Exhibit
10.1


 


EXECUTION VERSION


 




 





 


AMENDED AND
RESTATED CREDIT AGREEMENT


 


dated as of

March 17, 2006


 


among


 


EXCO RESOURCES,
INC.,

as Borrower


 


CERTAIN
SUBSIDIARIES OF BORROWER,

as Guarantors


 


The Lenders Party
Hereto


 


JPMORGAN CHASE
BANK, N.A.,

as Administrative Agent


 


J.P. MORGAN
SECURITIES INC.,

as Sole Bookrunner and Lead Arranger


 


$1,250,000,000
Senior Secured Revolving Credit Facility


 




 





 





 

















 


TABLE OF CONTENTS


 


	
  Article I Definitions

  	
  1

  
	
   

  	
  Section 1.01.

  	
  Defined Terms

  	
  1

  
	
   

  	
  Section 1.02.

  	
  Classification of Loans
  and Borrowings

  	
  24

  
	
   

  	
  Section 1.03.

  	
  Terms Generally

  	
  24

  
	
   

  	
  Section 1.04.

  	
  Accounting Terms; GAAP

  	
  25

  
	
   

  	
  Section 1.05.

  	
  Oil and Gas Definitions

  	
  25

  
	
   

  	
  Section 1.06.

  	
  Time of Day

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Article II The Credits

  	
  25

  
	
   

  	
  Section 2.01.

  	
  Commitments

  	
  25

  
	
   

  	
  Section 2.02.

  	
  Termination and Reduction
  of the Aggregate Commitment

  	
  25

  
	
   

  	
  Section 2.03.

  	
  Increases in the
  Aggregate Commitment

  	
  26

  
	
   

  	
  Section 2.04.

  	
  Loans and Borrowings

  	
  28

  
	
   

  	
  Section 2.05.

  	
  Requests for Revolving
  Borrowings

  	
  28

  
	
   

  	
  Section 2.06.

  	
  Swingline Loans

  	
  29

  
	
   

  	
  Section 2.07.

  	
  Letters of Credit

  	
  30

  
	
   

  	
  Section 2.08.

  	
  Funding of Borrowings

  	
  34

  
	
   

  	
  Section 2.09.

  	
  Interest Elections

  	
  35

  
	
   

  	
  Section 2.10.

  	
  Repayment of
  Loans; Evidence of Debt

  	
  36

  
	
   

  	
  Section 2.11.

  	
  Optional Prepayment of
  Loans

  	
  37

  
	
   

  	
  Section 2.12.

  	
  Mandatory Prepayment of
  Loans

  	
  38

  
	
   

  	
  Section 2.13.

  	
  Fees

  	
  39

  
	
   

  	
  Section 2.14.

  	
  Interest

  	
  40

  
	
   

  	
  Section 2.15.

  	
  Alternate Rate of
  Interest

  	
  40

  
	
   

  	
  Section 2.16.

  	
  Increased Costs

  	
  41

  
	
   

  	
  Section 2.17.

  	
  Break Funding Payments

  	
  42

  
	
   

  	
  Section 2.18.

  	
  Taxes

  	
  43

  
	
   

  	
  Section 2.19.

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

  	
  44

  
	
   

  	
  Section 2.20.

  	
  Mitigation Obligations;
  Replacement of Lenders

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Article III Borrowing
  Base

  	
  47

  
	
   

  	
  Section 3.01.

  	
  Reserve Report;
  Proposed Borrowing Base

  	
  47

  
	
   

  	
  Section 3.02.

  	
  Scheduled
  Redeterminations of the Borrowing Base; Procedures and Standards

  	
  48

  
	
   

  	
  Section 3.03.

  	
  Special
  Redeterminations

  	
  54

  
	
   

  	
  Section 3.04.

  	
  Notice of
  Redetermination

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IV
  Representations and Warranties

  	
  49

  
	
   

  	
  Section 4.01.

  	
  Organization; Powers

  	
  49

  
	
   

  	
  Section 4.02.

  	
  Authorization;
  Enforceability

  	
  49

  
	
   

  	
  Section 4.03.

  	
  Governmental Approvals;
  No Conflicts

  	
  50

  



 


i

















 


	
   

  	
  Section 4.04.

  	
  Financial Condition; No
  Material Adverse Change

  	
  50

  
	
   

  	
  Section 4.05.

  	
  Properties

  	
  50

  
	
   

  	
  Section 4.06.

  	
  Litigation and
  Environmental Matters

  	
  51

  
	
   

  	
  Section 4.07.

  	
  Compliance with Laws
  and Agreements

  	
  51

  
	
   

  	
  Section 4.08.

