, made pursuant to the Existing Credit Agreement by the following Pledgors,
respectively: the Borrower, EAP Operating, Inc. (“Operating GP”), EAP Properties,
Inc. (“Properties”), and EAP Energy, Inc. (“Energy”), which amendment and
restatement is made pursuant to that certain Amended and Restated Pledge Agreement dated as
of the date hereof made by the Borrower, Operating GP, Operating, Properties, and Energy in
favor of the Administrative Agent for the benefit of the Lenders; and




     (iii) the amendment and restatement of that certain Guaranty dated as of August 19,
2004 and made pursuant to the Existing Credit Agreement by the following Guarantors,
respectively: Operating GP, Operating, Energy, EAP Energy Services, L.P.
(“Services”), Encore Operating Louisiana, LLC (“Operating Louisiana”) and
Properties, which amendment and restatement is made pursuant to that certain Amended and
Restated Guaranty dated as of the date hereof made by Operating GP, Operating, Energy,
Services, Operating Louisiana and Properties.



     (e) The Borrower hereby terminates, effective as of the Closing Date, in full the commitments
under the Existing Credit Agreement of the Exiting Lenders.



     10.19 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.



108









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.





	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	ENCORE ACQUISITION COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert C. Reeves	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert C. Reeves, Senior Vice President,	 	 
	 

	 	 	 	Chief Financial Officer and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	ENCORE OPERATING, L.P.	 	 
	 

	 	By:
	 	EAP Operating, Inc., its sole general partner	 	 







	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert C. Reeves	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert C. Reeves, Senior Vice President,
	 	 
	 

	 	 	 	Chief Financial Officer and Treasurer	 	 






 









 





	 	 	 	 	 
	 	BANK OF AMERICA, N.A.,

     as the Administrative Agent

 	 
	 	By:  	/s/ Todd Mac Neill
 	 
	 	 	Name:  	Todd Mac Neill 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as a Lender, L/C Issuer

 	 
	 	By:  	/s/ Jeffrey H. Rathkamp
 	 
	 	 	Name:  	Jeffrey H. Rathkamp 	 
	 	 	Title:  	Managing Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	WACHOVIA BANK, N.A., as

     Co-Syndication Agent and as Lender

 	 
	 	By:  	/s/ Chris Hewitt
 	 
	 	 	Name:  	Chris Hewitt 	 
	 	 	Title:  	Vice President 	 
	 




 









 





	 	 	 	 	 
	 	FORTIS CAPITAL CORP., as Co-Syndication

     Agent and as a Lender

 	 
	 	By:  	/s/ Michele Jones
 	 
	 	 	Name:  	Michele Jones 	 
	 	 	Title:  	Senior Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Deirdre Sanborn
 	 
	 	 	Name:  	Deirdre Sanborn 	 
	 	 	Title:  	Senior Vice President 	 
	 




 









 





	 	 	 	 	 
	 	BNP PARIBAS, as Co-Documentation

     Agent and as a Lender

 	 
	 	By:  	/s/ Betsy Jocher
 	 
	 	 	Name:  	Betsy Jocher 	 
	 	 	Title:  	Director 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Polly Schott
 	 
	 	 	Name:  	Polly Schott 	 
	 	 	Title:  	Vice President 	 
	 




 









 





	 	 	 	 	 
	 	CALYON NEW YORK BRANCH, as

     Co-Documentation Agent and as a Lender

 	 
	 	By:  	/s/ Tom Byargeon
 	 
	 	 	Name:  	Tom Byargeon 	 
	 	 	Title:  	Managing Director 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Michael Willis
 	 
	 	 	Name:  	Michael Willis 	 
	 	 	Title:  	Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	BMO CAPITAL MARKETS FINANCING, INC., as

     a Lender

 	 
	 	By:  	/s/ James V. Ducote
 	 
	 	 	Name:  	James V. Ducote 	 
	 	 	Title:  	Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	MERRILL LYNCH CAPITAL, A DIVISION OF

     MERRILL LYNCH BUSINESS FINANCIAL SERVICES, as a Lender	 
	 
	 	By:  	/s/ Gregory B. Hanson
 	 
	 	 	Name:  	Gregory B. Hanson 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	THE ROYAL BANK OF SCOTLAND PLC, as a
Lender	 
	 
	 	By:  	/s/ Scott L. Joyce
 	 
	 	 	Name:  	Scott L. Joyce 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	SUNTRUST BANK, as a Lender

