Exhibit 10.14


    
      

    

    EXECUTION
      VERSION


     

    Senior
      Term Loan
      Agreement

    


    Dated
      as of

    January
      18, 2007

    


    among

    


    McMoRan
      Oil & Gas LLC,

    as
      Borrower,

    


    JPMorgan
      Chase Bank, N.A.,

    as
      Administrative Agent,

    


    TD
      SECURITIES (USA) LLC,

    as
      Syndication Agent,

    


    and

    


    The
      Lenders Party Hereto

    


     

    


     

    Co-Lead
      Arrangers and Joint Bookrunners

     

    J.P.
      Morgan Securities Inc. and TD Securities (USA) LLC

    


    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    
TABLE
      OF CONTENTS

     

                                                                                                                                                                                                                  
      Page

     

     

    ARTICLE
      I

    Definitions
      and Accounting Matters

     

    Section
      1.01  Terms
      Defined
      Above                                                                                                                                                                        1

    Section
      1.02  Certain
      Defined
      Terms                                                                                                                                                                       
1

    Section
      1.03  Types
      of
      Loans and
      Borrowings                                                                                                                                                    18

    Section
      1.04  Terms
      Generally; Rules of
      Construction                                                                                                                                      
18

    Section
      1.05  Accounting
      Terms and Determinations;
      GAAP                                                                                                                         
19

    Section
      1.06  Priority
      of
      Creditors                                                                                                                                                                  
       19

     

    ARTICLE
      II

    The
      Credits

     

    Section
      2.01  Commitments                                                                                                                                                                                     19

    Section
      2.02  Loans
      and
      Borrowings                                                                                                                                                                    
19

    Section
      2.03  Requests
      for
      Borrowings                                                                                                                                                                
20

    Section
      2.04  Interest
      Elections                                                                                                                                                                              20

    Section
      2.05  Funding
      of
      Borrowings                                                                                                                                                                   
22

     

    ARTICLE
      III

    Payments
      of Principal and Interest; Prepayments; Fees

     

    Section
      3.01  Repayment
      of
      Loans                                                                                                                                                                       
22

    Section
      3.02  Interest                                                                                                                                                                                              
      23

    Section
      3.03  Alternate
      Rate of
      Interest                                                                                                                                                               
23

    Section
      3.04  Prepayments                                                                                                                                                                                     
      24

    Section
      3.05  Fees                                                                                                                                                                                                    
      25

     

    ARTICLE
      IV

    Payments;
      Pro Rata Treatment; Sharing of Set-offs

     

    Section
      4.01  Payments
      Generally; Pro Rata Treatment; Sharing of
      Payments                                                                                               
26

    Section
      4.02  Presumption
      of Payment by the
      Borrower                                                                                                                                    
27

    Section
      4.03  Certain
      Deductions by the Administrative
      Agent                                                                                                                      
 27

    Section
      4.04  Disposition
      of
      Proceeds                                                                                                                                                                   27

     

    ARTICLE
      V

    Increased
      Costs; Break Funding Payments; Taxes; Illegality

     

    Section
      5.01  Increased
      Costs                                                                                                                                                                                27

    Section
      5.02  Break
      Funding
      Payments                                                                                                                                                               
28

    Section
      5.03  Taxes                                                                                                                                                                                                 
      29

    Section
      5.04  Mitigation
      Obligations                                                                                                                                                                   
30

    Section
      5.05  Illegality                                                                                                                                                                                             30

     

    
      
        i

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      VI

    Conditions
      Precedent

     

    Section
      6.01  Effective
      Date                                                                                                                                                                                  30

     

    ARTICLE
      VII

    Representations
      and Warranties

     

    Section
      7.01  Organization;
      Powers                                                                                                                                                                    
33

    Section
      7.02  Authority;
      Enforceability                                                                                                                                                             
33

    Section
      7.03  Approvals;
      No
      Conflicts                                                                                                                                                              
34

    Section
      7.04  Financial
      Condition; No Material Adverse
      Change                                                                                                                 
34

    Section
      7.05  Litigation                                                                                                                                                                                          34

    Section
      7.06  Environmental
      Matters                                                                                                                                                                 
35

    Section
      7.07  Compliance
      with the Laws and Agreements; No
      Defaults                                                                                                     
36

    Section
      7.08  Investment
      Company
      Act                                                                                                                                                           
 36

    Section
      7.09  Taxes                                                                                                                                                                                               
      36

    Section
      7.10  ERISA                                                                                                                                                                                              36

    Section
      7.11  Disclosure;
      No Material
      Misstatements                                                                                                                                   
37

    Section
      7.12  Insurance                                                                                                                                                                                        38

    Section
      7.13  Restriction
      on
      Liens                                                                                                                                                                     
38

    Section
      7.14  Subsidiaries                                                                                                                                                                                    38

    Section
      7.15  Location
      of Business and
      Offices                                                                                                                                              
38

    Section
      7.16  Properties;
      Titles,
      Etc                                                                                                                                                                   
39

    Section
      7.17  Maintenance
      of
      Properties                                                                                                                                                          
40

    Section
      7.18  Gas
      Imbalances,
      Prepayments                                                                                                                                                     
40

    Section
      7.19  Marketing
      of
      Production                                                                                                                                                              
40

    Section
      7.20  Swap
      Agreements                                                                                                                                                                           41

    Section
      7.21  Use
      of
      Loans                                                                                                                                                                                    41

    Section
      7.22  Solvency                                                                                                                                                                                          
      41

     

    ARTICLE
      VIII

    Affirmative
      Covenants

     

    Section
      8.01  Financial
      Statements; Other
      Information                                                                                                                                    
41

    Section
      8.02  Notices
      of Material
      Events                                                                                                                                                            44

    Section
      8.03  Existence;
      Conduct of
      Business                                                                                                                                                  
44

    Section
      8.04  Payment
      of
      Obligations                                                                                                                                                                 
45

    Section
      8.05  Performance
      of Obligations under Loan
      Documents                                                                                                                
45

    Section
      8.06  Operation
      and Maintenance of
      Properties                                                                                                                                  
45

    Section
      8.07  Insurance                                                                                                                                                                                         
       46

    Section
      8.08  Books
      and
      Records; Inspection
      Rights                                                                                                                                        46

    Section
      8.09  Compliance
      with
      Laws                                                                                                                                                                    
46

    Section
      8.10  Environmental
      Matters                                                                                                                                                                   
46

    Section
      8.11  Further
      Assurances                                                                                                                                                                          47

    Section
      8.12  Reserve
      Reports; Calculation of Total Reserve
      Values                                                                                                             
48

    Section
      8.13  Title
      Information                                                                                                                                                                                49

     

    
      
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    Section
      8.14  Additional
      Collateral; Additional
      Guarantors                                                                                                                              50

    Section
      8.15  ERISA
      Compliance                                                                                                                                                                           50

    Section
      8.16  Marketing
      Activities                                                                                                                                                                       
51

     

    ARTICLE
      IX

    Negative
      Covenants

     

    Section
      9.01  Financial
      Covenants                                                                                                                                                                       
51

    Section
      9.02  Debt                                                                                                                                                                                                   
      52

    Section
      9.03  Liens                                                                                                                                                                                                  
      53

    Section
      9.04  Dividends,
      Distributions and
      Redemptions                                                                                                                                
54

    Section
      9.05  Investments,
      Loans and
      Advances                                                                                                                                               54

    Section
      9.06  Nature
      of
      Business; International
      Operations                                                                                                                             
55

    Section
      9.07  Amendments
      to Organizational
      Documents                                                                                                                                
55

    Section
      9.08  Proceeds
      of
      Notes                                                                                                                                                                             55

    Section
      9.09  ERISA
      Compliance                                                                                                                                                                            56

    Section
      9.10  Sale
      or
      Discount of
      Receivables                                                                                                                                                     57

    Section
      9.11  Mergers,
      Etc                                                                                                                                                                                      
57

    Section
      9.12  Sale
      of
      Properties                                                                                                                                                                               57

    Section
      9.13  Environmental
      Matters                                                                                                                                                                    
58

    Section
      9.14  Transactions
      with
      Affiliates                                                                                                                                                           
58

    Section
      9.15  Subsidiaries                                                                                                                                                                                       
      58

    Section
      9.16  Negative
      Pledge Agreements; Dividend
      Restrictions                                                                                                                
58

    Section
      9.17  Gas
      Imbalances, Take-or-Pay or Other
      Prepayments                                                                                                                  
58

    Section
      9.18  Swap
      Agreements                                                                                                                                                                              58

    Section
      9.19  Optional
      Payments and Modifications of Certain Debt
      Instruments                                                                                        
59

     

    ARTICLE
      X

    Events
      of
      Default; Remedies

     

    Section
      10.01  Events
      of
      Default                                                                                                                                                                              59

    Section
      10.02  Remedies                                                                                                                                                                                           
      61

     

    ARTICLE
      XI

    The
      Administrative Agent

     

    Section
      11.02  Duties
      and Obligations of Administrative
      Agent                                                                                                                      
62

    Section
      11.03  Action
      by
      Administrative
      Agent                                                                                                                                                  
63

    Section
      11.04  Reliance
      by Administrative
      Agent                                                                                                                                                64

    Section
      11.05  Subagents                                                                                                                                                                                         
      64

    Section
      11.06  Resignation
      or Removal of Administrative
      Agent                                                                                                                      64

    Section
      11.07  Agents
      as
      Lenders                                                                                                                                                                           65

    Section
      11.08  No
      Reliance                                                                                                                                                                                       65

    Section
      11.09  Administrative
      Agent May File Proofs of
      Claim                                                                                                                        
65

    Section
      11.10  Authority
      of Administrative Agent to Release Collateral and
      Liens                                                                                      
66

    Section
      11.11  The
      Arrangers and the Syndication
      Agent                                                                                                                                
66

     

    
      
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    ARTICLE
      XII

    Miscellaneous

     

    Section
      12.01  Notices                                                                                                                                                                                            
      66

    Section
      12.02  Waivers;
      Amendments                                                                                                                                                                 
67

    Section
      12.03  Expenses,
      Indemnity; Damage
      Waiver                                                                                                                                       
69

    Section
      12.04  Successors
      and
      Assigns                                                                                                                                                               70

    Section
      12.05  Survival;
      Revival;
      Reinstatement                                                                                                                                                
73

    Section
      12.06  Counterparts;
      Integration;
      Effectiveness                                                                                                                                  
73

    Section
      12.07  Severability                                                                                                                                                                                     
      74

    Section
      12.08  Right
      of
      Setoff                                                                                                                                                                                 74

    Section
      12.09  GOVERNING
      LAW; JURISDICTION; CONSENT TO SERVICE OF
      PROCESS                                                                    74

    Section
      12.10  Headings                                                                                                                                                                                         
      75

    Section
      12.11  Confidentiality                                                                                                                                                                                
      76

    Section
      12.12  EXCULPATION
      PROVISIONS                                                                                                                                                     76

    Section
      12.13  No
      Third
      Party
      Beneficiaries                                                                                                                                                        
77

    Section
      12.14  USA
      Patriot Act
      Notice                                                                                                                                                                
77

    


    
      
        
          iv

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Exhibits
      and Schedules

    


     

    Schedule
      1 Commitments
      and Applicable Percentages

    Schedule
      2 Pricing
      Schedule

    


    Exhibit
      A Form
      of
      Note

    Exhibit
      B Form
      of
      Borrowing Request

    Exhibit
      C Form
      of
      Interest Election Request

    Exhibit
      D Form
      of
      Compliance Certificate

    Exhibit
      E Form
      of
      Legal Opinion of Jones
      Walker,
      special
      counsel to the Borrower

    Exhibit
      F-1 Security
      Instruments

    Exhibit
      F-2 Form
      of
      Guaranty and Collateral Agreement

    Exhibit
      G Form
      of
      Assignment and Assumption

    


    Schedule
      7.05 Litigation

    Schedule
      7.10(d) ERISA
      Plan

    Schedule
      7.10(f) Under-funded
      ERISA Plan

    Schedule
      7.12 Insurance

    Schedule
      7.14 Subsidiaries

    Schedule
      7.18 Gas
      Imbalances

    Schedule
      7.19 Marketing
      Contracts

    Schedule
      7.20 Swap
      Agreements

    Schedule
      9.05 Investments


    
      
        
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    THIS
      SENIOR TERM LOAN AGREEMENT
      dated as
      of January
      18, 2007,
      is
      among: McMoRan Oil & Gas LLC, a Delaware limited
      liability company (the
      “Borrower”);
      each
      of the Lenders from time to time party hereto; JPMorgan
      Chase Bank, N.A. (in
      its
      individual capacity, “JPMorgan”),
      as
      administrative agent for the Lenders (in such capacity, together with its
      successors in such capacity, the “Administrative
      Agent”);
      and
      TD Securities (USA) LLC, as syndication agent for the Lenders (in such capacity,
      together with its successors in such capacity, the “Syndication
      Agent”).

     

    The
      parties hereto agree as follows:

     

    ARTICLE
      I  

    Definitions
      and Accounting Matters

     

    


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

     

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


     

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

     

    “Adjusted
      LIBO Rate”
means,
      with respect to any Eurodollar Borrowing for any Interest Period, an interest
      rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal
      to
(a)
      the LIBO
      Rate for such Interest Period multiplied by (b)
      the
      Statutory Reserve Rate.

     

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

     

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

     

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

     

    “Agents”
means,
      collectively, the Administrative Agent and the Syndication Agent; and “Agent”
shall mean either of the Administrative Agent or the Syndication Agent, as
      the
      context requires.

     

    “Agreed
      Pricing”
      means:

     

    (i) for
      anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales
      contract, the fixed price or prices provided for in such sales contract during
      the term thereof; and

    
      
        
        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (ii) for
      anticipated sales of Hydrocarbons that are hedged by a fixed price Swap
      Agreement, the fixed price or prices provided for in such Swap Agreement during
      the term thereof, as modified by any necessary adjustment for quality and
      geographical differentials; and

     

    (iii) for
      anticipated sales of Hydrocarbons that are hedged by a Swap Agreement which
      Swap
      Agreement provides for a range of prices between a floor and a ceiling, the
      prices provided for in subsection (iv) below, provided that during the term
      of
      such Swap Agreement such prices shall in no event be less than such floor or
      exceed such ceiling, as such floor and ceiling are modified by any necessary
      adjustment specified by the Administrative Agent for quality and geographical
      differentials; and

     

    (iv) for
      anticipated sales of Hydrocarbons, if such sales are not hedged by a Swap
      Agreement or sales contract that is described in paragraphs (i), (ii), or (iii)
      above, for the date of calculation (or, if such date is not a Business Day,
      for
      the first Business Day thereafter), and with any necessary adjustment specified
      by the Administrative Agent for quality and geographical differentials, the
      “strip” price under Henry Hub Natural Gas futures contracts and Light, Sweet
      Crude Oil futures contracts for the five year period following such calculation
      date, in each case as published by New York Mercantile Exchange (NYMEX) on
      its
      website currently located at www.nymex.com,
      or any
      successor thereto (as such price may be corrected or revised from time to time
      by the NYMEX in accordance with its rules and regulations), as of the settlement
      of the last trading day for the contract month coincident with the effective
      date of the then most recent Reserve Report, and thereafter the price in effect
      at the end of such five year period.

     

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

     

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

     

    “Applicable
      Margin”
means,
      for any day, with respect to any ABR Loan or Eurodollar Loan, as the case may
      be, the percentage rate per annum which is applicable with respect to a
      Borrowing of such Type as set forth in the Pricing Schedule.

     

    “Applicable
      Percentage”
means,
      with respect to any Lender at any time, the percentage of the aggregate
      Commitment represented by such Lender’s Commitment at such time or, from and
      after the Effective Date, of the aggregate Loans represented by such Lender’s
      Loans. The initial amount of each Lender’s Applicable Percentage is as set forth
      on Schedule 1. 

     

    “Approved
      Petroleum Engineers”
means
      (a) Netherland, Sewell & Associates, Inc., (b) Ryder Scott Company Petroleum
      Consultants, L.P. and (c) any other independent petroleum engineers reasonably
      acceptable to the Administrative Agent.

     

    “Arrangers”
means
      J.P.
      Morgan Securities Inc.,
      and TD
      Securities (USA) LLC in their capacities as the co-lead arrangers and joint
      bookrunners hereunder.

    
      
        
        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “Asset
      Sale”
means
      any sale,
      transfer or disposition of Property or series of related sales, transfers or
      other dispositions of
      Property (excluding
      any such sale,
      transfer or disposition permitted
      by clause (a), (b) or (c) of Section 9.12) that yields gross proceeds to any
      Credit Party other than the Parent (valued at the initial principal amount
      thereof in the case of non-cash proceeds consisting of notes or other debt
      securities and valued at fair market value in the case of other non-cash
      proceeds) in excess of $500,000.