  	
  Investment Company
  Status

  	
  51

  
	
   

  	
  Section 4.09.

  	
  Taxes

  	
  51

  
	
   

  	
  Section 4.10.

  	
  ERISA

  	
  52

  
	
   

  	
  Section 4.11.

  	
  Disclosure

  	
  52

  
	
   

  	
  Section 4.12.

  	
  Labor Matters

  	
  52

  
	
   

  	
  Section 4.13.

  	
  Capitalization and
  Credit Party Information

  	
  52

  
	
   

  	
  Section 4.14.

  	
  Margin Stock

  	
  52

  
	
   

  	
  Section 4.15.

  	
  Oil and Gas Interests

  	
  53

  
	
   

  	
  Section 4.16.

  	
  Insurance

  	
  53

  
	
   

  	
  Section 4.17.

  	
  Solvency

  	
  53

  
	
   

  	
  Section 4.18.

  	
  Deposit Accounts

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Article V Conditions

  	
  54

  
	
   

  	
  Section 5.01.

  	
  Effective Date

  	
  54

  
	
   

  	
  Section 5.02.

  	
  Each Credit Event

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VI Affirmative
  Covenants

  	
  57

  
	
   

  	
  Section 6.01.

  	
  Financial Statements;
  Other Information

  	
  57

  
	
   

  	
  Section 6.02.

  	
  Notices of Material
  Events

  	
  59

  
	
   

  	
  Section 6.03.

  	
  Existence; Conduct of
  Business

  	
  60

  
	
   

  	
  Section 6.04.

  	
  Payment of Obligations

  	
  60

  
	
   

  	
  Section 6.05.

  	
  Maintenance of
  Properties; Insurance

  	
  61

  
	
   

  	
  Section 6.06.

  	
  Books and Records;
  Inspection Rights

  	
  61

  
	
   

  	
  Section 6.07.

  	
  Compliance with Laws

  	
  61

  
	
   

  	
  Section 6.08.

  	
  Use of Proceeds and
  Letters of Credit

  	
  61

  
	
   

  	
  Section 6.09.

  	
  Mortgages

  	
  62

  
	
   

  	
  Section 6.10.

  	
  Title Data

  	
  62

  
	
   

  	
  Section 6.11.

  	
  Swap Agreements

  	
  62

  
	
   

  	
  Section 6.12.

  	
  Operation of Oil and
  Gas Interests

  	
  63

  
	
   

  	
  Section 6.13.

  	
  Restricted Subsidiaries

  	
  63

  
	
   

  	
  Section 6.14.

  	
  Pledged Equity
  Interests

  	
  63

  
	
   

  	
  Section 6.15.

  	
  Production Proceeds and
  Bank Accounts

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VII Negative
  Covenants

  	
  64

  
	
   

  	
  Section 7.01.

  	
  Indebtedness

  	
  64

  
	
   

  	
  Section 7.02.

  	
  Liens

  	
  65

  
	
   

  	
  Section 7.03.

  	
  Fundamental Changes

  	
  66

  
	
   

  	
  Section 7.04.

  	
  Investments, Loans,
  Advances, Guarantees and Acquisitions

  	
  67

  
	
   

  	
  Section 7.05.

  	
  Swap Agreements

  	
  68

  
	
   

  	
  Section 7.06.

  	
  Restricted Payments

  	
  68

  
	
   

  	
  Section 7.07.

  	
  Transactions with
  Affiliates

  	
  68

  
	
   

  	
  Section 7.08.

  	
  Restrictive Agreements

  	
  69

  
	
   

  	
  Section 7.09.

  	
  Disqualified Stock

  	
  69

  



 


ii

















 


	
   

  	
  Section 7.10.

  	
  Amendments to
  Organizational Documents and Senior Note Documents

  	
  69

  
	
   

  	
  Section 7.11.

  	
  Financial Covenants

  	
  70

  
	
   

  	
  Section 7.12.

  	
  Sale and Leaseback
  Transactions and other Off-Balance Sheet Liabilities

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VIII Guarantee
  of Obligations

  	
  70

  
	
   

  	
  Section 8.01.

  	
  Guarantee of Payment

  	
  70

  
	
   

  	
  Section 8.02.

  	
  Guarantee Absolute

  	
  70

  
	
   

  	
  Section 8.03.

  	
  Guarantee Irrevocable

  	
  71

  
	
   

  	
  Section 8.04.

  	
  Reinstatement

  	
  71

  
	
   

  	
  Section 8.05.

  	
  Subrogation

  	
  71

  
	
   

  	
  Section 8.06.