 	 
	 	By:  	/s/ Sean Roche
 	 
	 	 	Name:  	Sean Roche 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	ALLIED IRISH BANKS PLC, as a Lender

 	 
	 	By:  	/s/ David O’ Driscoll
 	 
	 	 	Name:  	David O’ Driscoll 	 
	 	 	Title:  	Assistant Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Aidan Lanigan
 	 
	 	 	Name:  	Aidan Lanigan 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA, as a Lender

 	 
	 	By:  	/s/ Gregory B. George
 	 
	 	 	Name:  	Gregory B. George 	 
	 	 	Title:  	Managing Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	COMERICA BANK, as a Lender

 	 
	 	By:  	/s/ Peter L. Sefzik
 	 
	 	 	Name:  	Peter L. Sefzik 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	GENERAL ELECTRIC CAPITAL CORPORATION, as a

Lender

 	 
	 	By:  	/s/ Matthew A. Toth, III
 	 
	 	 	Name:  	Matthew A. Toth, III 	 
	 	 	Title:  	Authorized Signatory 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	KEYBANK NATIONAL ASSOCIATION, as a Lender

 	 
	 	By:  	/s/ Thomas Rajan
 	 
	 	 	Name:  	Thomas Rajan 	 
	 	 	Title:  	Senior Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	MIZUHO CORPORATE BANK, LTD., as a Lender

 	 
	 	By:  	/s/ Leon Mo
 	 
	 	 	Name:  	Leon Mo 	 
	 	 	Title:  	Senior Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	NATIXIS, as a Lender

 	 
	 	By:  	/s/ Timothy L. Polvado
 	 
	 	 	Name:  	Timothy L. Polvado 	 
	 	 	Title:  	Managing Director 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Louis P. Laville, III
 	 
	 	 	Name:  	Louis P. Laville, III 	 
	 	 	Title:  	Managing Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	SUMITOMO MITSUI BANKING CORPORATION, as a

Lender

 	 
	 	By:  	/s/ Masakazu Hasegawa
 	 
	 	 	Name:  	Masakazu Hasegawa 	 
	 	 	Title:  	Joint General Manager 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	WELLS FARGO BANK, N.A., as a Lender

 	 
	 	By:  	/s/ Charles D. Kirkman
 	 
	 	 	Name:  	Charles D. Kirkman 	 
	 	 	Title:  	Senior Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	BANK OF SCOTLAND, as a Lender

 	 
	 	By:  	/s/ Karen Weich
 	 
	 	 	Name:  	Karen Weich 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as a

Lender

 	 
	 	By:  	/s/ Daria M. Mahoney
 	 
	 	 	Name:  	Daria M. Mahoney 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	DNB NOR BANK ASA, as a Lender

 	 
	 	By:  	/s/ Kevin O’ Hara
 	 
	 	 	Name:  	Kevin O’ Hara 	 
	 	 	Title:  	Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Thomas Tangen
 	 
	 	 	Name:  	Thomas Tangen 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



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

 	 
	 	By:  	/s/ Alison Fuqua
 	 
	 	 	Name:  	Alison Fuqua 	 
	 	 	Title:  	Investment Banking Officer 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Timothy Brendel
 	 
	 	 	Name:  	Timothy Brendel 	 
	 	 	Title:  	Investment Banking Officer 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	CITIBANK, N.A., as a Lender

 	 
	 	By:  	/s/ John F. Miller
 	 
	 	 	Name:  	John F. Miller 	 
	 	 	Title:  	Attorney-in-Fact 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	THE FROST NATIONAL BANK, as a Lender

 	 
	 	By:  	/s/ John S. Warren
 	 
	 	 	Name:  	John S. Warren 	 
	 	 	Title:  	Senior Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	ROYAL BANK OF CANADA, as a Lender

 	 
	 	By:  	/s/ Scott Gildea
 	 
	 	 	Name:  	Scott Gildea 	 
	 	 	Title:  	Authorized Signatory 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	WESTLB AG, NEW YORK BRANCH, as a Lender

 	 
	 	By:  	/s/ Duncan Robertson
 	 
	 	 	Name:  	Duncan Robertson 	 
	 	 	Title:  	Executive Director 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Felicia La Forgia
 	 
	 	 	Name:  	Felicia La Forgia 	 
	 	 	Title:  	Director 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	COMPASS BANK, as a Lender

 	 
	 	By:  	/s/ Patrick McWilliams
 	 
	 	 	Name:  	Patrick McWilliams 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	MIDFIRST BANK, as a Lender