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Cash
      Equivalents”
means
      (a) marketable direct obligations issued by, or unconditionally guaranteed
      by,
      the United States Government or issued by any agency thereof and backed by
      the
      full faith and credit of the United States, in each case maturing within one
      year from the date of acquisition; (b) certificates of deposit, time deposits,
      eurodollar time deposits or overnight bank deposits having maturities of six
      months or less from the date of acquisition issued by any lender under the
      Revolving Credit Agreement or by any commercial bank or trust company organized
      under the laws of the United States or any state thereof having combined capital
      and surplus of not less than $250,000,000; (c) commercial paper of an issuer
      rated at least A-1 by S&P or P-1 by Moody’s, or carrying an equivalent
      rating by a nationally recognized rating agency, if both of the two named rating
      agencies cease publishing ratings of commercial paper issuers generally, and
      maturing within six months from the date of acquisition; (d) repurchase
      obligations of any lender under the Revolving Credit Agreement or of any
      commercial bank satisfying the requirements of clause (b) of this definition,
      having a term of not more than 30 days, with respect to securities issued or
      fully guaranteed or insured by the United 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    States
      government; (e) securities with maturities of one year or less from the date
      of
      acquisition issued or fully guaranteed by any state, commonwealth or territory
      of the United States, by any political subdivision or taxing authority of any
      such state, commonwealth or territory or by any foreign government, the
      securities of which state, commonwealth, territory, political subdivision,
      taxing authority or foreign government (as the case may be) are rated at least
      A
      by S&P or A by Moody’s; (f) securities with maturities of six months or less
      from the date of acquisition backed by standby letters of credit issued by
      any
      lender under the Revolving Credit Agreement or any commercial bank satisfying
      the requirements of clause (b) of this definition; (g) money market mutual
      or
      similar funds that invest exclusively in assets satisfying the requirements
      of
      clauses (a) through (f) of this definition; or (h) money market funds that
      (i)
      comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company
      Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and
      (iii) have portfolio assets of at least $5,000,000,000.

     

    “Casualty
      Event”
means
      any loss, casualty or other insured damage to, or any nationalization, taking
      under power of eminent domain or by condemnation or similar proceeding of,
      any
      Property of the Borrower or any of its Subsidiaries having a fair market value
      in excess of $1,000,000.

     

    “Change
      in Control”
means
      (a) the acquisition of ownership, directly or indirectly, beneficially or of
      record, by any Person or group (within the meaning of the Securities Exchange
      Act of 1934 and the rules of the SEC thereunder as in effect on the date
      hereof), of Equity Interests representing more than 35%
      of the
      aggregate ordinary voting power represented by the issued and outstanding Equity
      Interests of the Parent, (b) occupation of a majority of the seats (other than
      vacant seats) on the board of directors of the Parent by Persons who were
      neither (i) nominated by the board of directors of the Parent nor (ii) appointed
      by directors so nominated, (c) the acquisition of direct or indirect Control
      of
      the Parent by any Person or group or (d) the failure of the Parent to at any
      time own, directly or indirectly, beneficially or of record, 100% of all of
      the
      issued and outstanding Equity Interests of the Borrower.

     

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

     

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

     

    “Commitment”
means,
      as to any Lender, the obligation of such Lender, subject to the terms and
      conditions herein, to make a Loan on the Effective Date to the Borrower in
      a
      principal amount not to exceed the amount set forth under the heading
“Commitment” opposite such Lender’s name on Schedule 1. The original aggregate
      amount of the Commitments is $100,000,000.

      
        
          
          

          
          

        

        
          2

          
            

          

        

        
          
          

        

      



    “Consolidated
      Net Income”
means
      with respect to the Borrower and the Consolidated Subsidiaries, for any period,
      the aggregate of the net income (or loss) of the Borrower and the Consolidated
      Subsidiaries after allowances for taxes for such period determined on a
      consolidated basis in accordance with GAAP; provided that there shall be
      excluded from such net income (to the extent otherwise included therein) the
      following: (a) the net income of any Person in which the Borrower or any
      Consolidated Subsidiary has an interest (which interest does not cause the
      net
      income of such other Person to be consolidated with the net income of the
      Borrower and the Consolidated Subsidiaries in accordance with GAAP), except
      to
      the extent of the amount of dividends or distributions actually paid in cash
      during such period by such other Person to the Borrower or to a Consolidated
      Subsidiary, as the case may be; (b) the net income (but not loss) during such
      period of any Consolidated Subsidiary to the extent that the declaration or
      payment of dividends or similar distributions or transfers or loans by that
      Consolidated Subsidiary is not at the time permitted by operation of the terms
      of its charter or any agreement, instrument or Governmental Requirement
      applicable to such Consolidated Subsidiary or is otherwise restricted or
      prohibited, in each case determined in accordance with GAAP; (c) the net income
      (or loss) of any Person acquired in a pooling-of-interests transaction for
      any
      period prior to the date of such transaction; (d) any extraordinary non-cash
      gains or losses during such period and (e) non-cash gains or losses under FAS
      133 resulting from the net change in Borrower’s mark to market portfolio of
      commodity price risk management activities during that period and (f) any gains
      or losses attributable to writeups or writedowns of assets, including ceiling
      test writedowns; provided that if the Borrower or any Consolidated Subsidiary
      shall acquire or dispose of any Property or Person, including without limitation
      K-Mc Venture I LLC, during the period of four fiscal quarters ending on the
      last
      day of the fiscal quarter immediately preceding the date of determination for
      which financial statements are available and up to and including the date of
      the
      consummation of such acquisition or disposition, then Consolidated Net Income
      shall be calculated after giving pro
      forma
      effect
      to such acquisition or disposition, as if such acquisition or disposition had
      occurred on the first day of such period.

    


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

     

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

     

    “Credit
      Parties”
means
      collectively, the Borrower and each Guarantor and each individually, a
“Credit
      Party”.

     

    “Debt”
means,
      for any Person, the sum of the following (without duplication): (a) all
      obligations of such Person for borrowed money or evidenced by bonds, bankers’
acceptances, debentures, notes or other similar instruments; (b) all obligations
      of such Person (whether 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

      
        
          
          

          
          

        

        
          4

          
            

          

        

        
          
          

        

      



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

    


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

     

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

     

    “Equity
      Issuance”
means
      the issuance, sale or other disposition after the Effective Date by the Borrower
      (other than to the Parent), any of its Subsidiaries (other than to the Borrower
      or any Wholly-Owned Subsidiary of the Borrower) or any other Credit Party other
      than the Parent of its Equity Interests.

     

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

     

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

      
        
          
          

          
          

        

        
          5

          
            

          

        

        
          
          

        

      



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

     

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

     

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

     

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

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

      
        
          
          

          
          

        

        
          7

          
            

          

        

        
          
          

        

      



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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Guarantors”
      means:

     

    
      	 	
              (a)

            	
              the
                Parent;
                

            


    

     

    
      	 	
              (b)

            	
              K-Mc
                Venture I LLC, a Delaware limited liability
                company;

            


    

     

    
      	 	
              (c)

            	
              Freeport
                Canadian Exploration Company, a Delaware
                corporation;

            


    

     

    
      	 	
              (d)

            	
              McMoRan
                International Inc., a Delaware corporation; and


            


    

     

    
      	 	
              (e)

            	
              each
                other Domestic Subsidiary that guarantees the Indebtedness pursuant
                to
                Section
                8.14  (a).

            


    

    


    “Guaranty
      Agreement”
means
      an agreement executed by the Guarantors in substantially the form of Exhibit
      F-2
      unconditionally guarantying on a joint and several basis, payment of the
      Indebtedness, as the same may be amended, modified or supplemented from time
      to
      time.

      
        
          
          

          
          

        

        
          8

          
            

          

        

        
          
          

        

      



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

     

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

     

    “Indebtedness”
means
      any and all amounts owing or to be owing by the Borrower, any Subsidiary or
      any
      Guarantor (whether direct or indirect (including those acquired by assumption),
      absolute or contingent, due or to become due, now existing or hereafter
      arising): (a) to the Administrative Agent or any Lender under any Loan Document
      and (b) all renewals, extensions and/or rearrangements of any of the
      above.

     

    “Indemnified
      Taxes”
means
      Taxes other than Excluded Taxes.

     

    “Initial
      Reserve Report”
      means
      the
      engineering information prepared by the Borrower and delivered to the
      Administrative Agent, with respect to the value of the Oil and Gas Properties
      of
      the Borrower and its Subsidiaries as of December 31, 2005.

     

    “Intercreditor
      Agreement”
means
      an Intercreditor Agreement by and among the Administrative Agent, the Revolving
      Agent and the Credit Parties, dated the date hereof and in form and substance
      satisfactory to the Lenders, as amended, modified, supplemented or restated
      from
      time to time.

     

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

     

    “Interest
      Expense”
means,
      for any period, the sum (determined without duplication) of the aggregate gross
      interest expense of the Borrower and the Consolidated Subsidiaries for such
      period, including to the extent included in interest expense under GAAP: (i)
      amortization of debt discount, (ii) capitalized interest and (iii) the portion
      of any payments or accruals under Capital Leases allocable to interest expense,
      plus the portion of any payments or accruals under Synthetic Leases allocable
      to
      interest expense whether or not the same constitutes interest expense under
      GAAP.

     

    “Interest
      Payment Date”
means
      (a) with respect to any ABR Loan, the last day of each March, June, September
      and December and (b) with respect to any Eurodollar Loan, the last day of the
      Interest Period applicable to the Borrowing of which such Loan is a part and,
      in
      the case of a Eurodollar Borrowing with an Interest Period of more than three
      months’ duration, each day prior to the last day of such Interest Period that
      occurs at intervals of three months’ duration after the first day of such
      Interest Period.

     

    “Interest
      Period”
means
      with respect to any Eurodollar Borrowing, the period commencing on the date
      of
      such Borrowing and ending on the numerically corresponding day in the calendar
      month that is one, two, three or six months (or, with the consent of each
      Lender, 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    “Lenders”
means
      the Persons listed on Schedule 1 and any Person that shall have become a party
      hereto pursuant to an Assignment and Assumption, other than any such Person
      that
      ceases to be a party hereto pursuant to an Assignment and
      Assumption.

     

    “LIBO
      Rate”
means,
      with respect to any Eurodollar Borrowing for any Interest Period, the rate
      appearing on Page 3750 of the Dow Jones Market Service (or on any successor
      or
      substitute page of such Service, or any successor to or substitute for such
      Service, providing rate quotations comparable to those currently provided on
      such page of such Service, as determined by the Administrative Agent from time
      to time for purposes of providing quotations of interest rates applicable to
      dollar deposits in the London interbank market) at approximately 11:00 a.m.,
      London time, two Business Days prior to the commencement of such Interest
      Period, as the rate for dollar deposits with a maturity comparable to such
      Interest Period. In the event that such rate is not available at such time
      for
      any reason, then the “LIBO
      Rate”
with
      respect to such Eurodollar Borrowing for such Interest Period shall be the
      rate
      (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits
      of $5,000,000 and for a maturity comparable to such Interest Period are offered
      by the principal London office of the Administrative Agent in immediately
      available funds in the London interbank market at approximately 11:00 a.m.,
      London time, two Business Days prior to the commencement of such Interest
      Period.

      
        
          
          

          
          

        

        
          10

          
            

          

        

        
          
          

        

      



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

     

    “Loan”
is
      defined in Section 2.01.

     

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

     

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

     

    “Majority
      Lenders”
means
      the holders of more than 50% of the aggregate unpaid principal amount of the
      Loans then outstanding. 

     

    “Material
      Adverse Effect”
means
      a
      material adverse change in, or material adverse effect on (a) the business,
      operations, Property or condition (financial or otherwise) of the Borrower
      and
      the Subsidiaries taken as a whole (excluding events, developments or
      circumstances generally affecting the industry in which the Borrower and its
      Subsidiaries operate or arising from changes in general business or economic
      conditions, so long as the foregoing do not disproportionately adversely affect
      the Borrower or its Subsidiaries), (b) the ability of the Borrower, any
      Subsidiary or any Guarantor to perform any of its obligations under any Loan
      Document to which it is a party, (c) the validity or enforceability of any
      Loan
      Document or (d) the rights and remedies of or benefits available to the
      Administrative Agent, any other Agent or any Lender under any Loan
      Document.

     

    “Material
      Indebtedness”
means
      Debt (other than the Loans), or obligations in respect of one or more Swap
      Agreements, of any one or more of the Borrower and its Subsidiaries or any
      Guarantor in an aggregate principal amount exceeding $10,000,000.
      For
      purposes of determining Material Indebtedness, the “principal amount” of the
      obligations of the Borrower or any Subsidiary or Guarantor in respect of any
      Swap Agreement at any time shall be the Swap Termination Value.

     

    “Maturity
      Date”
means
      the date that is five years after the Effective Date.

     

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

      
        
          
          

          
          

        

        
          11

          
            

          

        

        
          
          

        

      



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

     

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

     

    “Net
      Cash Proceeds”
means
      in connection with (a) any Asset Sale or any Recovery Event, the proceeds
      thereof in the form of cash and Cash Equivalents (including any such proceeds
      received by way of deferred payment of principal pursuant to a note or
      installment receivable or purchase price adjustment receivable or otherwise,
      but
      only as and when received), net of attorneys’ fees, accountants’ fees,
      investment banking fees, amounts required to be applied to the repayment of
      Debt
      secured by a Lien expressly permitted hereunder on any asset that is the subject
      of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security
      Instrument) and other customary fees and expenses actually incurred in
      connection therewith and net of taxes paid or reasonably estimated to be payable
      as a result thereof (after taking into account any available tax credits or
      deductions and any tax sharing arrangements) and (b) any incurrence of Debt,
      the
      cash proceeds received from such incurrence, net of attorneys’ fees, investment
      banking fees, accountants’ fees, underwriting discounts and commissions and
      other customary fees and expenses actually incurred in connection
      therewith.

     

    “Net
      Equity Proceeds”
means
      the aggregate cash proceeds received by the Borrower, any of its Subsidiaries
      or
      any other Credit Party in respect of any Equity Issuance, net of (without
      duplication) the direct costs relating to such Equity Issuance (including
      without limitation, legal, accounting and investment banking fees and
      underwriting discounts and commissions).

     

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

     

    “Oil
      and Gas Properties”
means
      (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or
      unitized with Hydrocarbon Interests; (c) all presently existing or future
      unitization, pooling agreements and declarations of pooled units and the units
      created thereby (including without limitation all units created under orders,
      regulations and rules of any Governmental Authority) which may affect all or
      any
      portion of the Hydrocarbon Interests; (d) all operating agreements,
      contracts and other agreements, including production sharing contracts and
      agreements, which relate to any of the Hydrocarbon Interests or the production,
      sale, purchase, exchange or processing of Hydrocarbons from or attributable
      to
      such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may
      be
      produced and saved or attributable to the Hydrocarbon Interests, including
      all
      oil in tanks, and all rents, issues, profits, proceeds, products, revenues
      and
      other incomes from or attributable to the Hydrocarbon Interests; (f) all
      tenements, hereditaments, appurtenances and Properties in any manner
      appertaining, belonging, affixed or incidental to the Hydrocarbon Interests
      and
      (g) all Properties, rights, titles, interests and estates described or referred
      to above, including any and all Property, real or personal, now owned or
      hereinafter acquired and situated upon, used, held for use or useful in
      connection with the operating, working or development of any of such Hydrocarbon
      Interests or Property (excluding drilling rigs, automotive equipment, rental
      equipment or other personal Property which may be on such premises for the
      purpose of drilling a well or for other 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    similar
      temporary uses) and including any and all oil wells, gas wells, injection wells
      or other wells, buildings, structures, fuel separators, liquid extraction
      plants, plant compressors, pumps, pumping units, field gathering systems, tanks
      and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
      boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
      wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
      and servitudes together with all additions, substitutions, replacements,
      accessions and attachments to any and all of the foregoing.

     

    “Organizational
      Documents”
means
      (a) with respect to any corporation, its certificate or articles of
      incorporation or organization, as amended, and its by-laws, as amended, (b)
      with
      respect to any limited partnership, its certificate of limited partnership,
      as
      amended, and its partnership agreement, as amended, (c) with respect to any
      general partnership, its partnership agreement, as amended, and (d) with respect
      to any limited liability company, its certificate of formation or articles
      of
      organization, as amended, and its limited liability company agreement or
      operating agreement, as amended.

     

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

     

    “Parent”
means
      McMoRan Exploration Co., a Delaware corporation.

     

    “Parent
      Loan”
means
      the intercompany loan agreement by and between the Borrower and the Parent
      dated
      as of April 17, 2006.