  	
  Subordination

  	
  71

  
	
   

  	
  Section 8.07.

  	
  Payments Generally

  	
  72

  
	
   

  	
  Section 8.08.

  	
  Setoff

  	
  72

  
	
   

  	
  Section 8.09.

  	
  Formalities

  	
  72

  
	
   

  	
  Section 8.10.

  	
  Limitations on
  Guarantee

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IX Events of
  Default

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  Article X The
  Administrative Agent

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XI
  Miscellaneous

  	
  77

  
	
   

  	
  Section 11.01.

  	
  Notices.

  	
  77

  
	
   

  	
  Section 11.02.

  	
  Waivers; Amendments

  	
  78

  
	
   

  	
  Section 11.03.

  	
  Expenses; Indemnity;
  Damage Waiver

  	
  79

  
	
   

  	
  Section 11.04.

  	
  Successors and Assigns

  	
  81

  
	
   

  	
  Section 11.05.

  	
  Survival

  	
  84

  
	
   

  	
  Section 11.06.

  	
  Counterparts;
  Integration; Effectiveness

  	
  85

  
	
   

  	
  Section 11.07.

  	
  Severability

  	
  85

  
	
   

  	
  Section 11.08.

  	
  Right of Setoff

  	
  85

  
	
   

  	
  Section 11.09.

  	
  GOVERNING LAW;
  JURISDICTION; CONSENT TO SERVICE OF PROCESS

  	
  85

  
	
   

  	
  Section 11.10.

  	
  WAIVER OF JURY TRIAL

  	
  86

  
	
   

  	
  Section 11.11.

  	
  Headings

  	
  86

  
	
   

  	
  Section 11.12.

  	
  Confidentiality

  	
  87

  
	
   

  	
  Section 11.13.

  	
  Interest Rate
  Limitation

  	
  87

  
	
   

  	
  Section 11.14.

  	
  USA PATRIOT Act

  	
  87

  
	
   

  	
  Section 11.15.

  	
  Original Credit
  Agreement

  	
  88

  
	
   

  	
  Section 11.16.

  	
  Reaffirmation and Grant
  of Security Interest

  	
  88

  
	
   

  	
  Section 11.17.

  	
  Reallocation of
  Aggregate Commitment

  	
  88

  



 


iii

















 


SCHEDULES:


 


Schedule 2.01 – Applicable
Percentages and Initial Commitments


Schedule 4.06 – Disclosed
Matters


Schedule 4.13 –
Capitalization and Credit Party Information


Schedule 4.18 – Deposit
and Investment Accounts


Schedule 7.01 – Existing
Indebtedness


Schedule 7.02 – Existing
Liens


Schedule 7.07 –
Transactions with Affiliates


Schedule 7.08 – Existing
Restrictions


 


EXHIBITS:


 


Exhibit A – Form of
Assignment and Assumption


Exhibit
B – Form of Opinion of Borrower’s Counsel


Exhibit
C – Form of Counterpart Agreement


Exhibit
D – Form of Solvency Certificate


Exhibit
E – Form of Note


 


iv

















 


AMENDED AND RESTATED
CREDIT AGREEMENT dated as of March 17, 2006, among EXCO RESOURCES, INC., as
Borrower, CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party
hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.


 


The parties hereto agree
as follows:


 


Article I


 


Definitions


 


Section 1.01.          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.


 


“Acquisition”
means, the acquisition by the Borrower or any Restricted Subsidiary, whether by
purchase, merger (and, in the case of a merger with any such Person, with such
Person being the surviving corporation) or otherwise, of all or substantially
all of the Equity Interest of, or the business, property or fixed assets of or
business line or unit or a division of, any other Person primarily engaged in
the business of producing oil or natural gas or the acquisition by the Borrower
or any Restricted Subsidiary of property or assets consisting of Oil and Gas Interests.


 


“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 Agent”
means JPMorgan Chase Bank, in its capacity as contractual representative of the
Lenders hereunder pursuant to Article X and not in its individual capacity as a
Lender, and any successor agent appointed pursuant to Article X.


 


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


 


“Advance Payment
Contract” means any contract whereby any Credit Party either
(a) receives or becomes entitled to receive (either directly or
indirectly) any payment (an “Advance Payment”) to be applied toward
payment of the purchase price of Hydrocarbons produced or to be produced from
Oil and Gas Interests owned by any Credit Party and which Advance Payment is,
or is to be, paid in advance of actual delivery of such production to or for
the account of the purchaser regardless of such production, or (b) grants
an option or right of refusal to the purchaser to take delivery of such
production in lieu of payment, and, in either of


 


1

















 


the foregoing instances, the Advance Payment is, or is to be, applied
as payment in full for such production when sold and delivered or is, or is to
be, applied as payment for a portion only of the purchase price thereof or of a
percentage or share of such production; provided that inclusion of the standard “take or pay”
provision in any gas sales or purchase contract or any other similar contract
shall not, in and of itself, constitute such contract as an Advance Payment
Contract for the purposes hereof.