 	 
	 	By:  	/s/ Sean D. Brewer
 	 
	 	 	Name:  	Sean D. Brewer 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	UBS LOAN FINANCE LLC, as a Lender

 	 
	 	By:  	/s/ Irja R. Otsa
 	 
	 	 	Name:  	Irja R. Otsa 	 
	 	 	Title:  	Associate Director Banking Products
Services US 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Barbara Ezell-McMichael
 	 
	 	 	Name:  	Barbara Ezell-McMichael 	 
	 	 	Title:  	Associate Director Banking Products
Services, US 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	DZ BANK AG DEUTSCHE

ZENTRAL-GENOSSENSCHAFTSBANK, FRANKFURT

 AM MAIN, NEW YORK BRANCH, as a Lender	 
	 
	 	By:  	/s/ Daria A. Pishko
 	 
	 	 	Name:  	Daria A. Pishko 	 
	 	 	Title:  	First Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Judson Horn
 	 
	 	 	Name:  	Judson Horn 	 
	 	 	Title:  	Assistant Treasurer 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	RZB FINANCE LLC, as a Lender

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



	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Griselda Alvizo
 	 
	 	 	Name:  	Griselda Alvizo 	 
	 	 	Title:  	Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	STERLING BANK, as a Lender

 	 
	 	By:  	/s/ Melissa A. Bauman
 	 
	 	 	Name:  	Melissa A. Bauman 	 
	 	 	Title:  	Senior Vice President 	 
	 




 









 





SCHEDULE 2.01




COMMITMENTS

AND APPLICABLE PERCENTAGES




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Applicable
	Lender	 	Commitment	 	Percentage
	Bank of America, N.A.
	 	$	59,210,526.42	 	 	 	4.736842105	%
	Wachovia Bank, N.A.
	 	$	57,894,736.84	 	 	 	4.631578947	%
	Fortis Capital Corp.
	 	$	57,894,736.84	 	 	 	4.631578947	%
	BNP Paribas
	 	$	57,894,736.84	 	 	 	4.631578947	%
	Calyon New York Branch
	 	$	57,894,736.84	 	 	 	4.631578947	%
	BMO Capital Markets Financing, Inc.
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Merrill Lynch Capital, a division of
Merrill Lynch Business Financial
Services
	 	$	40,789,473.68	 	 	 	3.263157895	%
	The Royal Bank of Scotland plc
	 	$	40,789,473.68	 	 	 	3.263157895	%
	SunTrust Bank
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Allied Irish Bank plc
	 	$	40,789,473.68	 	 	 	3.263157895	%
	The Bank of Nova Scotia
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Comerica Bank
	 	$	40,789,473.68	 	 	 	3.263157895	%
	General Electric Capital Corporation
	 	$	40,789,473.68	 	 	 	3.263157895	%
	KeyBank National Association
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Mizuho Corporate Bank, Ltd.
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Natixis
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Sumitomo Mitsui Banking Corp.
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Wells Fargo Bank, N.A.
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Bank of Scotland
	 	$	40,789,473.68	 	 	 	3.263157895	%
	U.S. Bank National Association
	 	$	40,789,473.68	 	 	 	3.263157895	%
	DnB NOR Bank ASA
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Union Bank of California, N.A.
	 	$	40,789,473.68	 	 	 	3.263157895	%
	Citibank, N.A.
	 	$	30,263,157.89	 	 	 	2.421052632	%
	The Frost National Bank
	 	$	30,263,157.89	 	 	 	2.421052632	%
	Royal Bank of Canada
	 	$	30,263,157.89	 	 	 	2.421052632	%
	WestLB AG, New York Branch
	 	$	30,263,157.89	 	 	 	2.421052632	%
	Compass Bank
	 	$	30,263,157.89	 	 	 	2.421052632	%
	MidFirst Bank
	 	$	30,263,157.89	 	 	 	2.421052632	%
	UBS Loan Finance LLC
	 	$	21,052,631.58	 	 	 	1.684210526	%
	DZ Bank AG Deutsche
Zentral-Genossenschaftsbank,
Frankfurt am Maim, New York Branch
	 	$	21,052,631.58	 	 	 	1.684210526	%
	RZB Finance LLC
	 	$	21,052,631.58	 	 	 	1.684210526	%
	Sterling Bank
	 	$	21,052,631.58	 	 	 	1.684210526	%
	 	 	 	 	 	 
	Total
	 	$	1,250,000,000.00	 	 	 	1.0000000000	%