     

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

     

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

     

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

     

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

     

    “Pricing
      Schedule”
means
      the pricing schedule set forth in Schedule 2.

     

    “Prime
      Rate”
means
      the rate of interest per annum publicly announced from time to time by
JPMorgan as
      its
      prime rate in effect at its principal office in New York City; each change
      in
      the Prime Rate shall be effective from and including the date such change is
      publicly announced as being effective. Such rate is set by the Administrative
      Agent as a general reference rate of interest, taking into account such factors
      as the Administrative Agent may deem appropriate; it being understood that
      many
      of the Administrative Agent’s commercial or other loans are priced in relation
      to such rate, that it is not necessarily the lowest or best rate actually
      charged to any 

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    customer
      and that the Administrative Agent may make various commercial or other loans
      at
      rates of interest having no relationship to such rate.

     

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

     

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

     

    “Proved
      Reserves”
means
      “Proved Reserves” determined in accordance with SEC requirements (with the
      exception that such reserves shall be calculated using the Agreed Pricing)
      in
      effect at
      the
      time in question
      which
      are categorized as “Proved Developed Reserves” and “Proved Undeveloped
      Reserves”. Proved Developed Reserves are further subcategorized as “Proved
      Developed Producing Reserves” and “Proved Developed Nonproducing Reserves” in
      the Definitions
      for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers
      (or
      any generally recognized successor) as in effect at the time in
      question.

     

    “PV”
means
      the net present value, discounted at 10% per annum, of the future net revenues
      expected to accrue to the Borrower’s and its Subsidiaries’ collective interests
      in Proved Reserves and Probable Reserves (calculated separately) expected to
      be
      produced from Oil and Gas Properties during the remaining expected economic
      lives of such reserves. Each calculation of Total Proved Reserve Value shall
      be
      made in accordance with SEC requirements in effect at
      the
      time in question and each calculation of Total Probable
      Reserve Value shall be made in accordance with
      the then
      existing standards of the Society of Petroleum Engineers,
      provided that in any event (a) appropriate deductions shall be made for
      severance and ad valorem taxes, and for operating, gathering, transportation
      and
      marketing costs required for the production and sale of such reserves and (b)
      such calculations shall be made using the Agreed Pricing.

     

    “Recovery
      Event”
means
      any settlement of or payment in respect of any property or casualty insurance
      claim or any condemnation proceeding relating to any asset of any Credit Party
      other than any asset of the Parent other than Equity Interests in the
      Borrower.

     

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

     

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

     

    “Regulation
      D”
means
      Regulation D of the Board, as the same may be amended, supplemented or replaced
      from time to time.

     

    “Reinvestment
      Deferred Amount”
means
      with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received
      by any Credit Party in connection therewith that are not applied to prepay
      the
      Loans or reduce the commitments pursuant to the Revolving Credit Agreement
      pursuant to Section 3.04(c)(iii) as a result of the delivery of a Reinvestment
      Notice.

      
        
          
          

          
          

        

        
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    “Reinvestment
      Event”
means
      any Asset Sale or Recovery Event in respect of which the Borrower has delivered
      a Reinvestment Notice.

     

    “Reinvestment
      Notice”
means
      a
      written notice executed by a Responsible Officer stating that no Event of
      Default has occurred and is continuing and that the Borrower (directly or
      indirectly through a Subsidiary) intends and expects to use all or a specified
      portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire,
      maintain, explore for, develop, construct, improve, upgrade or repair assets
      useful in its business.

     

    “Reinvestment
      Prepayment Amount”
means
      with respect to any Reinvestment Event, the Reinvestment Deferred Amount
      relating thereto less any amount expended prior to the relevant Reinvestment
      Prepayment Date to acquire or repair assets useful in the Borrower’s
      business.

     

    “Reinvestment
      Prepayment Date”
means
      with respect to any Reinvestment Event, the earlier of (a) the date occurring
      twelve months after such Reinvestment Event and (b) the date on which the
      Borrower shall have determined not to, or shall have otherwise ceased to,
      acquire or repair assets useful in the Borrower’s business with all or any
      portion of the relevant Reinvestment Deferred Amount.

     

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

     

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

     

    “Reserve
      Report”
means
      the Initial Reserve Report and each other report setting forth, as of each
      January 1st
      or July
      1st
      (or any
      date of redetermination of Total Proved Reserve Value or Total Probable Reserve
      Value pursuant to Section 8.12(e), if applicable), the oil and gas reserves
      attributable to the Oil and Gas Properties of the Borrower and the Subsidiaries,
      together with a projection of the rate of production and future net income,
      taxes, operating expenses and capital expenditures with respect thereto as
      of
      such date, reflecting (and conforming to the definition of) PV, provided that
      each such report hereafter delivered must (a) separately report on Proved
      Developed Producing Reserves, Proved Developed Nonproducing Reserves, Proved
      Undeveloped Reserves and Probable Reserves and separately calculate the PV
      of
      each such category for the Borrower’s and the Subsidiaries’ interests, (b) take
      into account the Borrower’s actual experiences with leasehold operating expenses
      and other costs in determining projected leasehold operating expenses and other
      costs, (c) identify and take into account any “over-produced” or
“under-produced” status under gas balancing arrangements, and (d) contain
      information and analysis comparable in scope to that contained in the Initial
      Reserve Report.

     

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

     

    “Restricted
      Payment”
means
      any dividend or other distribution (whether in cash, securities or other
      Property) with respect to any Equity Interests in the Borrower or any of its
      Subsidiaries, or any payment (whether in cash, securities or other Property),
      including any 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    sinking
      fund or similar deposit, on account of the purchase, redemption, retirement,
      acquisition, cancellation or termination of any such Equity Interests in the
      Borrower or any of its Subsidiaries or any option, warrant or other right to
      acquire any such Equity Interests in the Borrower or any of its
      Subsidiaries.

     

    “Revolving
      Agent”
means
      JPMorgan Chase Bank, N.A. in its capacity as contractual representative of
      the
      financial institutions and other Persons from time to time a party to the
      Revolving Facility and any successor agent appointed pursuant to the terms
      of
      the Revolving Facility Documents.

     

    “Revolving
      Credit Agreement”
means
      that certain Credit Agreement dated April 19, 2006, by and among the Borrower,
      each of the lenders from time to time party thereto, JPMorgan Chase Bank, N.A.,
      as administrative agent, and Toronto Dominion (Texas) LLC, as Syndication Agent,
      and any renewal, extension, refinancing or replacement thereof otherwise
      complying with the provisions hereof.

     

    “Revolving
      Facility”
means
      the revolving loan facility evidenced by the Revolving Facility
      Documents.

     

    “Revolving
      Facility Documents”
means
      the Revolving Credit Agreement and any promissory notes executed in connection
      therewith, security instruments and any other agreements executed in connection
      with the Revolving Credit Agreement.

     

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

     

    “Security
      Instruments”
means
      the Guaranty Agreement, mortgages, deeds of trust and other agreements,
      instruments or certificates described or referred to in Exhibit F-1, and any
      and
      all other agreements, instruments, consents or certificates now or hereafter
      executed and delivered by the Borrower or any other Person (other than
      participation or similar agreements between any Lender and any other lender
      or
      creditor with respect to any Indebtedness pursuant to this Agreement) as
      security for the payment or performance of the Indebtedness, the Notes or this
      Agreement.

     

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

     

    “Statutory
      Reserve Rate”
means
      a
      fraction (expressed as a decimal), the numerator of which is the number one
      and
      the denominator of which is the number one minus the aggregate of the maximum
      reserve percentages (including any marginal, special, emergency or supplemental
      reserves) expressed as a decimal established by the Board to which the
      Administrative Agent is subject, with respect to the Adjusted LIBO Rate, for
      eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
      Regulation D of the Board). Such reserve percentages shall include those imposed
      pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
      eurocurrency funding and to be subject to such reserve requirements without
      benefit of or credit for proration, exemptions or offsets that may be available
      from time to time to any Lender under such Regulation D or any comparable
      regulation. The Statutory Reserve Rate shall 

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    be
      adjusted automatically on and as of the effective date of any change in any
      reserve percentage.

     

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

     

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

     

    “Swap
      Termination Value”
means,
      in respect of any one or more Swap Agreements, after taking into account the
      effect of any legally enforceable netting agreement relating to such Swap
      Agreements, (a) for any date on or after the date such Swap Agreements have
      been
      closed out and termination value(s) determined in accordance therewith, such
      termination value(s) and (b) for any date prior to the date referenced in clause
      (a), the amount(s) determined as the mark-to-market value(s) for such Swap
      Agreements, as determined by the counterparties to such Swap
      Agreements.

     

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

     

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

     

    “Total
      Debt”
means,
      at any date, all Debt of the Borrower and the Consolidated Subsidiaries on
      a
      consolidated basis, excluding (i) non-cash obligations under FAS 133 and (ii)
      accounts payable and other accrued liabilities (for the deferred purchase price
      of Property or services) from time to time incurred in the ordinary course
      of
      business which are not greater than ninety (90) days past the date of invoice
      or
      which are being contested in good faith by 

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    appropriate
      action and for which adequate reserves have been maintained in accordance with
      GAAP.

     

    “Total
      Probable Reserve Value”
means
      at any time the PV attributable to Probable Reserves as most recently determined
      and certified to the Lenders in accordance with Section 8.12, as the same may
      be
      adjusted from time to time pursuant to Section 8.13(c) or Section
      9.12.

     

    “Total
      Proved Reserve Value”
means
      at any time the PV attributable to Proved Reserves as most recently determined
      and certified to the Lenders in accordance with Section 8.12, as the same may
      be
      adjusted from time to time pursuant to Section 8.13(c) or Section 9.12.


     

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

     

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

     

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

     

    Section
      1.03    Types
      of Loans and Borrowings

     

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

     

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

    
      
        
        

      

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

     

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

     

    Section
      1.06    Priority
      of Creditors.

     

    The
      Administrative Agent and the Lenders are hereby designated “Second Priority
      Creditors” for all purposes under and as defined in the Intercreditor Agreement
      and the Security Instruments are hereby designated “Second Priority Security
      Instruments” for all purposes under and as defined in the Intercreditor
      Agreement.

     

    ARTICLE
      II  

    The
      Credits

     

    Section
      2.01    Commitments.
      Subject
      to the terms and conditions set forth herein, each Lender severally agrees
      to
      make a term loan (a “Loan”)
      to the
      Borrower on the Effective Date in an amount not to exceed the amount of the
      Commitment of such Lender. 

     

    Section
      2.02    Loans
      and Borrowings.

     

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

     

    (b)  Types
      of Loans.
      Subject
      to Section
      3.03  the
      Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
      Borrower may request in accordance herewith. Each Lender at its option may
      make
      any Eurodollar Loan by causing any domestic or foreign branch or Affiliate
      of
      such Lender to make such Loan; provided that any 

    
      
        
        

      

      
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    exercise
      of such option shall not affect the obligation of the Borrower to repay such
      Loan in accordance with the terms of this Agreement.

     

    (c)  Notes.
      Any
      Lender may request that its Loans be evidenced by a Note. Only upon such request
      shall the Borrower be required to execute and deliver to such Lender a Note
      for
      such Loans payable to the order of such Lender in the form attached hereto
      as
      Exhibit A. Thereafter, the Loans evidenced by such Note and interest thereon
      shall at all times (including after any assignment pursuant to Section 12.04)
      be
      represented by one or more Notes payable to the order of the payee named therein
      or any assignee pursuant to Section 12.04.

     

    Section
      2.03    Requests
      for Borrowings

     

    To
      request that the Lenders make Loans on the Effective Date, the Borrower shall
      notify the Administrative Agent of such request by telephone (a) in the case
      of
      a Eurodollar Borrowing, not later than noon, New York City time, three Business
      Days before the date of the proposed Eurodollar Borrowing or (b) in the case
      of
      an ABR Borrowing, not later than noon, New York City time, one Business Day
      before the proposed Effective Date. Such telephonic Borrowing Request shall
      be
      irrevocable and shall be confirmed promptly by hand delivery or telecopy to
      the
      Administrative Agent of a written Borrowing Request in substantially the form
      of
      Exhibit B and signed by the Borrower. Such telephonic and written Borrowing
      Request shall specify the following information:

     

    (i)  the
      aggregate amount of the requested Borrowing;

     

    (ii)  the
      date
      of the proposed Effective Date, which shall be a Business Day; 

     

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

     

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

     

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

     

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

     

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

     

    Section
      2.04    Interest
      Elections.

     

    (a)  Conversion
      and Continuance.
      The
      Loans made on the Effective Date shall be either ABR Borrowings or Eurodollar
      Borrowings. Thereafter, the Borrower may elect to 

    
      
        
        

      

      
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    convert
      such Loans to a different Type or to continue such Loans and, in the case of
      Eurodollar Loans, may elect Interest Periods therefor, all as provided in this
      Section. The Borrower may elect different options with respect to different
      portions of the Loans, in which case each such portion shall be allocated
      ratably among the Lenders holding the Loans.

     

    (b)  Interest
      Election Requests.
      To make
      an election pursuant to this Section, the Borrower shall notify the
      Administrative Agent of such election by telephone (a) in the case of a
      conversion into or a continuation as a Eurodollar Loan, not later than noon,
      New
      York City time, three Business Days before the date of the proposed election
      or
      (b) in the case of a conversion into or a continuation as an ABR Loan, not
      later
      than noon, New York City time, one Business Day before the date of the proposed
      election. Each such telephonic Interest Election Request shall be irrevocable
      and shall be confirmed promptly by hand delivery or telecopy to the
      Administrative Agent of a written Interest Election Request in substantially
      the
      form of Exhibit C signed by the Borrower.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (e)  Effect
      of Failure to Deliver Timely Interest Election Request and Events of Default
      on
      Interest Election.
      If the
      Borrower fails to deliver a timely Interest Election Request with respect to
      a
      Eurodollar Borrowing prior to the end of the Interest Period applicable thereto,
      then, unless such Borrowing is repaid as provided herein, at the end of such
      Interest Period such Borrowing shall be converted to an ABR Borrowing.
      Notwithstanding any contrary provision hereof, if an Event of Default has
      occurred and is continuing: (i) no outstanding Borrowing may 

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    be
      converted to or continued as a Eurodollar Borrowing (and any Interest Election
      Request that requests the conversion of any Borrowing to, or continuation of
      any
      Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless
      repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at
      the
      end of the Interest Period applicable thereto. 

     

    (f)  All
      conversions and continuations of Eurodollar Loans shall be in an aggregate
      amount that is an integral multiple of $1,000,000 and not less than $1,000,000.
      All conversions and continuations of ABR Loans shall be in an aggregate amount
      that is an integral multiple of $100,000 and not less than $100,000. Loans
      of
      more than one Type may be outstanding at the same time; provided
      that
      there shall not at any time be more than a total of four (4) Eurodollar
      Borrowings outstanding.

     

    Section
      2.05    Funding
      of Borrowings.

     

    (a)  Funding
      by Lenders.
      Each
      Lender shall make each Loan to be made by it hereunder on the proposed Effective
      Date, by wire transfer of immediately available funds (less original issue
      discount of 0.50%) by 2:00 p.m., New York City time, to the account of the
      Administrative Agent most recently designated by it for such purpose by notice
      to the Lenders. The Administrative Agent will make such Loans available to
      the
      Borrower by promptly crediting the amounts so received, in like funds, to an
      account of the Borrower maintained with the Administrative Agent in Houston,
      Texas and designated by the Borrower in the applicable Borrowing
      Request.
      Nothing
      herein shall be deemed to obligate any Lender to obtain the funds for its Loan
      in any particular place or manner or to constitute a representation by any
      Lender that it has obtained or will obtain the funds for its Loan in any
      particular place or manner.

     

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

     

    ARTICLE
      III  

    Payments
      of Principal and Interest; Prepayments; Fees

     

    Section
      3.01    Repayment
      of Loans.
      The
      Borrower hereby unconditionally promises to repay the Loans in annual
      installments equal to ten percent (10%) of the original principal amount of
      the
      Loans on the 31st day of each December, commencing December 31, 2008


    
      
        
        

      

      
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    (provided
      that any Lender may decline to accept any installment by notifying the
      Administrative Agent in writing at least two (2) Business Days prior to the
      payment date therefor that it elects to refuse to accept such installment and
      the portion of such installment that would have been allocated to the repayment
      of such Lender’s Loans shall instead be repayable on the Maturity Date); and on
      the Maturity Date the Borrower shall pay the outstanding balance of the Loans
      in
      full.

     

    Section
      3.02    Interest.

     

    (a)  ABR
      Loans.
      The
      Loans comprising each ABR Borrowing shall bear interest at the Alternate Base
      Rate plus the Applicable Margin.