 


“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.


 


“Aggregate Commitment”
means the amount equal to the lesser of (i) the Maximum Facility Amount and
(ii) the Borrowing Base; provided that the initial Aggregate Commitment is
$300,000,000. The Aggregate Commitment may be reduced or increased pursuant to
Section 2.02 and Section 2.03; provided that in no event shall the Aggregate
Commitment exceed the Borrowing Base or be less than the lesser of (a) the
Borrowing Base or (b) $300,000,000. If at any time the Borrowing Base is reduced
below the Aggregate Commitment in effect prior to such reduction, the Aggregate
Commitment shall be reduced automatically to the amount of the Borrowing Base
in effect at such time.


 


“Aggregate Credit
Exposure” means, as of any date of determination, the aggregate amount of
the Credit Exposure of all of the Lenders as of such date.


 


“Agreement” means
this Amended and Restated Credit Agreement, dated as of March 17, 2006 as it
may be amended, supplemented or otherwise modified from time to time.


 


“Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) 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.


 


“Appalachia Properties”
means, at any time, the Mortgaged Properties owned by North Coast, North Coast
Eastern or any of their respective Subsidiaries and located in Ohio,
Pennsylvania,West Virginia or any other state specified by the Borrower and
acceptable to the Administrative Agent at such time.


 


“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. The initial
amount of each Lender’s Applicable Percentage is as set forth on Schedule 2.01.
If the Aggregate Commitment has terminated or expired, the Applicable
Percentages shall be determined based upon the Aggregate Commitment most
recently in effect, giving effect to any subsequent assignments.


 


“Applicable Rate”
means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with
respect to the Unused Commitment Fees payable hereunder, as the case may be,
the applicable rate per annum set forth below under the caption “ABR Spread”,


 


2

















 


“Eurodollar Spread” or “Unused Commitment Fee Rate”, as the case may
be, based upon the Borrowing Base Usage applicable on such date:


 




	
  Borrowing Base

  Usage

  	
   

  	
  Eurodollar

  Spread

  	
   

  	
  ABR

  Spread

  	
   

  	
  Unused

  Commitment

  Fee Rate

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  >
  90%

  	
   

  	
  175 b.p.

  	
   

  	
  75 b.p.

  	
   

  	
  37.5 b.p.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  >
  75% and < 90%

  	
   

  	
  150 b.p.

  	
   

  	
  50 b.p.

  	
   

  	
  37.5 b.p.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  >
  50% and < 75%

  	
   

  	
  125 b.p.

  	
   

  	
  25 b.p.

  	
   

  	
  30 b.p.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  < 50%

  	
   

  	
  100 b.p.

  	
   

  	
  0 b.p.

  	
   

  	
  25 b.p.

  






 


Each change in the
Applicable Rate shall apply during the period commencing on the effective date
of such change and ending on the date immediately preceding the effective date
of the next change.


 


“Approved Counterparty”
means, at any time and from time to time, (i) any Person engaged in the
business of writing Swap Agreements for commodity, interest rate or currency
risk that is acceptable to the Administrative Agent and has (or the credit
support provider of such Person has), at the time Borrower or any Restricted
Subsidiary enters into a Swap Agreement with such Person, a long term senior
unsecured debt credit rating of BBB+ or better from S&P or Baa1 or better
from Moody’s and (ii) any Lender Counterparty.


 


“Approved Fund”
has the meaning assigned to such term in Section 11.04.


 


“Approved Investor”
means (a) a BP Investor and (b) any Person other than the Persons described in
clause (a) of the definition of “Control Group” to whom Equity Interests of the
Borrower are transferred or assigned with the prior written consent of the
Required Lenders, which consent shall not be unreasonably withheld, conditioned
or delayed. For the avoidance of doubt, any assignment or transfer of Equity
Interests of the Borrower by any Person to any Person other than a BP Investor
or the Persons described in clause (a) of the definition of “Control Group” is
subject to the foregoing, including any transferee or assignee of such Person.


 


“Approved Petroleum
Engineer” means Lee Keeling & Associates or any other reputable firm of
independent petroleum engineers selected by the Borrower and approved by the
Administrative Agent and the Required Lenders which approval shall not be
unreasonably withheld.