     

    (b)  Eurodollar
      Loans.
      The
      Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted
      LIBO Rate for the Interest Period in effect for such Loans plus the Applicable
      Margin.

     

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

     

    (d)  Interest
      Payment Dates.
      Accrued
      interest on each Loan shall be payable in arrears on each Interest Payment
      Date
      for such Loan, and on the Maturity Date; provided that (i) interest accrued
      pursuant to Section
      3.02  (c)
      shall be
      payable on demand, (ii) in the event of any repayment or prepayment of any
      Loan,
      accrued interest on the principal amount repaid or prepaid shall be payable
      on
      the date of such repayment or prepayment, and (iii) in the event of any
      conversion of any Eurodollar Loan prior to the end of the current Interest
      Period therefor, accrued interest on such Loan shall be payable on the effective
      date of such conversion.

     

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

     

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

     

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

      
        
          
          

          
          

        

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

     

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

     

    Section
      3.04    Prepayments.

     

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

     

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

     

    (c)  Mandatory
      Prepayments.

     

    (i)  An
      amount
      equal to 50% of the Net Equity Proceeds of any Equity Issuance shall be applied
      on the date thereof toward the prepayment of the Loans as set forth in Section
      3.04(c)(iv). 

     

    (ii)  An
      amount
      equal to 100% of the Net Cash Proceeds of the incurrence of Debt after the
      Effective Date by the Borrower or any of its Subsidiaries (excluding Debt
      permitted pursuant to Section
      9.02  )
      or any
      other Credit Party (with the exception of the Parent) shall be applied on the
      date of such incurrence toward the prepayment of the Loans as set forth in
      Section 3.04(c)(iv). 

     

    (iii)  If
      on any
      date any Credit Party shall receive Net Cash Proceeds from any Asset Sale or
      Recovery Event then, unless a Reinvestment Notice shall be delivered in respect
      thereof or such Net Cash Proceeds are required to be applied to repay the
      Revolving Facility, such Net Cash Proceeds shall be applied on such date toward
      the prepayment of the Loans as set forth in Section 3.04(c)(iv); provided,
      that,


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    notwithstanding
      the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales and Recovery
      Events that may be excluded from the foregoing requirement pursuant to a
      Reinvestment Notice shall not exceed $25,000,000 in any fiscal year of the
      Borrower and (ii) on each Reinvestment Prepayment Date, an amount equal to
      the
      Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event
      shall be applied toward the prepayment of the Loans as set forth in Section
      3.04(c)(iv). 

     

    (iv)  Amounts
      to be applied in connection with prepayments made pursuant to Section
      3.04  (c)
      shall be
      applied to the prepayment of the Loans in accordance with Section 4.01(b).
      Each
      prepayment of Borrowings pursuant to this Section
      3.04  (c)
      shall be
      applied, first, ratably to ABR Loans then outstanding, and, second, to any
      Eurodollar Loans then outstanding, and if more than one Eurodollar Borrowing
      is
      then outstanding, to each such Eurodollar Borrowing beginning with the
      Eurodollar Borrowing with the least number of days remaining in the Interest
      Period applicable thereto and ending with the Eurodollar Borrowing with the
      most
      number of days remaining in the Interest Period applicable thereto.


     

    (v)  Prepayments
      pursuant to this Section
      3.04  (c)
      shall be
      accompanied by accrued interest to the extent required by Section
      3.02  .

     

    (d)  Notwithstanding
      the foregoing, each Lender shall have the right to reject all or any portion
      of
      the prepayments made pursuant to Section 3.04(c), allocable to it, in which
      case
      the amounts so rejected shall be offered ratably to each non-rejecting Lender
      (and each such Lender shall have the right to reject such offer in the time
      and
      in the manner determined by the Agents). Any amounts remaining after making
      the
      above described offers may be used by the Borrower for general corporate
      purposes.

     

    (e)  Prepayment
      Premium.
      Prepayments permitted or required under this Section
      3.04  
      shall be
      without premium or penalty, except as required under Section
      5.02  ,
      and
      except that optional prepayments or prepayments from the proceeds of a
      refinancing of Loans shall be at par plus a premium. The premium shall be (i)
      during the period from the Effective Date to and including the first anniversary
      thereof, 3% of the aggregate principal amount prepaid, (ii) during the period
      commencing after the first anniversary of the Effective Date to and including
      the second anniversary of the Effective Date, 2% of the aggregate principal
      amount prepaid, (iii) during the period commencing after the second anniversary
      of the Effective Date to and including the third anniversary of the Effective
      Date, 1% of the aggregate principal amount prepaid and (iv) after the third
      anniversary of the Effective Date, 0%.

     

    Section
      3.05    Fees.

     

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

     

    (b)  Payment;
      Fees Nonrefundable.
      All
      fees payable hereunder shall be paid on the dates due, in immediately available
      funds, to the Administrative Agent. Fees paid shall not be refundable under
      any
      circumstances.

      
        
          
          

          
          

        

        
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    ARTICLE
      IV  

    Payments;
      Pro Rata Treatment; Sharing of Set-offs

     

    Section
      4.01    Payments
      Generally; Pro Rata Treatment; Sharing of Payments.
      

     

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

     

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

     

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


    
      
        
        

      

      
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    it
      may
      effectively do so under applicable law, that any Lender acquiring a
      participation pursuant to the foregoing arrangements may exercise against the
      Borrower rights of set-off and counterclaim with respect to such participation
      as fully as if such Lender were a direct creditor of the Borrower in the amount
      of such participation.

     

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

     

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

     

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

     

    ARTICLE
      V  

    Increased
      Costs; Break Funding Payments; Taxes;
      Illegality

     

    Section
      5.01    Increased
      Costs.

     

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

      
        
          
          

          
          

        

        
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    (i)  impose,
      modify or deem applicable any reserve, special deposit or similar requirement
      against assets of, deposits with or for the account of, or credit extended
      by,
      any Lender (except any such reserve requirement reflected in the Adjusted LIBO
      Rate); or

     

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

     

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

     

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

     

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

     

    (d)  Effect
      of Failure or Delay in Requesting Compensation.
      Failure
      or delay on the part of any Lender to demand compensation pursuant to this
      Section
      5.01  
      shall
      not constitute a waiver of such Lender’s right to demand such compensation;
      provided that the Borrower shall not be required to compensate a Lender pursuant
      to this Section
      5.01  
      for any
      increased costs or reductions incurred more than 365 days prior to the date
      that
      such Lender, notifies the Borrower of the Change in Law giving rise to such
      increased costs or reductions and of such Lender’s intention to claim
      compensation therefor; provided further that, if the Change in Law giving rise
      to such increased costs or reductions is retroactive, then the 365-day period
      referred to above shall be extended to include the period of retroactive effect
      thereof.

     

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

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    loss,
      cost or expense to any Lender shall be deemed to include an amount determined
      by
      such Lender to be the excess, if any, of (i) the amount of interest which would
      have accrued on the principal amount of such Loan had such event not occurred,
      at the Adjusted LIBO Rate that would have been applicable to such Loan, for
      the
      period from the date of such event to the last day of the then current Interest
      Period therefor (or, in the case of a failure to borrow, convert or continue,
      for the period that would have been the Interest Period for such Loan), over
      (ii) the amount of interest which would accrue on such principal amount for
      such
      period at the interest rate which such Lender would bid were it to bid, at
      the
      commencement of such period, for dollar deposits of a comparable amount and
      period from other banks in the eurodollar market. 

     

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

     

    Section
      5.03    Taxes.

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    ARTICLE
      VI  

    Conditions
      Precedent

     

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

      
        
          
          

          
          

        

        
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    (a)  The
      Administrative Agent shall have received counterparts of this Agreement and
      all
      other Loan Documents required to be executed and delivered by the parties
      thereto in such number as may be requested by the Administrative
      Agent.

     

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

     

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

     

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

     

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

     

    (f)  (i)The
      Administrative Agent shall have received from each party thereto duly executed
      counterparts (in such number as may be requested by the Administrative Agent)
      of
      the Security Instruments, including the Guaranty Agreement and the other
      Security Instruments described on Exhibit F-1. In connection with the execution
      and delivery of the Security Instruments, the Administrative Agent shall be
      reasonably satisfied that the Security Instruments create first priority,
      perfected Liens (subject only to Liens created pursuant to the Revolving
      Facility Documents and Excepted Liens identified in clauses (a) to (d) and
      (f)
      of the definition thereof, but subject to the provisos at the end of such
      definition) on at least 90% of the total value of the Proved Reserves evaluated
      in the Initial Reserve Report; and 

     

    (ii) the
      Revolving Agent shall hold in pledge as bailee for the benefit of the Lenders
      (subject to the Intercreditor Agreement), certificates,
      together with undated, blank stock powers for each such certificate,
      representing all of the issued and outstanding Equity Interests of the Borrower,
      each of the Guarantors and not less than 65% of all of the issued and
      outstanding capital stock of 

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    each
      Foreign Subsidiary that is not a Guarantor, which is directly owned by either
      the Borrower or a Domestic Subsidiary.

     

    (g)  The
      Administrative Agent shall have received an opinion of Jones Walker, special
      counsel to the Borrower, substantially in a form and of substance reasonably
      acceptable to the Administrative Agent.

     

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

     

    (i)  The
      Administrative Agent shall have received title information as the Administrative
      Agent may reasonably require satisfactory to the Administrative Agent setting
      forth the status of title to at least 90% of the total value of the Proved
      Reserves evaluated in the Initial Reserve Report. 

     

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

     

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

     

    (l)  The
      Administrative Agent shall have received the financial statements referred
      to in
Section
      7.04  (a)
      and the
      Initial Reserve Report accompanied by a certificate covering the matters
      described in Section
      8.12  (b)
      and the
      Lenders shall have received satisfactory projections through December 31,
      2011.

     

    (m)  The
      Administrative Agent shall have received appropriate UCC search certificates
      reflecting no prior Liens encumbering the Properties of the Borrower and the
      Subsidiaries for each of the following jurisdictions: Delaware,
      Louisiana, Texas, Mississippi and
      any
      other jurisdiction requested by the Administrative Agent;
      other
      than Liens created pursuant to the Revolving Facility Documents and those being
      assigned or released on or prior to the Effective Date or Liens permitted by
      Section
      9.03  

     

    (n)  The
      Administrative Agent shall have received from the Borrower any and all
      documentation relating to the Parent Loan with an accompanying certificate
      of a
      Responsible Officer certifying (i) any amounts currently outstanding under
      the
      Parent Loan and (ii) that all documentation delivered is true and
      complete.

     

    (o)  The
      Administrative Agent shall have received a solvency certificate from the chief
      financial officer of the Borrower. 

     

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

     

    (q)  At
      the
      time of and immediately after giving effect to such Borrowing no Default shall
      have occurred and be continuing.

      
        
          
          

          
          

        

        
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    (r)  At
      the
      time of and immediately after giving effect to such Borrowing no event,
      development or circumstance has occurred or shall then exist that has resulted
      in, or could reasonably be expected to have, a Material Adverse
      Effect.

     

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

     

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

     

    (u)  The
      Administrative Agent shall have received a Borrowing Request in accordance
      with
Section
      2.03  

     

    The
      request for a Borrowing shall be deemed to constitute a representation and
      warranty by the Borrower on the date thereof as to the matters specified in
      Section
      6.01  (p)
      through
(u).

     

    ARTICLE
      VII  

    Representations
      and Warranties

     

    The
      Borrower represents and warrants to the Lenders that:

     

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

     

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

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    generally
      and subject to general principles of equity, regardless of whether considered
      in
      a proceeding in equity or at law.

     

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

     

    Section
      7.04    Financial
      Condition; No Material Adverse Change.

     

    (a)  The
      Borrower has heretofore furnished to the Administrative Agent its (i)
      consolidated balance sheet and statement of operations, member’s equity and cash
      flows as of and for the fiscal year ended December 31, 2005 reported on by
      Ernst
& Young LLP, independent public accountants, (ii) unaudited consolidated
      financial statements for the nine month period ending September 30, 2006 and
      (iii) the Initial Reserve Report. Such financial statements present fairly,
      in
      all material respects, the financial position and results of operations and
      cash
      flows of the Borrower and its Consolidated Subsidiaries as of such dates and
      for
      such periods in accordance with GAAP, subject to year-end audit adjustments
      and
      the absence of footnotes in the case of the unaudited quarterly financial
      statements.

     

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

     

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

     

    Section
      7.05    Litigation.
      

     

    (a)  Except
      as
      set forth on Schedule 7.05, there are no actions, suits, investigations or
      proceedings by or before any arbitrator or Governmental Authority pending
      against or, to the knowledge of the Borrower, threatened against or affecting
      the Borrower or any 

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    Subsidiary
      (i)
      not
      fully covered by insurance (except for normal deductibles) as to which there
      is
      a reasonable possibility of an adverse determination that, if adversely
      determined, could reasonably be expected, individually or in the aggregate,
      to
      result in a Material Adverse Effect or (ii)
      that
      involve any Loan Document or the Transactions.

     

    (b)  Since
      the
      date of this Agreement, there has been no change in the status of the matters
      disclosed in Schedule 7.05 that, individually or in the aggregate, has
      resulted in, or materially increased the likelihood of, a Material Adverse
      Effect.

     

    Section
      7.06    Environmental
      Matters

     

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

     

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

     

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

     

    (c)  all
      notices, permits, licenses, exemptions, approvals or similar authorizations,
      if
      any, required to be obtained or filed in connection with the operation or use
      of
      any and all Property of the Borrower and each Subsidiary, including, without
      limitation, past or present treatment, storage, disposal or release of a
      hazardous substance, oil and gas waste or solid waste into the environment,
      have
      been duly obtained or filed, and the Borrower and each Subsidiary are in
      compliance with the terms and conditions of all such notices, permits, licenses
      and similar authorizations.

     

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

     

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

      
        
          
          

          
          

        

        
          35

          
            

          

        

        
          
          

        

      



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

     

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

     

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

     

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

     

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

     

    (c)  No
      Default has occurred and is continuing.

     

    Section
      7.08    Investment
      Company Act

     

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

     

    Section
      7.09    Taxes

     

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

     

    Section
      7.10    ERISA.
      

     

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

      
        
          
          

          
          

        

        
          36

          
            

          

        

        
          
          

        

      



    (b)  Each
      Plan
      is, and has been, maintained in substan-tial compliance with ERISA and, where
      applicable, the Code.

     

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

     

    (d)  Except
      as
      provided in Schedule 7.10(d), no Plan (other than a defined contribu-tion plan)
      or any trust created under any such Plan has been terminated since
      September 2, 1974. No liability to the PBGC (other than for the payment of
      current premiums which are not past due) by the Borrower, any Subsidiary or
      any
      ERISA Affiliate has been or is expected by the Borrower, any Subsidiary or
      any
      ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with
      respect to any Plan has occurred.

     

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

     

    (f)  Except
      as
      provided in Schedule 7.10(f), the actuarial present value of the benefit
      liabili-ties under each Plan which is subject to Title IV of ERISA does
      not, as of the end of the Borrower’s most recently ended fiscal year, exceed the
      current value of the assets (computed on a plan termination basis in accordance
      with Title IV of ERISA) of such Plan allocable to such benefit liabilities
      by an amount in excess of $500,000. The term “actuarial present value of the
      benefit liabilities” shall have the meaning specified in section 4041 of
      ERISA.

     

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

     

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

     

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

     

    Section
      7.11    Disclosure;
      No Material Misstatements.
      The
      Borrower has disclosed to the Administrative Agent and the Lenders all material
      agreements, instruments and corporate or other restrictions to which it or
      any
      of its Subsidiaries is subject, and all other matters known to it, that,
      individually or in the aggregate, could reasonably be expected to result in
      a
      Material 

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    Section
      7.15    Location
      of Business and Offices.
      The
      Borrower’s jurisdiction of organization is Delaware;
      the
      name of the Borrower as listed in the public records of its jurisdiction of
      organization is McMoRan
      Oil & Gas LLC;
      and the
      organizational identification number of the Borrower in its jurisdiction of
      organization is 2927213
      (or, in
      each case, as set forth in a notice delivered to the Administrative Agent
      pursuant to Section
      8.01  (m)
      in
      accordance with Section
      12.01).
      

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    The
      Borrower’s principal place of business and chief executive offices are located
      at the address specified in Section
      12.01  
      (or as
      set forth in a notice delivered pursuant to Section
      8.01 (m)
      and
Section
      12.01 (c)).
      Each
      Subsidiary’s jurisdiction of organization, name as listed in the public records
      of its jurisdiction of organization, organizational identification number in
      its
      jurisdiction of organization, and the location of its principal place of
      business and chief executive office is stated on Schedule 7.15 (or as set forth
      in a notice delivered pursuant to Section
      8.01  (m)).