 


“Arranger” means
J.P. Morgan Securities Inc. in its capacity as sole bookrunner and lead
arranger.


 


“Assessment Rate”
means, for any day, the annual assessment rate in effect on such day that is
payable by a member of the Bank Insurance Fund classified as “well-capitalized”
and within supervisory subgroup “B” (or a comparable successor risk
classification) within the meaning of 12 C.F.R. Part 327 (or any successor
provision) to the


 


3

















 


Federal Deposit Insurance Corporation for insurance by such Corporation
of time deposits made in Dollars at the offices of such member in the United
States; provided that if, as a result of any change in any law, rule or
regulation, it is no longer possible to determine the Assessment Rate as
aforesaid, then the Assessment Rate shall be such annual rate as shall be
determined by the Administrative Agent to be representative of the cost of such
insurance to the Lenders.


 


“Assignment and
Assumption” means an assignment and assumption entered into by a Lender and
an Eligible Assignee, and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.


 


“Availability Period”
means the period from and including the Effective Date to but excluding the
earlier of the Maturity Date and the date of termination of the Aggregate
Commitment.


 


“Base CD Rate”
means the sum of (a) the Three-Month Secondary CD Rate multiplied by the
Statutory Reserve Rate plus (b) the Assessment Rate.


 


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


 


“Borrower” means
EXCO Resources, Inc., a Texas corporation, and its successors and permitted
assigns.


 


“Borrower Materials”
has the meaning assigned to such term in Section 6.01.


 


“Borrowing” means
(a) Revolving 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 or (b) a Swingline Loan.


 


“Borrowing Base”
means, at any time an amount equal to the amount determined in accordance with
Section 3.01, as the same may be redetermined, adjusted or reduced from time to
time pursuant to Section 3.02 and Section 3.03.


 


“Borrowing Base
Deficiency” means, as of any date, the amount, if any, by which the
Aggregate Credit Exposure on such date exceeds the Borrowing Base in effect on
such date; provided, that, for purposes of determining the existence and
amount of any Borrowing Base Deficiency, obligations under any Letter of Credit
will not be deemed to be outstanding to the extent such obligations are secured
by cash in the manner contemplated by Section 2.07(j).


 


“Borrowing Base
Properties” means all Oil and Gas Interests of the Borrower and the
Restricted Subsidiaries evaluated by the Lenders for purposes of establishing
the Borrowing Base.


 


“Borrowing Base Usage”
means, as of any date and for all purposes, the quotient, expressed as a
percentage, of (i) the Aggregate Credit Exposure as of such date, divided by
(ii) the Borrowing Base as of such date.


 


4

















 


“Borrowing Request”
means a request by the Borrower for a Revolving Borrowing in accordance with
Section 2.05.


 


“BP Investor”
means, collectively, (a) BP EXCO Holdings LP, a Texas limited partnership and
any other investment fund managed by BP Capital Management LP, and (b) Boone
Pickens, any Affiliate of Boone Pickens, any spouse or lineal descendant of
Boone Pickens (whether natural or adopted), the estate of Boone Pickens, and
any trust solely for the benefit of Boone Pickens and/or his spouse and/or
lineal descendants


 


“Business Day”
means any day that is not a Saturday, Sunday or other day on which commercial
banks in Chicago, Illinois or Dallas, Texas are authorized or required by law
to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term “Business Day” shall also exclude any day on
which banks are not open for dealings in dollar deposits in the London
interbank market.


 


“Capital Lease
Obligations” of any Person means the obligations of such Person to pay rent
or other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.


 


“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 the Issuing Bank (or,
for purposes of Section 2.16(b), by any lending office of such Lender or by
such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.


 


“Change of Control”
means (i) 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 Securities and Exchange Commission
thereunder as in effect on the Effective Date) other than the Control Group, of
Equity Interests representing more than 30% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Interests of Borrower;
or (ii) occupation of a majority of the seats (other than vacant seats) on the
board of directors of Borrower by persons who were neither (1) nominated by the
board of directors of Borrower nor (2) appointed by directors so nominated; or
(iii) the acquisition of direct or indirect Control of Borrower by any Person
or group other than the Control Group.


 


“Charges” has the
meaning assigned to such term in Section 11.13.


 


“Class” where used
in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are Revolving Loans or Swingline Loans.


 


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


 


5

















 


“Collateral” means
all assets, whether now owned or hereafter acquired by any Borrower or any
other Credit Party, in which a Lien is granted or purported to be granted to
any Secured Party as security for any Obligation.


 


“Commitment”
means, with respect to each Lender, the commitment of such Lender to make Loans
and to acquire participations in Letters of Credit and Swingline Loans
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced
or increased from time to time pursuant to Section 2.02 and Section 2.03, (b)
reduced or increased from time to time as a result of changes in the Borrowing
Base pursuant to Article III and (c) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.04. The
initial amount of each Lender’s Commitment (which amount is such Lender’s
Applicable Percentage of the initial Aggregate Commitment) is set forth in
Schedule 2.01, or in the Assignment and Assumption pursuant to which such
Lender shall have assumed its Commitment, as applicable.


 


“Consolidated Current
Assets” means, as of any date of determination, the total of (i) the
consolidated current assets of the Borrower and the Restricted Subsidiaries
determined in accordance with GAAP as of such date and calculated on a combined
basis, plus, all Unused Commitments as of such date, (ii) less
any non-cash assets required to be included in consolidated current assets of
the Borrower and the Restricted Subsidiaries as a result of the application of
FASB Statement 133 as of such date.


 


“Consolidated Current
Liabilities” means, as of any date of determination, the total of (i)
consolidated current liabilities of the Borrower and the Restricted
Subsidiaries, as determined in accordance with GAAP as of such date, (ii) less
current maturities of the Revolving Loans, (iii) less any non-cash
obligations required to be included in consolidated current liabilities of the
Borrower and the Restricted Subsidiaries as a result of the application of FASB
Statement 133 as of such date.


 


“Consolidated Current
Ratio” means, as of any date of determination, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities as of such date.


 


“Consolidated EBITDAX”
means, with respect to the Borrower and its Restricted Subsidiaries for any
period, Consolidated Net Income for such period; plus, without
duplication and to the extent deducted in the calculation of Consolidated Net
Income for such period, the sum of (a) income or franchise Taxes paid or
accrued; (b) Consolidated Interest Expense; (c) amortization,
depletion and depreciation expense; (d) any non-cash losses or charges on
any Swap Agreement resulting from the requirements of FASB Statement 133 for
that period; (e) oil and gas exploration expenses (including all drilling,
completion, geological and geophysical costs) for such period; (f) losses
from sales or other dispositions of assets (other than Hydrocarbons produced in
the ordinary course of business) and other extraordinary or non-recurring
losses; (g) workover expenses for such period, (h) cash payments made during
such period as a result of the early termination of any Swap Agreement (giving
effect to any netting agreements); and (i) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business);
minus, to the extent included in the calculation of Consolidated Net Income for
such period; (j) the sum of (1) any non-cash gains on any Swap
Agreements resulting


 


6

















 


from the requirements of FASB Statement 133 for that period;
(2) extraordinary or non-recurring gains; and (3) gains from sales or
other dispositions of assets (other than Hydrocarbons produced in the ordinary
course of business); provided that, with respect to the determination of
Borrower’s compliance with the leverage ratio set forth in Section 7.11(b) for
any period, Consolidated EBITDAX shall be adjusted to give effect, on a pro
forma basis, to any Acquisitions made during such period as if such
Acquisitions were made at the beginning of such period.


 


“Consolidated Funded
Indebtedness” means, as of any date and without duplication, Indebtedness
of the Borrower and the Restricted Subsidiaries of the type described in
clauses (a), (b), (c), (d), (e), (f), (g) or (h) of the definition of
Indebtedness.


 


“Consolidated Interest
Expense” means for any period, without duplication, the aggregate of all
interest paid or accrued by the Borrower and its Restricted Subsidiaries, on a
consolidated basis, in respect of Indebtedness of any such Person, on a
consolidated basis, including all interest, fees and costs payable with respect
to the obligations related to such Indebtedness (other than fees and costs
which may be capitalized as transaction costs in accordance with GAAP) and the
interest component of Capitalized Lease Obligations, all as determined in
accordance with GAAP.


 


“Consolidated Net
Income” means for any period, the consolidated net income (or loss) of the
Borrower and its Consolidated Subsidiaries, as applicable, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Consolidated Subsidiary of the Borrower, or is merged into or
consolidated with the Borrower or any of its Consolidated Subsidiaries, as
applicable, and (b) the undistributed earnings of any Consolidated Subsidiary
of the Borrower, to the extent that the declaration or payment of dividends or
similar distributions by such Consolidated Subsidiary is not at the time
permitted by the terms of any contractual obligation (other than under any Loan
Document) or by any law applicable to such Consolidated Subsidiary.


 


“Consolidated
Subsidiaries” means, for any Person, any Subsidiary or other entity the
accounts of which would be consolidated with those of such Person in its
consolidated financial statements 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. “Controlling”
and “Controlled” have meanings correlative thereto.