     

    Section
      7.16    Properties;
      Titles, Etc.
      

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    production
      of Hydrocarbons, with such exceptions as could not reasonably be expected to
      have a Material Adverse Effect.

     

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

     

    Section
      7.18    Gas
      Imbalances,
      Prepayments.
      Except
      as set forth on Schedule 7.18 or on the most recent certificate delivered
      pursuant to Section
      8.12 (b),
      on a
      net basis there are no gas imbalances, take or pay or other prepayments which
      would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons
      produced from the Oil and Gas Properties at some future time without then or
      thereafter receiving full payment therefor exceeding 500,000 Mcf of gas (on
      an
      Mcf equivalent basis) in the aggregate.

     

    Section
      7.19    Marketing
      of Production.
      Except
      for contracts listed and in effect on the date hereof on Schedule 7.19, and
      thereafter either disclosed in writing to the Administrative Agent or included
      in the most recently delivered Reserve Report (with respect to all of which
      contracts the Borrower represents that it or its Subsidiaries are receiving
      a
      price for all production sold thereunder which is computed substantially in
      accordance with the terms of the relevant contract and are not having deliveries
      curtailed substantially below the subject Property’s delivery capacity), no
      material agreements exist which are not cancelable on 60 days notice or less
      without penalty or detriment for the sale of production from the Borrower’s or
      its Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other
      rights to purchase, production, whether or not the same are currently being
      exercised) that (a)
      pertain
      to the sale of production at a fixed price and (b)
      have a
      maturity or expiry date of longer than six (6) months from the date
      hereof.



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

     

    Section
      7.21    Use
      of
      Loans.
      The
      proceeds of the Loans shall be used to provide working capital for exploration
      and production operations, to provide funding for general corporate purposes
      of
      the Borrower and its Subsidiaries, to provide funds to refinance existing debt
      (including intercompany debt) and to pay the costs and expenses incurred by
      the
      Borrower in connection with the negotiation, documentation and closing of the
      Loans. The Borrower and its Subsidiaries are not engaged principally, or as
      one
      of its or their important activities, in the business of extending credit for
      the purpose, whether immediate, incidental or ultimate, of buying or carrying
      margin stock (within the meaning of Regulation T, U or X of the Board). No
      part
      of the proceeds of any Loan will be used for any purpose which violates the
      provisions of Regulations T, U or X of the Board.

     

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

     

    ARTICLE
      VIII  

    Affirmative
      Covenants

     

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

     

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

     

    (a)  Annual
      Financial Statements.
      As soon
      as available, but in any event in accordance with then applicable law and not
      later than 90 days after the end of each fiscal year of the Parent and the
      Borrower, each of their audited consolidated balance sheets and related
      statements of operations, stockholders’ equity, as applicable, and cash flows as
      of the end of and 

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    for
      such
      year, setting forth in each case in comparative form the figures for the
      previous fiscal year, all reported on by Ernst
      & Young LLP
      or other
      independent public accountants of recognized national standing (without a “going
      concern” or like qualification or exception and without any qualification or
      exception as to the scope of such audit) to the effect that such consolidated
      financial statements present fairly in all material respects the financial
      condition and results of operations of the Parent and the Borrower and their
      consolidated subsidiaries on a consolidated basis in accordance with GAAP
      consistently applied.

     

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

     

    (c)  Certificate
      of Financial Officer -- Compliance.
      Concurrently with any delivery of financial statements under Section
      8.01  (a)
      or
Section
      8.01  (b),
      a
      certificate of a Financial Officer in substantially the form of Exhibit D hereto
      (i)
      certifying as to whether a Default has occurred and, if a Default has occurred,
      specifying the details thereof and any action taken or proposed to be taken
      with
      respect thereto, (ii)
      setting
      forth reasonably detailed calculations demonstrating compliance with
Section
      9.01  
      and
(iii)
      stating
      whether any change in GAAP or in the application thereof has occurred since
      the
      date of the audited financial statements referred to in Section
      7.04  
      and, if
      any such change has occurred, specifying the effect of such change on the
      financial statements accompanying such certificate.

     

    (d)  Certificate
      of Accounting Firm - Defaults.
      Concurrently with any delivery of financial statements under Section 8.01(a),
      a
      certificate of the accounting firm that reported on such financial statements
      stating whether they obtained knowledge during the course of their examination
      of such financial statements of any Default (which certificate may be limited
      to
      the extent required by accounting rules or guidelines).

     

    (e)  Certificate
      of Financial Officer - Swap Agreements.
      Concurrently with any delivery of financial statements under Section
      8.01  (a)
      and
Section
      8.01  (b),
      a
      certificate of a Financial Officer, in form and substance satisfactory to the
      Administrative Agent, setting forth as of the last Business Day of such fiscal
      quarter or fiscal year, a true and complete list of all Swap Agreements of
      the
      Borrower and each Subsidiary, the material terms thereof (including the type,
      term, effective date, termination date and notional amounts or volumes), the
      net
      mark-to-market value therefor, any new credit support agreements relating
      thereto not listed on Schedule 7.20, any margin required or supplied under
      any
      credit support document, and the counterparty to each such agreement.

      
        
          
          

          
          

        

        
          42

          
            

          

        

        
          
          

        

      



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

     

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

     

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

     

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

     

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

     

    (k)  Notice
      of Sales of Oil and Gas Properties.
      In the
      event the Borrower or any Subsidiary intends to sell, transfer, assign or
      otherwise dispose of any Oil or Gas Properties or any Equity Interests in any
      Subsidiary in accordance with Section 9.11, prior written notice of such
      disposition, the price thereof and the anticipated date of closing and any
      other
      details thereof requested by the Administrative Agent or any
      Lender.

     

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

     

    (m)  Information
      Regarding Borrower and Guarantors.
      Prompt
      written notice of (and in any event at least ten (10) Business Days following)
      any change (i) in
      the Borrower or any Guarantor’s corporate name or in any trade name used to
      identify such Person in the conduct of its business or in the ownership of
      its
      Properties, (ii) in
      the location of the Borrower or any Guarantor’s chief executive office or
      principal place of business, (iii) in
      the Borrower or any Guarantor’s identity or corporate structure or in the
      jurisdiction in which such Person is incorporated or formed, (iv)
      in the
      Borrower or any Guarantor’s jurisdiction of organization or such Person’s
      organizational identification number in such jurisdiction of organization,
      and
(v) in
      the Borrower or any Guarantor’s federal taxpayer identification
      number.

      
        
          
          

          
          

        

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

     

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

     

    Section
      8.02    Notices
      of Material Events.
      The
      Borrower will furnish to the Administrative Agent and each Lender prompt written
      notice of the following:

     

    (a)  the
      occurrence of any Default;

     

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

     

    (c)  the
      occurrence of any ERISA Event that, alone or together with any other ERISA
      Events that have occurred, could reasonably be expected to result in liability
      of the Borrower and its Subsidiaries in an aggregate amount exceeding
      $10,000,000; and

     

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

     

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

     

    Section
      8.03    Existence;
      Conduct of Business.
      The
      Borrower will, and will cause each Subsidiary to, do or cause to be done all
      things necessary to preserve, renew and keep in full force and effect its legal
      existence and the rights, licenses, permits, privileges and franchises material
      to the conduct of its business and maintain, if necessary, its qualification
      to
      do business in each other jurisdiction in which its Oil and Gas Properties
      is
      located or the ownership of its Properties requires such qualification, except
      where the failure to so qualify could not reasonably be expected to have a
      Material Adverse Effect; provided that the foregoing shall not prohibit any
      merger, consolidation, liquidation or dissolution permitted under Section
      9.11.

      
        
          
          

          
          

        

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

     

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

     

    Section
      8.06    Operation
      and Maintenance of Properties.
      The
      Borrower, at its own expense, will, and will cause each Subsidiary
      to:

     

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

     

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

     

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

     

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

     

    (e)  operate
      its Oil and Gas Properties and other material Properties or cause or make
      reasonable and customary efforts to cause such Oil and Gas Properties and other
      material 

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    Properties
      to be operated in accordance with the practices of the industry and in material
      compliance with all applicable contracts and agreements and in compliance in
      all
      material respects with all Governmental Requirements. 

     

    (f)  to
      the
      extent the Borrower is not the operator of any Property, the Borrower shall
      use
      commercially reasonable efforts to cause the operator to comply with this
Section
      8.06.

     

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

     

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

     

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

     

    Section
      8.10    Environmental
      Matters.

     

    (a)  The
      Borrower shall
      at
      its sole expense: (i) comply, and shall cause its Properties and operations
      and
      each Subsidiary and each Subsidiary’s Properties and operations to comply, with
      all applicable Environmental Laws, the breach of which could be reasonably
      expected to have a Material Adverse Effect; (ii) not dispose of or otherwise
      release, and shall cause each Subsidiary not to dispose of or otherwise release,
      any oil, oil and gas waste, hazardous substance, or solid waste on, under,
      about
      or from any of the Borrower’s or its Subsidiaries’ Properties or any other
      Property to the extent caused by the Borrower’s or any of its Subsidiaries’
operations except in compliance with applicable Environmental Laws, the disposal
      or release of which could reasonably be expected to have a Material Adverse
      Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely
      obtain or file, all notices, permits, licenses, exemptions, approvals,
      registrations or other authorizations, if any, required under applicable
      Environmental Laws to be obtained or filed in connection with the operation
      or
      use of the Borrower’s or its Subsidiaries’ Properties, which failure to obtain
      or file could 

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

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

     

    (b)  The
      Borrower will promptly, but in no event later than five days of the occurrence
      of a triggering event, notify the Administrative Agent and the Lenders in
      writing of any threatened action, investigation or inquiry by any Governmental
      Authority or any threatened demand or lawsuit by any landowner or other third
      party against the Borrower or its Subsidiaries or their Properties of which
      the
      Borrower has knowledge in connection with any Environmental Laws (excluding
      routine testing and corrective action) if the Borrower reasonably anticipates
      that such action will result in liability (whether individually or in the
      aggregate) in excess of $10,000,000, not fully covered by insurance, subject
      to
      normal deductibles.

     

    Section
      8.11    Further
      Assurances.

     

    (a)  The
      Borrower at its sole expense will, and will cause each Subsidiary to, promptly
      execute and deliver to the Administrative Agent all such other documents,
      agreements and instruments reasonably requested by the Administrative Agent
      to
      comply with, cure any defects or accomplish the conditions precedent, covenants
      and agreements of the Borrower or any Subsidiary, as the case may be, in the
      Loan Documents, including the Notes, or to further evidence and more fully
      describe the collateral intended as security for the Indebtedness, or to correct
      any omissions in this Agreement or the Security Instruments, or to state more
      fully the obligations secured therein, or to perfect, protect or preserve any
      Liens created pursuant to this Agreement or any of the Security Instruments
      or
      the priority thereof, or to make any recordings, file any notices or obtain
      any
      consents, all as may be reasonably necessary or appropriate, in the sole
      discretion of the Administrative Agent, in connection therewith.

     

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

      
        
          
          

          
          

        

        
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    Section
      8.12    Reserve
      Reports;
      Calculation of Total Reserve Values.

     

    (a)  On
      or
      before March 1st and September 1st of each year, commencing
      March 1,
      2007,
      the
      Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
      Report evaluating the Oil and Gas Properties of the Borrower and its
      Subsidiaries as of the immediately preceding January 1 and July 1. The Reserve
      Report as of December 31 of each year shall be prepared by one or more Approved
      Petroleum Engineers, and the June 30 Reserve Report of each year shall be
      prepared by or under the supervision of the chief engineer of the Borrower
      who
      shall certify such Reserve Report to be true and accurate and to have been
      prepared in accordance with the procedures used in the immediately preceding
      January 1 Reserve Report.

     

    (b)  With
      the
      delivery of each Reserve Report, the Borrower shall provide to the
      Administrative Agent and the Lenders a certificate from a Responsible Officer
      certifying that in all material respects: (i)
      the
      information contained in the Reserve Report and any other information delivered
      in connection therewith is true and correct, (ii)
      the
      Borrower or its Subsidiaries owns good and defensible title to the Oil and
      Gas
      Properties evaluated in such Reserve Report and such Properties are free of
      all
      Liens except Liens permitted by Section
      9.03  ,
      (iii)
      except
      as set forth on an exhibit to the certificate, on a net basis there are no
      gas
      imbalances, take or pay or other prepayments in excess of the volume specified
      in Section
      7.18  
      with
      respect to its Oil and Gas Properties evaluated in such Reserve Report which
      would require the Borrower or any Subsidiary to deliver Hydrocarbons either
      generally or produced from such Oil and Gas Properties at some future time
      without then or thereafter receiving full payment therefor, (iv)
      such
      Reserve Report reflects the latest determination or redetermination, as the
      case
      may be, required to be made pursuant to this Section, which certificate, if
      applicable, shall list all of its Oil and Gas Properties sold subsequent to
      the
      later of the date hereof or the most recently delivered Reserve Report and
      in
      such detail as reasonably required by the Administrative Agent, (v)
      attached
      to the certificate is a list of all marketing agreements entered into subsequent
      to the later of the date hereof or the most recently delivered Reserve Report
      which the Borrower could reasonably be expected to have been obligated to list
      on Schedule 7.19 had such agreement been in effect on the date hereof and
(vi)
      attached
      thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
      Report that are Mortgaged Properties

     

    (c)  Subject
      to interim adjustment under Section 8.13(c) and Section 9.12, the initial Total
      Proved Reserve Value shall be $387,600,000.

     

    (d)  No
      later
      than March 1st and September 1st of each year, the Borrower shall deliver to
      the
      Administrative Agent two certificates, each in form reasonably satisfactory
      to
      the Administrative Agent, reflecting the Total Proved Reserve Value and the
      Total Probable Reserve Value, respectively, as of the immediately preceding
      January 1 and July 1, commencing March 1, 2007.

     

    (e)  In
      addition, the Borrower may, by notifying the Administrative Agent thereof,
      elect
      to require the Total Proved Reserve Value to be determined two additional times
      on a specified “as of” date between such regular determinations (which shall be
      the first day of a calendar month following the date of such notice), in which
      event the Borrower shall deliver to the Administrative Agent a certificate,
      in
      form reasonably satisfactory to the Administrative 

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    Agent
      (which may be in the form of an updated Reserve Report), no later than three
      months after such specified date reflecting the Total Proved Reserve Value
      as of
      such specified date.

     

    (f)  The
      Borrower shall calculate the Total Proved Reserve Value and the Total Probable
      Reserve Value based upon the applicable definitions of this Agreement, and
      provide with each such certificate the Reserve Report and other information
      used
      by the Borrower in calculating the Total Proved Reserve Value and Total Probable
      Reserve Value.

     

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

     

    Section
      8.13    Title
      Information.

     

    (a)  On
      or
      before the delivery to the Administrative Agent and the Lenders of each Reserve
      Report required by Section
      8.12  (a),
      the
      Borrower will deliver title information in form and substance acceptable to
      the
      Administrative Agent covering enough of the Proved Reserves evaluated by such
      Reserve Report that were not included in the immediately preceding Reserve
      Report, so that the Administrative Agent shall have received together with
      title
      information previously delivered to the Administrative Agent, satisfactory
      title
      information on at least 90% of the total value of the Proved Reserves evaluated
      by such Reserve Report.

     

    (b)  If
      the
      Borrower has provided title information for additional Properties under
Section
      8.13  (a),
      the
      Borrower shall, within 60 days of notice from the Administrative Agent that
      title defects or exceptions exist with respect to such additional Properties,
      either (i)
      cure any
      such title defects or exceptions (including defects or exceptions as to
      priority) which are not permitted by Section
      9.03  
      raised
      by such information, (ii)
      substitute acceptable Mortgaged Properties with no title defects or exceptions
      except for Excepted Liens (other than Excepted Liens described in clauses (e),
      (g) and (h) of such definition) having an equivalent value or (iii)
      deliver
      title information in form and substance acceptable to the Administrative Agent
      so that the Administrative Agent shall have received, together with title
      information previously delivered to the Administrative Agent, satisfactory
      title
      information on at least 90% of the value of the Proved Reserves evaluated by
      such Reserve Report.