 


“Control Group”
means (a) Douglas H. Miller, Stephen F. Smith, any Affiliate Controlled by any
such Person and any spouse or lineal descendants (whether natural or adopted)
of any such Person and any trust solely for the benefit of such Person and/or
such Person’s spouse and/or lineal descendants and (b) any Approved Investor.


 


“Counterpart Agreement”
means a Counterpart Agreement substantially in the form of Exhibit C delivered
by a Guarantor pursuant to Section 6.13.


 


7

















 


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


 


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


 


“Crude Oil” means
all crude oil and condensate.


 


“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.


 


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


 


“Disclosed Matters”
means the actions, suits and proceedings and the environmental matters
disclosed in Schedule 4.06.


 


“Disqualified Stock”
means any Equity Interest, which, 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, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof, in whole or in part, on or prior to the Maturity Date.


 


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


 


“Domestic Subsidiary”
means, with respect to any Person, a subsidiary of such Person that is
incorporated or formed under the laws of the United States of America, any
state thereof or the District of Columbia.


 


“Effective Date”
means the date on which the conditions specified in Section 5.01 are satisfied
(or waived in accordance with Section 11.02).


 


“Eligible Account”
has the meaning assigned to such term in Section 6.15.


 


“Eligible Assignee”
means any Person that qualifies as an assignee pursuant to Section 11.04(b)(i);
provided that notwithstanding the foregoing, “Eligible Assignee” shall not
include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.


 


“Engineered Value”
means, the value attributed to the Borrowing Base Properties for purposes of
the most recent Redetermination of the Borrowing Base pursuant to Article III
(or for purposes of determining the Initial Borrowing Base in the event no such
Redetermination


 


8

















 


has occurred), based upon the discounted present value of the estimated
net cash flow to be realized from the production of Hydrocarbons from the
Borrowing Base Properties as set forth in the Reserve Report.


 


“Environmental Laws”
means all laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
release or threatened release of any Hazardous Material or to health and safety
matters.


 


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


 


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


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.


 


“ERISA Affiliate”
means any trade or business (whether or not incorporated) that, together with
any Credit Party, is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the Code.


 


“ERISA Event”
means (a) any “reportable event”, as defined in Section 4043 of ERISA
or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by any
Credit Party or any of its ERISA Affiliates of any liability under
Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by any Credit Party or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice, concerning the


 


9

















 


imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.


 


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


 


“Event of Default”
has the meaning assigned to such term in Article IX.


 


“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, the Issuing Bank
or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
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 is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.20(b)), 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 2.18(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 2.18(a).


 


“Existing Swap
Agreements” means any Swap Agreements entered into between the Borrower or
any Guarantor and any Lender Counterparty prior to the Effective Date and in effect
on the Effective Date.


 


“FASB” means
Financial Accounting Standards Board.


 


“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.


 


“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
that in which any Credit Party 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.


 


“GAAP” means
generally accepted accounting principles in the United States of America.


 


10

















 


“Gas Balancing
Agreement” means any agreement or arrangement whereby the Borrower or any
Restricted Subsidiary, or any other party having an interest in any
Hydrocarbons to be produced from Oil and Gas Interests in which the Borrower or
any Restricted Subsidiary owns an interest, has a right to take more than its
proportionate share of production therefrom.


 


“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 properly exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to
government.


 


“Guarantee” of or
by any Person (in this definition, the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment thereof,
(b) to purchase or lease property, securities or services for the purpose
of assuring the owner of such Indebtedness or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.


 


“Guaranteed
Liabilities” has the meaning assigned to such term in Section 8.01.


 


“Guarantor” means
each Restricted Subsidiary that is a party hereto or hereafter executes and
delivers to the Administrative Agent and the Lenders, a Counterpart Agreement
pursuant to Section 6.13 or otherwise.


 


“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.


 


“Hydrocarbons”
means all Crude Oil and Natural Gas produced from or attributable to the Oil
and Gas Interests of the Credit Parties.


 


“Increased Commitment
Date” has the meaning assigned to such term in Section 2.03.


 


“Indebtedness” of
any Person means, without duplication, (a) all obligations of such Person
for borrowed money or with respect to deposits or advances of any kind,
(b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all


 


11

















 


obligations of such Person upon which interest charges are paid,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person, (e) all
obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed,
(g) all Guarantees by such Person of Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all obligations, contingent
or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.


 


“Indemnified Taxes”
means Taxes other than Excluded Taxes.