     

    (c)  If
      the
      Borrower is unable to cure any title defect requested by the Administrative
      Agent or the Lenders to be cured within the 60-day period or the Borrower does
      not comply with the requirements to provide acceptable title information
      covering 90% of the value of the Proved Reserves evaluated in the most recent
      Reserve Report, such default shall not be a Default, but instead the
      Administrative Agent and/or the Majority Lenders shall have the right to
      exercise the following remedy in their sole discretion from time to time, and
      any failure to so exercise this remedy at any time shall not be a waiver as
      to
      future exercise of the remedy by 

    
      
        
        

      

      
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    the
      Administrative Agent or the Lenders. To the extent that the Administrative
      Agent
      or the Majority Lenders are not satisfied with title to any Mortgaged Property
      after the 60-day period has elapsed, such unacceptable Mortgaged Property shall
      not count towards the 90% requirement, and the Administrative Agent may send
      a
      notice to the Borrower and the Lenders that the then outstanding PV and Total
      Proved Reserve Value shall be reduced by an amount as determined by the Majority
      Lenders to cause the Borrower to be in compliance with the requirement to
      provide acceptable title information on 90% of the value of the Proved Reserves.
      The new PV and Total Proved Reserve Value shall become effective immediately
      after receipt of such notice.

     

    Section
      8.14    Additional
      Collateral; Additional Guarantors.

     

    (a)  The
      Loans
      shall be, at all times, secured by a second priority Lien on and security
      interest in all collateral securing the Revolving Facility (in the case of
      any
      termination thereof, all collateral securing the Revolving Facility immediately
      prior to such termination). 

     

    (b)  The
      Borrower shall promptly cause each Domestic Subsidiary to guarantee the
      Indebtedness pursuant to the Guaranty Agreement. In connection with any such
      guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to
(A)
      execute
      and deliver a supplement to the Guaranty Agreement executed by such Subsidiary,
      (B)
      pledge
      all of the Equity Interests of such new Subsidiary (including, without
      limitation, delivery (if applicable) to the Revolving Agent (or to the
      Administrative Agent, if the Revolving Facility shall have terminated) of
      original certificates evidencing the Equity Interests of such Subsidiary,
      together with an appropriate undated stock powers for each certificate duly
      executed in blank by the registered owner thereof) and (C)
      execute
      and deliver such other additional closing documents, certificates and legal
      opinions as shall reasonably be requested by the Administrative
      Agent.

     

    (c)  In
      the
      event that the Borrower or any Domestic Subsidiary becomes the owner of a
      Foreign Subsidiary, then the Borrower shall promptly cause such Domestic
      Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement.
      In
      connection with any such guaranty, the Borrower shall, or shall cause such
      Domestic Subsidiary to, (1) execute and deliver a supplement to the Guaranty
      Agreement, (2) pledge 65% of all the Equity Interests of such Foreign Subsidiary
      (including, without limitation, delivery to the Revolving Agent (or to the
      Administrative Agent, if the Revolving Facility shall have terminated) of
      original stock certificates evidencing such Equity Interests of such Foreign
      Subsidiary, together with appropriate stock powers for each certificate duly
      executed in blank by the registered owner thereof) and (3) execute and deliver
      such other additional closing documents, certificates and legal opinions as
      shall reasonably be requested by the Administrative Agent.

     

    Section
      8.15    ERISA
      Compliance.
      The
      Borrower will promptly furnish and will cause the Subsidiaries and any ERISA
      Affiliate to promptly furnish to the Administrative Agent (i)
      immediately upon becoming aware of the occurrence of any ERISA Event or of
      any
“prohibited transaction,” as described in section 406 of ERISA or in section
      4975 of the Code, in connection with any Plan or any trust created thereunder,
      a
      written notice signed by the President or the principal Financial Officer,
      the
      Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
      thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
      taking or proposes to take with respect thereto, and, when known, any action
      taken or proposed by the 

    
      
        
        

      

      
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    Internal
      Revenue Service, the Department of Labor or the PBGC with respect thereto,
      and
(ii)
      immediately upon receipt thereof, copies of any notice of the PBGC’s intention
      to terminate or to have a trustee appointed to administer any Plan. With respect
      to each Plan (other than a Multiemployer Plan), the Borrower will, and will
      cause each Subsidiary and ERISA Affiliate to, (i)
      satisfy
      in full and in a timely manner, without incurring any late payment or
      underpayment charge or penalty and without giving rise to any lien, all of
      the
      contribution and funding requirements of section 412 of the Code (determined
      without regard to subsections (d), (e), (f) and (k) thereof) and of section
      302
      of ERISA (determined without regard to sections 303, 304 and 306 of ERISA),
      and
(ii)
      pay, or
      cause to be paid, to the PBGC in a timely manner, without incurring any late
      payment or underpayment charge or penalty, all premiums required pursuant to
      sections 4006 and 4007 of ERISA.

     

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

     

    ARTICLE
      IX  

    Negative
      Covenants

     

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

     

    Section
      9.01    Financial
      Covenants.
      

     

    (a)  Ratio
      of Net Debt to EBITDAX.
      The
      Borrower will not permit as
      of any
      date of determination the
      ratio
      of (A) (1) Total Debt less (2) the sum as of such date of (x) unencumbered
      cash
      and Cash Equivalents of the Borrower and its Subsidiaries and (y) Debt permitted
      pursuant to Section 9.02(g) to (B)
      EBITDAX for the four fiscal quarters ending on the last day of the fiscal
      quarter immediately preceding such date for which financial statements are
      available to be greater than 3.0 to 1.0.

     

    (b)  Ratio
      of Total Proved Reserve Value to Net Debt.
      The
      Borrower will not as of any date of determination permit the ratio of (i) Total
      Proved Reserve Value to (ii) (A) Total Debt less (B) the sum as of such date
      of
      (1) unencumbered cash and Cash Equivalents of the Borrower and its Subsidiaries
      and (2) Debt
      permitted pursuant to Section 9.02(g) to
      be
      less 

    
      
        
        

      

      
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    than
      (x)
      as of December 31, 2006 through December 30, 2007, 1.5 to 1.0, (y) as of
      December 31, 2007 through December 30, 2008, 1.75 to 1.0 and (z) thereafter
      2.0
      to 1.0.

     

    (c)  Interest
      Coverage Ratio.
      The
      Borrower will not permit the ratio, determined as of the end of any fiscal
      quarter, of (i) EBITDAX for the trailing four fiscal quarter period ending
      on
      such date, to (ii) Interest Expense for such four fiscal quarter period to
      be
      less than (x) prior to December 31, 2007, 2.75 to 1.00, (y) on and after
      December 31, 2007 and prior to December 31, 2008, 3.25 to 1.00 and (z)
      thereafter 3.75 to 1.00.

     

    Section
      9.02    Debt.
      The
      Borrower will not, and will not permit any Subsidiary to, incur, create, assume
      or suffer to exist any Debt, except:

     

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

     

    (b)  Debt
      under the Revolving Facility (and guarantees thereof) in an aggregate principal
      amount not exceeding 40% of Total Proved Reserve Value as of the date such
      Debt
      is incurred.

     

    (c)  Debt
      of
      the Borrower and its Subsidiaries existing on the date hereof that is reflected
      in the Financial Statements.

     

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

     

    (e)  Debt
      of
      the Borrower or any Subsidiary incurred to finance the acquisition, construction
      or improvement of any fixed or capital assets, including obligations under
      Capital Leases and any Debt assumed in connection with the acquisition of any
      such assets or secured by a Lien on any such asset prior to the acquisition
      thereof, and extensions, renewals and replacements of any such Debt that do
      not
      increase the outstanding principal amount thereof; provided that (i) such Debt
      is incurred prior to or within 90 days after such acquisition or the completion
      of such construction or improvement and (ii) the aggregate principal amount
      of
      Debt permitted by this clause (d) shall not exceed $3,000,000.

     

    (f)  Debt
      in
      respect of letters of credit, bank or completion guarantees, surety,
      performance, warranty, bid, appeal or other bonds or guarantees and similar
      instruments, in each case to the extent (x) required
      by Governmental Requirements
      or any
      third Person and (y) provided in the ordinary course of business in connection
      with the operation of the Oil and Gas Properties.

     

    (g)  intercompany
      Debt between (i) the Borrower and the Parent and (ii) the Borrower and any
      Subsidiary or between Subsidiaries to the extent permitted by Section 9.05(g);
      provided that (1) such Debt is not held, assigned, transferred, negotiated
      or
      pledged to any Person other than, in the case of the Parent Loan, the Parent
      and
      otherwise, the Borrower or one 

    
      
        
        

      

      
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    of
      its
      Wholly-Owned Subsidiaries, (2) any such Debt owed by either the Borrower or
      a
      Guarantor shall be subordinated to the Indebtedness on terms set forth in the
      Guaranty Agreement, (3) any such Debt shall not have any scheduled amortization
      prior to January 31, 2012 and (4) in the case of the Parent Loan (x) no interest
      shall be payable in cash thereon and (y) no payments may be made if a Default
      shall have occurred and be continuing.

     

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

     

    (i)  Debt
      (other than for borrowed money) incurred in the ordinary course of business
      in
      connection with Hydrocarbon transportation, Hydrocarbon purchasing or other
      similar arrangements, provided that such arrangements are disclosed to the
      Administrative Agent.

     

    (j)  Debt
      incurred in connection with vendor financing provided by Midland Pipe
      Corporation and its affiliates not to exceed $15,000,000 in the aggregate at
      any
      one time outstanding.

     

    (k)  other
      Debt secured by Liens pari passu
      with the
      Liens securing the Indebtedness hereunder in an aggregate principal amount
      at
      any time outstanding not exceeding $100,000,000, provided such Debt matures
      no
      earlier than the Maturity Date.

     

    (l)  other
      unsecured Debt, provided at the time such Debt is incurred no Default
      exists.

     

    (m)  other
      Debt not to exceed $3,000,000
      in
      the aggregate at any one time outstanding.

     

    Section
      9.03    Liens.
      The
      Borrower will not, and will not permit any Subsidiary to, create, incur, assume
      or permit to exist any Lien on any of its Properties (now owned or hereafter
      acquired), except:

     

    (a)  Liens
      securing the payment of any Indebtedness and Liens securing the Revolving
      Facility and Swap Agreements with lenders under the Revolving Facility and/or
      their Affiliates.

     

    (b)  Excepted
      Liens.

     

    (c)  Liens
      on
      fixed
      or capital assets acquired, constructed or improved by the Borrower or any
      Subsidiary; provided that (i) such Liens secure Indebtedness permitted by
      Section 9.02(d), (ii) such Liens and the Debt secured thereby are incurred
      prior
      to or within 90 days after such acquisition or the completion of such
      construction or improvement, (iii) the Debt secured thereby does not exceed
      100%
      of the cost of acquiring, constructing or improving such fixed or capital assets
      and (iv) such security interests shall not apply to any other property or assets
      of the Borrower or any Subsidiary.

     

    (d)  Liens
      on
      Property not constituting collateral for the Indebtedness and not otherwise
      permitted by the foregoing clauses of this Section
      9.03  ;
      provided that the aggregate 

    
      
        
        

      

      
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    principal
      or face amount of all Debt secured under this Section
      9.03  (d)
      shall
      not exceed $1,000,000 at any time.

     

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

     

    Section
      9.05    Investments,
      Loans and Advances.
      The
      Borrower will not, and will not permit any Subsidiary to, make or permit to
      remain outstanding any Investments in or to any Person, except that the
      foregoing restriction shall not apply to:

     

    (a)  Investments
      reflected in the Financial Statements or which are disclosed to the Lenders
      in
      Schedule 9.05.

     

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

     

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

     

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

     

    (e)  deposits
      maturing within one year from the date of creation thereof with, including
      certificates of deposit issued by, any Lender or any office located in the
      United States of any other bank or trust company which is organized under the
      laws of the United States or any state thereof, has capital, surplus and
      undivided profits aggregating at least $100,000,000 (as of the date of such
      bank
      or trust company’s most recent financial reports) and has a short term deposit
      rating of no lower than A2 or P2, as such rating is set forth from time to
      time,
      by S&P or Moody’s, respectively.

     

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

     

    (g)  Investments
      (i) made by the Borrower in or to the Guarantors, (ii) made by any Domestic
      Subsidiary in or to the Borrower or any Guarantor, and (iii) made by the
      Borrower or any Guarantor in or to Foreign Subsidiaries which are not Guarantors
      in an aggregate amount at any one time outstanding not to exceed
      $1,500,000.

     

    (h)  subject
      to the limits in Section 9.06, Investments (including, without limitation,
      capital contributions) in general or limited partnerships or other types of
      entities (each a “venture”)
      entered into by the Borrower or a Subsidiary with others in the ordinary course
      of business; provided that (i)
      any such
      venture is engaged exclusively in oil and gas exploration, development,
      production, processing and related activities, including transportation,
(ii)
      the


    
      
        
        

      

      
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    interest
      in such venture is acquired in the ordinary course of business and on fair
      and
      reasonable terms and (iii)
      such
      venture interests acquired and capital contributions made (valued as of the
      date
      such interest was acquired or the contribution made) do not exceed, in the
      aggregate at any time outstanding an amount equal to $2,000,000.

     

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

     

    (j)  loans
      or
      advances to employees, officers or directors in the ordinary course of business
      of the Borrower or any of its Subsidiaries, in each case only as permitted
      by
      applicable law, including Section 402 of the Sarbanes Oxley Act of 2002, but
      in
      any event not to exceed $1,500,000 in the aggregate at any time.

     

    (k)  Investments
      in stock, obligations or securities received in settlement of debts arising
      from
      Investments permitted under this Section
      9.05  
      owing to
      the Borrower or any Subsidiary as a result of a bankruptcy or other insolvency
      proceeding of the obligor in respect of such debts or upon the enforcement
      of
      any Lien in favor of the Borrower or any of its Subsidiaries; provided that
      the
      Borrower shall give the Administrative Agent prompt written notice in the event
      that the aggregate amount of all Investments held at any one time under this
      Section
      9.05  (k)
      exceeds
      $1,500,000.

     

    (l)  other
      Investments not to exceed $3,000,000 in the aggregate at any time.

     

    Section
      9.06    Nature
      of Business;
      International Operations.
      The
      Borrower will not, and will not permit any Subsidiary to, allow any material
      change to be made in the character of its business as an independent oil and
      gas
      exploration and production company. Except as permitted by Section 9.05(g)
      or
      otherwise in an amount not to exceed an amount of $3,000,000 per year, the
      Borrower and its Subsidiaries will not acquire or make any other expenditures
      (whether such expenditure is capital, operating or otherwise) in or related
      to,
      any Oil and Gas Properties not located within the geographical boundaries of
      the
      United States or Canada.

     

    Section
      9.07    Amendments
      to Organizational Documents.
      The
      Borrower will not, nor will it permit any of its Subsidiaries to, enter into
      or
      permit any material modification or amendment of, or waive any material right
      or
      obligation of any Person under its Organizational Documents.

     

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


    
      
        
        

      

      
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    of
      FR
      Form U-1 or such other form referred to in Regulation U, Regulation T or
      Regulation X of the Board, as the case may be.

     

    Section
      9.09    ERISA
      Compliance.
      The
      Borrower will not, and will not permit any Subsidiary to, at any
      time:

     

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

     

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

     

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

     

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

     

    (e)  permit,
      or allow any ERISA Affiliate to permit, the actuarial present value of the
      benefit liabilities under any Plan maintained by the Borrower, a Subsidiary
      or
      any ERISA Affiliate which is regulated under Title IV of ERISA to exceed
      the current value of the assets (computed on a plan termination basis in
      accordance with Title IV of ERISA) of such Plan allocable to such benefit
      liabilities. The term “actuarial present value of the benefit liabilities” shall
      have the meaning specified in section 4041 of ERISA.

     

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

     

    (g)  acquire,
      or permit any ERISA Affiliate to acquire, an interest in any Person that causes
      such Person to become an ERISA Affiliate with respect to the Borrower or a
      Subsidiary or with respect to any ERISA Affiliate of the Borrower or a
      Subsidiary if such Person sponsors, maintains or contributes to, or at any
      time
      in the six-year period preceding such acquisition has sponsored, maintained,
      or
      contributed to, (1)
      any
      Multiemployer Plan, or (2)
      any
      other Plan that is subject to Title IV of ERISA under which the actuarial
      present value of the benefit liabilities under such Plan exceeds the current
      value of the assets (computed on a plan termination basis in accordance with
      Title IV of ERISA) of such Plan allocable to such benefit
      liabilities.

     

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

    
      
        
        

      

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

     

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

     

    Section
      9.10    Sale
      or Discount of Receivables.
      Except
      for receivables obtained by the Borrower or any Subsidiary out of the ordinary
      course of business or the settlement of joint interest billing accounts in
      the
      ordinary course of business or discounts granted to settle collection of
      accounts receivable or the sale of defaulted accounts arising in the ordinary
      course of business in connection with the compromise or collection thereof
      and
      not in connection with any financing transaction, the Borrower will not, and
      will not permit any Subsidiary to, discount or sell (with or without recourse)
      any of its notes receivable or accounts receivable.

     

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

     

    Section
      9.12    Sale
      of Properties.
      The
      Borrower will not, and will not permit any Subsidiary to, sell, assign,
      farm-out, convey or otherwise transfer any Property except for (a)
      the sale
      of Hydrocarbons in the ordinary course of business; (b)
      farmouts
      in the ordinary course of business of undeveloped acreage or undrilled depths
      and assignments in connection with such farmouts; (c)
      the sale
      or transfer of equipment that is no longer necessary for the business of the
      Borrower or such Subsidiary or is replaced by equipment of at least comparable
      value and use; (d) the sale or other disposition (including Casualty Events)
      of
      any Oil and Gas Property or any interest therein or any Subsidiary owning Oil
      and Gas Properties; provided that (i)
      100% of
      the consideration received in respect of such sale or other disposition shall
      be
      cash, (ii)
      the
      consideration received in respect of such sale or other disposition shall be
      equal to or greater than the fair market value of the Oil and Gas Property,
      interest therein or Subsidiary subject of such sale or other disposition (and
      if
      requested by the Administrative Agent, the Borrower shall deliver a certificate
      of a Responsible Officer of the Borrower certifying to that effect), and
(iii)
      if any
      such sale or other disposition is of a Subsidiary owning Oil and Gas Properties,
      such sale or other disposition shall include all the Equity Interests of such
      Subsidiary; and (e) sales and other dispositions of Properties not regulated
      by
      Section 9.12(a) to (d) having a fair market value not to exceed $2,000,000
      during any 12-month period. If the Borrower or any Subsidiary shall sell or
      otherwise dispose of any Oil and Gas Property included in the calculation of
      PV,
      then until PV is recalculated in accordance herewith, PV and Total Proved
      Reserve Value as then in effect shall be reduced to reflect the PV of the Oil
      and Gas Property so sold or disposed of.

      
        
          
          

          
          

        

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

     

    Section
      9.14    Transactions
      with Affiliates.
      The
      Borrower will not, and will not permit any Subsidiary to, enter into any
      transaction, including, without limitation, any purchase, sale, lease or
      exchange of Property or the rendering of any service, with any Affiliate (other
      than the Wholly-Owned Subsidiaries of the Borrower and FM Services, Inc.) unless
      such transactions are (i) otherwise permitted under this Agreement, (ii) are
      upon fair and reasonable terms no less favorable to the Borrower or its
      Subsidiaries than it would obtain in a comparable arm’s length transaction with
      a Person not an Affiliate and, (iii) in the case of any such transaction for
      an
      aggregate consideration in excess of $15,000,000 in cash or fair market value,
      the fairness of such transaction to the Borrower or such Subsidiary, as the
      case
      may be, is confirmed by a reputable independent bank or other recognized
      valuation expert; provided that clause (iii) of this Section 9.14 shall not
      apply to any exploration, drilling or other joint venture entered into by the
      Borrower or any Subsidiary in the ordinary course of business.

     

    Section
      9.15    Subsidiaries.
      The
      Borrower will not, and will not permit any Subsidiary to, create or acquire
      any
      additional Subsidiaries unless the Borrower gives written notice to the
      Administrative Agent of such creation or acquisition and complies with
Section
      8.14  (a)
      and
      Section 8.14(c). The Borrower shall not, and shall not permit any Subsidiary
      to,
      sell, assign or otherwise dispose of any Equity Interests in any Subsidiary
      except in compliance with Section 9.12(d).

     

    Section
      9.16    Negative
      Pledge Agreements; Dividend Restrictions.
      The
      Borrower will not, and will not permit any Subsidiary to, create, incur, assume
      or suffer to exist any contract, agreement or understanding (other than this
      Agreement, the Revolving Facility Documents, the Security Instruments or Capital
      Leases creating Liens permitted by Section
      9.03  (c)
      and (d))
      which in any way prohibits or restricts the granting, conveying, creation or
      imposition of any Lien on any of its Property in favor of the Administrative
      Agent and the Lenders or restricts any Subsidiary from paying dividends or
      making distributions to the Borrower or any Guarantor, or which requires the
      consent of or notice to other Persons in connection therewith.

     

    Section
      9.17    Gas
      Imbalances, Take-or-Pay or Other Prepayments.
      The
      Borrower will not, and will not permit any Subsidiary to, allow gas imbalances,
      take-or-pay or other prepayments with respect to the Oil and Gas Properties
      of
      the Borrower or any of its Subsidiaries that would require the Borrower or
      such
      Subsidiary to deliver Hydrocarbons at some future time without then or
      thereafter receiving full payment therefor to exceed 500,000 Mcf of gas (on
      an
      Mcf equivalent basis) in the aggregate.

     

    Section
      9.18    Swap
      Agreements.
      The
      Borrower will not, and will not permit any Subsidiary to, enter into any Swap
      Agreements with any Person other than (a)
      Swap
      Agreements in respect of commodities the notional volumes for which (when
      aggregated with other 

    
      
        
        

      

      
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    commodity
      Swap Agreements then in effect other than basis differential swaps on volumes
      already hedged pursuant to other Swap Agreements) do not exceed, as of the
      date
      such Swap Agreement is executed, 60% of the reasonably anticipated projected
      production from proved, developed, producing Oil and Gas Properties for each
      month during the period during which such Swap Agreement is in effect for each
      of crude oil and natural gas, calculated separately, and (b)
      Swap
      Agreements in respect of interest rates which effectively convert interest
      rates
      from floating to fixed, the notional amounts of which (when aggregated with
      all
      other Swap Agreements of the Borrower and its Subsidiaries then in effect
      effectively converting interest rates from floating to fixed) do not exceed
      75%
      of the then outstanding principal amount of the Borrower’s Debt for borrowed
      money which bears interest at a floating rate. Except for any Swap Agreement
      entered into with a lender under the Revolving Credit Agreement or an Affiliate
      of such a lender, in no event shall any Swap Agreement contain any requirement,
      agreement or covenant for the Borrower or any Subsidiary to post collateral
      or
      margin to secure their obligations under such Swap Agreement or to cover market
      exposures.

     

    Section
      9.19    Optional
      Payments and Modifications of Certain Debt Instruments.
      The
      Borrower will not (a) make or offer to make any optional or voluntary payment,
      prepayment, repurchase or redemption of or otherwise optionally or voluntarily
      defease or segregate funds with respect to any Debt of the Credit Parties (other
      than in connection with (i) the prepayment of the Revolving Facility, (ii)
      prepayment of Indebtedness under this Agreement, (iii) prepayment of Debt
      permitted pursuant to Section 9.02(k), provided that simultaneously therewith
      the Borrower shall prepay the Loans ratably with such Debt, and (iv) prepayments
      of Debt (other than the Parent Loan) in an aggregate amount not to exceed
      $10,000,000) or (b) amend, modify, waive or otherwise change, or consent or
      agree to any amendment, modification, waiver or other change to, any of the
      terms of any Debt (other than the Revolving Facility) of the Credit Parties
      (other than any such amendment, modification, waiver or other change that (i)
      would extend the maturity or reduce the amount of any payment of principal
      thereof or reduce the rate or extend any date for payment of interest thereon
      and (ii) does not involve the payment of a consent fee).

     

    ARTICLE
      X  

    Events
      of Default; Remedies

     

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

     

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

     

    (b)  the
      Borrower shall fail to pay any interest on any Loan or any fee or any other
      amount (other than an amount referred to in Section
      10.01  (a))
      payable
      under any Loan Document, when and as the same shall become due and payable,
      and
      such failure shall continue unremedied for a period of three (3) Business
      Days.

     

    (c)  any
      representation or warranty made or deemed made by or on behalf of the Parent,
      the Borrower or any Subsidiary in or in connection with any Loan Document or
      any


    
      
        
        

      

      
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    amendment
      or modification of any Loan Document or waiver under such Loan Document, or
      in
      any report, certificate, financial statement or other document furnished
      pursuant to or in connection with any Loan Document or any amendment or
      modification thereof or waiver thereunder, shall prove to have been incorrect
      when made or deemed made.

     

    (d)  the
      Parent, the Borrower or any Subsidiary shall fail to observe or perform any
      covenant, condition or agreement contained in Section 8.01(j), Section
      8.01  (m),
      Section
      8.02  ,
      Section
      8.03  ,
      Section
      8.14 or in ARTICLE
      IX.

     

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

     

    (f)  the
      Borrower or any Guarantor shall fail to make any payment (whether of principal
      or interest and regardless of amount) in respect of any Material Indebtedness,
      when and as the same shall become due and payable, provided that this clause
      (f)
      shall not apply to Indebtedness under the Revolving Facility unless the holder
      or holders of any Indebtedness under the Revolving Facility or any trustee
      or
      agent on its or their behalf have caused such Indebtedness to become due prior
      to its scheduled maturity.

     

    (g)  any
      event
      or condition occurs that results in any Material Indebtedness becoming due
      prior
      to its scheduled maturity or that enables or permits (following any applicable
      grace period and notice) the holder or holders of any Material Indebtedness
      or
      any trustee or agent on its or their behalf to cause any Material Indebtedness
      to become due, or to require the Redemption thereof or any offer to Redeem
      to be
      made in respect thereof, prior to its scheduled maturity or require the Parent,
      the Borrower or any Subsidiary to make an offer in respect thereof, provided
      that this clause (g) does not apply to Indebtedness under the Revolving Facility
      unless the holder or holders of any Indebtedness under the Revolving Facility
      or
      any trustee or agent on its or their behalf have caused such Indebtedness to
      become due prior to its scheduled maturity.

     

    (h)  an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed seeking (i) liquidation, reorganization or other relief in respect of
      the
      Parent, the Borrower or any Subsidiary or its debts, or of a substantial part
      of
      its assets, under any Federal, state or foreign bankruptcy, insolvency,
      receivership or similar law now or hereafter in effect or (ii) the appointment
      of a receiver, trustee, custodian, sequestrator, conservator or similar official
      for the Parent, the Borrower or any Subsidiary or for a substantial part of
      its
      assets, and, in any such case, such proceeding or petition shall continue
      undismissed for thirty (30) days or an order or decree approving or ordering
      any
      of the foregoing shall be entered.

     

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

     

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

     

    (k)  (i)
      one or
      more judgments for the payment of money in an aggregate amount in excess of
      $1,500,000 (to the extent not covered by independent third party insurance
      provided by insurers of the highest claims paying rating or financial strength
      as to which the insurer does not dispute coverage and is not subject to an
      insolvency proceeding) or (ii)
      any one
      or more non-monetary judgments that have, or could reasonably be expected to
      have, individually or in the aggregate, a Material Adverse Effect, shall be
      rendered against the Parent, the Borrower, any Subsidiary or any combination
      thereof and the same shall remain undischarged for a period of 30 consecutive
      days during which execution shall not be effectively stayed, or any action
      shall
      be legally taken by a judgment creditor to attach or levy upon any assets of
      the
      Parent, the Borrower or any Subsidiary to enforce any such
      judgment.

     

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

     

    (m)  an
      ERISA
      Event shall have occurred that, in the opinion of the Majority Lenders, when
      taken together with all other ERISA Events that have occurred, could reasonably
      be expected to result in liability of the Borrower and its Subsidiaries in
      an
      aggregate amount exceeding $1,500,000
      in any
      year.

     

    (n)  a
      Change
      in Control shall occur.

     

    Section
      10.02    Remedies.

     

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

     

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

     

    (c)  Subject
      to the provisions of the Intercreditor Agreement, all proceeds realized from
      the
      liquidation or other disposition of collateral or otherwise received after
      maturity of the Notes, whether by acceleration or otherwise, shall be
      applied:

     

    (i)  first,
      to
      payment or reimbursement of that portion of the Indebtedness constituting fees,
      expenses and indemnities payable to the Administrative Agent in its capacity
      as
      such;

     

    (ii)  second,
      pro
      rata to payment or reimbursement of that portion of the Indebtedness
      constituting fees, expenses and indemnities payable to the Lenders;

     

    (iii)  third,
      pro
      rata to payment of accrued interest on the Loans; 

     

    (iv)  fourth,
      pro
      rata to payment of principal outstanding on the Loans;

     

    (v)  fifth,
      pro
      rata to any other Indebtedness; and 

     

    (vi)  sixth,
      any
      excess, after all of the Indebtedness shall have been indefeasibly paid in
      full
      in cash, shall be paid to the Borrower or as otherwise required by any
      Governmental Requirement.

     

    ARTICLE
      XI  

    The
      Administrative
      Agent

     

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

     

    Section
      11.02    Duties
      and Obligations of Administrative Agent.
      The
      Administrative Agent shall not have any duties or obligations except those
      expressly set forth in the Loan 

    
      
        
        

      

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

     

    Section
      11.03    Action
      by Administrative Agent.
      The
      Administrative Agent shall have no duty to take any discretionary action or
      exercise any discretionary powers, except discretionary rights and powers
      expressly contemplated hereby or by the other Loan Documents that the
      Administrative Agent is required to exercise in writing as directed by the
      Majority Lenders (or such other number or percentage of the Lenders as shall
      be
      necessary under the circumstances as provided in Section
      12.02  )
      and in
      all cases the Administrative Agent shall be fully justified in failing or
      refusing to act hereunder or under any other Loan Documents unless it shall
      (a)
      receive
      written instructions from the Majority Lenders (or such other number or
      percentage of the Lenders as shall be necessary under the circumstances as
      provided in Section
      12.02  )
      specifying the action to be taken and (b)
      be
      indemnified to its satisfaction by the Lenders against any and all liability
      and
      expenses which may be incurred by it by reason of taking or continuing to take
      any 

    
      
        
        

      

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

     

    Section
      11.04    Reliance
      by 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 believed by it to be genuine
      and to have been signed or sent 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 be made by the proper Person, and shall not incur any liability for
      relying thereon and each of the Borrower and the Lenders hereby waives the
      right
      to dispute the Administrative Agent’s record of such statement, except in the
      case of gross negligence or willful misconduct by the Administrative Agent.
      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. The Administrative Agent
      may
      deem and treat the payee of any Note as the holder thereof for all purposes
      hereof unless and until a written notice of the assignment or transfer thereof
      permitted hereunder shall have been filed with the Administrative Agent.


     

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

     

    Section
      11.06    Resignation
      or Removal of Administrative Agent.
      Subject
      to the appointment and acceptance of a successor Agent as provided in this
      Section
      11.06  ,
      any
      Agent may resign at any time by notifying the Lenders and the Borrower, and
      any
      Agent may be removed at any time with or without cause by the Majority Lenders.
      Upon any such resignation 

    
      
        
        

      

      
        64

        
          

        

      

      
        
        

      

    

     

    or
      removal, the Majority Lenders shall have the right, in consultation with the
      Borrower, to appoint a successor. If no successor shall have been so appointed
      by the Majority Lenders and shall have accepted such appointment within 30
      days
      after the retiring Agent gives notice of its resignation or removal of the
      retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint
      a
      successor Agent. Upon the acceptance of its appointment as Agent hereunder
      by a
      successor, such successor shall succeed to and become vested with all the
      rights, powers, privileges and duties of the retiring Agent, and the retiring
      Agent shall be discharged from its duties and obligations hereunder. The fees
      payable by the Borrower to a successor Agent shall be the same as those payable
      to its predecessor unless otherwise agreed between the Borrower and such
      successor. After the Agent’s resignation hereunder, the provisions of this
ARTICLE
      XI
      and
Section
      12.03  shall
      continue in effect for the benefit of such retiring Agent, its sub-agents and
      their respective Related Parties in respect of any actions taken or omitted
      to
      be taken by any of them while it was acting as Agent.

     

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

     

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

     

    Section
      11.09    Administrative
      Agent May File Proofs of Claim.
      

     

    In
      case
      of the pendency of any receivership, insolvency, liquidation, bankruptcy,
      reorganization, arrangement, adjustment, composition or other judicial
      proceeding relative to the Borrower or 

    
      
        
        

      

      
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    any
      of
      its Subsidiaries, the Administrative Agent (irrespective of whether the
      principal of any Loan shall then be due and payable as herein expressed or
      by
      declaration or otherwise and irrespective of whether the Administrative Agent
      shall have made any demand on the Borrower) shall be entitled and empowered,
      by
      intervention in such proceeding or otherwise: 

     

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

     

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

     

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

     

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

     

    Section
      11.10    Authority
      of Administrative Agent to Release Collateral and Liens.
      Each
      Lender hereby authorizes the Administrative Agent to release any collateral
      that
      is permitted to be sold or released pursuant to the terms of the Loan Documents.
      Each Lender hereby authorizes the Administrative Agent to execute and deliver
      to
      the Borrower, at the Borrower’s sole cost and expense, any and all releases of
      Liens, termination statements, assignments or other documents reasonably
      requested by the Borrower in connection with any sale or other disposition
      of
      Property to the extent such sale or other disposition is permitted by the terms
      of Section 9.10 or is otherwise authorized by the terms of the Loan
      Documents.

     

    Section
      11.11    The
      Arrangers
      and
      the Syndication Agent.
      The
      Arrangers and the Syndication Agent shall have no duties, responsibilities
      or
      liabilities under this Agreement and the other Loan Documents other than their
      duties, responsibilities and liabilities in their capacity as Lenders
      hereunder.

     

    ARTICLE
      XII  

    Miscellaneous

     

    Section
      12.01    Notices.

      
        
          
          

          
          

        

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

     

    (i)  if
      to the
      Borrower, to it at 1615
      Poydras Street, New Orleans, Louisiana 70112,
      Attention of Kathleen
      Quirk (Telecopy No. (504) 582-4511); 

     

    (ii)  if
      to the
      Administrative Agent, to it at 10 South Dearborn, Fl 19, IL1-0010, Chicago,
      Illinois 60603, Attention of Loan and Agency Services, Attention of Leonida
      Mischke (Telecopy No. (312) 385-7096), with a copy to 712 Main Street, 8th
      Floor
      South, Houston, Texas 77002, Attention of Lisa Miller (Telecopy No. (713)
      750-2666), and for all other correspondence other than borrowings, continuation
      and conversion requests 712 Main Street, 8th Floor South, Houston, Texas 77002,
      Attention of Ronald Dierker (Telecopy No. (713) 216-7770), with a copy to 712
      Main Street, 12th
      Floor,
      Houston, Texas 77002, Attention of Robert C. Mertensotto (Telecopy No. (713)
      216-8870);

     

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

     

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

     

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

     

    Section
      12.02    Waivers;
      Amendments.

     

    (a)  
      No
      failure on the part of the Administrative Agent or any Lender to exercise and
      no
      delay in exercising, and no course of dealing with respect to, any right, power
      or privilege, or any abandonment or discontinuance of steps to enforce such
      right, power or privilege, under any of the Loan Documents shall operate as
      a
      waiver thereof, nor shall any single or partial exercise of any right, power or
      privilege under any of the Loan Documents preclude any other or further exercise
      thereof or the exercise of any other right, power or privilege. The rights
      and
      remedies of the Administrative Agent and the Lenders hereunder and under the
      other Loan Documents are cumulative and are not exclusive of any rights or
      remedies that they would otherwise have. No waiver of any provision of this
      Agreement or any other Loan Document or consent to any departure by the Borrower
      therefrom shall in any event be effective unless the same shall be permitted
      by
      Section 12.02(b), and then such waiver or consent 

    
      
        
        

      

      
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    shall
      be
      effective only in the specific instance and for the purpose for which given.
      Without limiting the generality of the foregoing, the making of a Loan shall
      not
      be construed as a waiver of any Default, regardless of whether the
      Administrative Agent or any Lender may have had notice or knowledge of such
      Default at the time. 

     

    (b)  Neither
      this Agreement nor any provision hereof nor any Security Instrument nor any
      provision thereof may be waived, amended or modified except pursuant to an
      agreement or agreements in writing entered into by the Borrower and the Majority
      Lenders or by the Borrower and the Administrative Agent with the consent of
      the
      Majority Lenders; provided that no such agreement shall (i) reduce the principal
      amount of any Loan or reduce the rate of interest thereon, or reduce any fees
      payable hereunder, or reduce any other Indebtedness hereunder or under any
      other
      Loan Document, without the written consent of each Lender affected thereby,
      (ii)
      postpone the scheduled date of payment or prepayment of the principal amount
      of
      any Loan or any interest thereon, or any fees payable hereunder, or any other
      Indebtedness hereunder or under any other Loan Document, or reduce the amount
      of, waive or excuse any such payment, or postpone the Maturity Date, without
      the
      written consent of each Lender affected thereby, (iii) change Section
      4.01  (b)
      or
Section
      4.01  (c)
      in a
      manner that would alter the pro rata sharing of payments required thereby,
      without the written consent of each Lender, (iv) waive or amend Section
      3.04  (c),
      Section
      6.01  ,
      Section
      8.14  
      or
Section
      10.02  (c)
      or
      change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”,
      or “Subsidiary”, without the written consent of each Lender, (v) release any
      Guarantor (except as set forth in the Guaranty Agreement), release any of the
      collateral (other than as provided in Section
      11.10  ),
      or
      reduce the percentage set forth in Section 8.13(b) to less than 90%, without
      the
      written consent of each Lender, (vi) change any of the provisions of this
      Section or the definition of “Majority Lenders” or any other provision hereof
      specifying the number or percentage of Lenders required to waive, amend or
      modify any rights hereunder or under any other Loan Documents or make any
      determination or grant any consent hereunder or any other Loan Documents,
      without the written consent of each Lender or (vii) waive any prepayment
      penalty, without the written consent of each Lender; provided further that
      no
      such agreement shall amend, modify or otherwise affect the rights or duties
      of
      the Administrative Agent or any other Agent hereunder or under any other Loan
      Document without the prior written consent of the Administrative Agent or other
      such Agent, as the case may be. Notwithstanding the foregoing, any supplement
      to
      Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
      Administrative Agent a supplemental schedule clearly marked as such and, upon
      receipt, the Administrative Agent will promptly deliver a copy thereof to the
      Lenders.

     

    Notwithstanding
      the foregoing, this Agreement may be amended (or amended and restated) with
      the
      written consent of the Majority Lenders, the Agent and the Borrower (a) to
      add
      one or more additional credit facilities to this Agreement and to permit the
      extensions of credit from time to time outstanding thereunder and the accrued
      interest and fees in respect thereof to share ratably in the benefits of this
      Agreement and the other Loan Documents with the Loans and (b) to include
      appropriately the Lenders holding such credit facilities in any determination
      of
      the Majority Lenders.

     

    In
      addition, notwithstanding the foregoing, this Agreement may be amended with
      the
      written consent of the Agent, the Borrower and the Lenders providing the
      relevant Replacement Loans (as defined below) to permit the refinancing,
      replacement or modification of all 

    
      
        
        

      

      
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    outstanding
      Loans (“Replaced
      Loans”)
      with a
      replacement term loan tranche hereunder (“Replacement
      Loans”),
      provided
      that (a)
      the aggregate principal amount of such Replacement Loans shall not exceed the
      sum of (i) the aggregate principal amount of such Replaced Loans and (ii)
      accrued and unpaid fees, expenses and premiums in respect of such Replaced
      Loans, (b) the Applicable Margin for such Replacement Loans shall not be higher
      than the Applicable Margin for such Replaced Loans and (c) the weighted average
      life to maturity of such Replacement Loans shall not be shorter than the
      weighted average life to maturity of such Replaced Loans at the time of such
      refinancing.

     

    Section
      12.03    Expenses,
      Indemnity; Damage Waiver.

     

    (a)  The
      Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
      Administrative Agent and its Affiliates, including 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
      and administration of this Agreement and the other Loan Documents or any
      amendments, modifications or waivers of the provisions hereof (whether or not
      the transactions contemplated hereby or thereby shall be consummated) and (ii)
      all out-of-pocket expenses incurred by the Administrative Agent or any Lender,
      including the fees, charges and disbursements of any counsel for the
      Administrative Agent or any Lender, in connection with the enforcement or
      protection of its rights in connection with the Loan Documents, including its
      rights under this Section, or in connection with the Loans made hereunder,
      including all such out-of-pocket expenses incurred during any workout,
      restructuring or negotiations in respect of such Loans.

     

    (b)  THE
      BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER, AND EACH
      RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED
      AN
“INDEMNITEE”)
      AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
      DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND
      DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST
      ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF
      (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY AGREEMENT OR
      INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR
      RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS OR
      ANY
      OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II)  ANY ACTUAL OR ALLEGED
      PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR
      OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY
      RELATED IN ANY WAY TO THE BORROWER OR ANY SUBSIDIARY, OR (III) ANY ACTUAL OR
      PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY
      OF
      THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
      REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO; PROVIDED
      THAT
      SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
      THAT
      SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED
      BY
      A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO


    
      
        
        

      

      
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    HAVE
      RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE,
      ANY
      OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE DIRECTORS AND
      EMPLOYEES.

     

    (c)  To
      the
      extent that any Credit Party fails to pay any amount required to be paid by
      it
      to the Administrative Agent under paragraph (a) or (b) of this Section, each
      Lender severally agrees to pay to the Administrative Agent, such Lender’s
      Applicable Percentage (in each case, 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 in its capacity as such.

     

    (d)  TO
      THE
      MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE CREDIT PARTIES SHALL NOT ASSERT,
      AND HEREBY WAIVE, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY,
      FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT
      OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS
      AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS,
      ANY LOAN OR THE USE OF THE PROCEEDS THEREOF.

     

    (e)  All
      amounts due under this Section shall be payable not later than 10 days after
      written demand therefor.

     

    Section
      12.04    Successors
      and Assigns.

     

    (a)  The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the parties hereto and their respective successors and assigns permitted hereby,
      except that (i) the Borrower may not assign or otherwise transfer any of its
      rights or obligations hereunder without the prior written consent of each Lender
      (and any attempted assignment or transfer by the Borrower without such consent
      shall be null and void) and (ii) no Lender may assign or otherwise transfer
      its
      rights or obligations hereunder except in accordance with this Section
      12.03  (a).
      Nothing
      in this Agreement, expressed or implied, shall be construed to confer upon
      any
      Person (other than the parties hereto, their respective successors and assigns
      permitted hereby, Participants (to the extent provided in Section
      12.04  (c))
      and, to
      the extent expressly contemplated hereby, the Related Parties of each of the
      Administrative Agent and the Lenders) any legal or equitable right, remedy
      or
      claim under or by reason of this Agreement.

     

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

     

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

      
        
          
          

          
          

        

        
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    (B)  the
      Administrative Agent, provided
      that no
      consent of the Agent shall be required for an assignment of all or any portion
      of a Loan to a Lender, an affiliate of a Lender or an Approved Fund;
      and

     

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

     

    (A)  except
      in
      the case of an assignment to a Lender, an affiliate of a Lender or an Approved
      Fund or an assignment of the entire remaining amount of the assigning Lender’s
      Loans, the amount 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) shall not be less
      than
      $1,000,000
      unless
      each of the Borrower and the Agent otherwise consent, provided
      that (1)
      no such consent of the Borrower shall be required if an Event of Default has
      occurred and is continuing and (2) such amounts shall be aggregated in respect
      of each Lender and its affiliates or Approved Funds, if any;

     

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

     

    (C)  the
      parties to each assignment shall execute and deliver to the Administrative
      Agent
      an Assignment and Assumption, together with a processing and recordation fee
      of
      $3,500 (except that no such processing and recordation fee shall be payable
      in
      the case of an assignee which is an Affiliate or an Approved Fund);
      and

     

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

     

    For
      the
      purposes of this Section 12.04(b), the term “Approved
      Fund”
has
      the
      following meaning:

     

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

     

    (iii)  Subject
      to Section
      12.04  (b)(iv)
      and the
      acceptance and recording thereof, from and after the effective date specified
      in
      each Assignment and Assumption the assignee thereunder shall be a party hereto
      and, to the extent of the interest assigned by such Assignment and Assumption,
      have the rights and obligations of a Lender under this Agreement, and the
      assigning Lender thereunder shall, to the extent of the interest assigned by
      such Assignment and Assumption, be released from its obligations under this
      Agreement (and, in the case of an Assignment and Assumption covering all of
      the
      assigning Lender’s rights and obligations under this Agreement, such Lender
      shall cease to be a party hereto but shall continue to be entitled to the
      benefits of Section
      5.01  ,
      Section
      5.02  ,
      Section
      5.03  
      and
Section
      12.03  ).
      Any
      assignment or transfer by a Lender of rights or obligations under this Agreement
      that does not comply with this Section
      12.03 (a)
      shall be
      treated for purposes of this Agreement as a sale 

    
      
        
        

      

      
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    by
      such
      Lender of a participation in such rights and obligations in accordance with
      Section
      12.04 (c).

     

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

     

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

     

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

     

    (ii) A
      Participant shall not be entitled to receive any greater payment under
Section
      5.01  
      or
Section
      5.03  
      than the
      applicable Lender would have been entitled to receive with respect to the
      participation sold to such Participant, unless the sale of the 

    
      
        
        

      

      
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    participation
      to such Participant is made with the Borrower’s prior written consent. A
      Participant that would be a Foreign Lender if it were a Lender shall not be
      entitled to the benefits of Section
      5.03  
      unless
      the Borrower is notified of the participation sold to such Participant and
      such
      Participant agrees, for the benefit of the Borrower, to comply with Section
      5.03  (e)
      as
      though it were a Lender.

     

    (d)  Any
      Lender may at any time pledge or assign a security interest in all or any
      portion of its rights under this Agreement to secure obligations of such Lender,
      including, without limitation, any pledge or assignment to secure obligations
      to
      a Federal Reserve Bank, and this Section
      12.04  (d)
      shall
      not apply to any such pledge or assignment of a security interest; provided
      that
      no such pledge or assignment of a security interest shall release a Lender
      from
      any of its obligations hereunder or substitute any such pledgee or assignee
      for
      such Lender as a party hereto.

     

    (e)  Notwithstanding
      any other provisions of this Section
      12.03  (a),
      no
      transfer or assignment of the interests or obligations of any Lender or any
      grant of participations therein shall be permitted if such transfer, assignment
      or grant would require the Borrower and the Guarantors to file a registration
      statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any
      state.

     

    Section
      12.05    Survival;
      Revival; Reinstatement.
      

     

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

     

    Section
      12.06    Counterparts;
      Integration; Effectiveness.
      

     

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

     

    (b)  This
      Agreement, the other Loan Documents and any separate letter agreements with
      respect to fees payable to the Administrative Agent constitute the entire
      contract among the parties relating to the subject matter hereof and thereof
      and
      supersede any and all previous agreements and understandings, oral or written,
      relating to the subject matter hereof and 

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    (a)  THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
      SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
      LAW
      OF THE STATE OF NEW YORK.

     

    (b)  EACH
      CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
      ITS
      PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
      NEW
      YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
      ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR 

    
      
        
        

      

      
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    RECOGNITION
      OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY
      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 OR,
      TO
      THE EXTENT PERMITTED BY 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 SHALL AFFECT
      ANY
      RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING
      ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY
      OR
      ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     

    (c)  EACH
      CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
      EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW
      OR
      HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
      OUT OF OR RELATING TO THIS AGREEMENT 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 LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

     

    (d)  EACH
      PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
      PROVIDED FOR NOTICES IN SECTION 12.01. NOTHING IN THIS AGREEMENT WILL AFFECT
      THE
      RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER
      PERMITTED BY LAW.

     

    (e)  EACH
      PARTY HERETO HEREBY 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 THE TRANSACTIONS
      CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
      EACH
      PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
      OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
      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 BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
      CERTIFICATIONS IN THIS SECTION.

     

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

      
        
          
          

          
          

        

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

     

    Each
      Lender acknowledges that information furnished to it pursuant to this Agreement
      or the other Loan Documents may include material non-public information
      concerning the Borrower and its Affiliates and their related parties or their
      respective securities, and confirms that it has developed compliance procedures
      regarding the use of material non-public information and that it will handle
      such material non-public information in accordance with those procedures and
      applicable law, including Federal and state securities laws.

     

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

     

    Section
      12.12    EXCULPATION
      PROVISIONS.
      EACH OF
      THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT
      

    
      
        
        

      

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

     

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

     

    Section
      12.14    USA
      Patriot Act Notice.
      Each
      Lender hereby notifies each Credit Party 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 each Credit
      Party which information includes the name and address of each Credit Party
      and
      other information that will allow such Lender to identify the each Credit Party
      in accordance with the Act.

     

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

     

    BORROWER:                                                                                       
      MCMORAN
      OIL
& GAS LLC

     

    By:
      _________________________     

    Name:

    Title:

    


    


    
      
        
        

        
        

      

      
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    ADMINISTRATIVE
      AGENT:                                                            JPMORGAN
      CHASE BANK, N.A.,

    as
      Administrative Agent

     

    


    By:
      _____________________________

    Name:
       

    Title:
       

    


    



    
      
        
        

        
        

      

      
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    SYNDICATION
      AGENT:                                                                  
TD
      SECURITIES (USA) LLC,

    as
      Syndication Agent

     

    


    By:__________________________

    Name:
       

    Title:
       

    


    



    
      
        
           

        

        
        

      

      
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    LENDER:                                                                                              
      JPMORGAN
      CHASE BANK, N.A., as a 

    Lender

    


    


    By: ________________________________ 

    Name: 

    Title:

     

    


    TORONTO
      DOMINION (TEXAS) LLC

    Lender

    


    


    By:
      __________________________________    

    Name: 

    Title:

     

    


     


    
      
        
        

        
        

      

      
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