 


“Indemnitee” has
the meaning assigned to such term in Section 11.03.


 


“Indenture” means
that certain Indenture dated as of January 20, 2004, by and among the Borrower,
certain Subsidiaries of the Borrower and the Trustee, as in effect on the date
hereof and as amended, modified, supplemented or restated from time to time
thereafter as permitted under this Agreement.


 


“Information” has
the meaning assigned to such term in Section 11.12.


 


“Initial Borrowing
Base” has the meaning assigned to such term in Section 3.01.


 


“Interest Election
Request” means a request by the Borrower to convert or continue a Borrowing
in accordance with Section 2.09.


 


“Interest Payment Date”
means (a) with respect to any ABR Loan (other than a Swingline Loan), the
last day of each calendar month, (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, and (c) with respect to any Swingline Loan,
the day that such Loan is required to be repaid.


 


“Interest Period”
means with respect to any Eurodollar Borrowing, the period commencing on the
date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the
Borrower may elect; provided, that (i) 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 (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar
month (or on a day


 


12

















 


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,
in the case of a Revolving Borrowing, thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.


 


“Issuing Bank”
means JPMorgan Chase Bank, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.07(i).
The Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing
Bank” shall include any such Affiliate with respect to Letters of Credit issued
by such Affiliate.


 


“JPMorgan Chase Bank”
and “JPMorgan Chase Bank, N.A.” means JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, N.A. Illinois) and its successors.


 


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


 


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


 


“Lender Counterparty”
means any Lender or any Affiliate of a Lender counterparty to a Swap Agreement
with any Credit Party.


 


“Lenders” means
the Persons listed on Schedule 2.01 and any other 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. Unless the context otherwise requires, the term “Lenders” includes
the Swingline Lender.


 


“Letter of Credit”
means any letter of credit issued pursuant to this Agreement and, to the extent
outstanding on the Effective Date, any letter of credit issued under the
Original Credit Agreement and any renewals thereof after the Effective Date.


 


“LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Page 3750 of the Telerate (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 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


 


13

















 


interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.


 


“Lien” means, with
respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such asset and
(c) in the case of securities, any purchase option, call or similar right
of a third party with respect to such securities.


 


“Loan Documents”
means this Agreement, any promissory notes executed in connection herewith,
Security Instruments, the Letters of Credit (and any applications therefore and
reimbursement agreements related thereto), the Fee Letter and any other
agreements executed in connection with this Agreement.


 


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


 


“Material Adverse
Effect” means a material adverse effect on (a) the assets or
properties, financial condition, businesses or operations of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of any Credit Party to carry
out its business as of the date of this Agreement or as proposed at the date of
this Agreement to be conducted, (c) the ability of any Credit Party to
perform fully and on a timely basis its respective obligations under any of the
Loan Documents to which it is a party, or (d) the validity or
enforceability of any of the Loan Documents or the rights and remedies of the
Administrative Agent or the Lenders under this Agreement and the other Loan
Documents.


 


“Material Domestic
Subsidiary” means any Domestic Subsidiary that owns or holds assets,
properties or interests (including Oil and Gas Interests) with an aggregate
fair market value, on a consolidated basis, greater than five percent (5%) of
the aggregate fair market value of all of the assets, properties and interests
(including Oil and Gas Interests) of the Borrower and the Restricted
Subsidiaries, on a consolidated basis.


 


“Material Gas
Imbalance” means, with respect to all Gas Balancing Agreements to which Borrower
or any Restricted Subsidiary is a party or by which any Oil and Gas Interests
owned by Borrower or a Restricted Subsidiary is bound, a net overproduced gas
imbalance to Borrower and the Restricted Subsidiaries, taken as a whole, in
excess of $5,000,000.


 


“Material Indebtedness”
means Indebtedness under the Senior Notes and any other Indebtedness (other
than the Loans and Letters of Credit), or obligations in respect of one or more
Swap Agreements, of the Borrower or any one or more of the Restricted
Subsidiaries in an aggregate principal amount exceeding $5,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of the Borrower or any Guarantor in respect of any Swap Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Guarantor would be required to pay if
such Swap Agreement were terminated at such time.


 


14

















 


“Material Sales
Contract” means, as of any date of determination, any agreement for the
sale of Hydrocarbons from the Borrowing Base Properties to which the Borrower
or any Restricted Subsidiary is a party if the aggregate volume of Hydrocarbons
sold pursuant to such agreement during the twelve months immediately preceding
such date equals or exceeds 10% of the aggregate volume of Hydrocarbons sold by
the Borrower and the Restricted Subsidiaries, on a consolidated basis, from the
Borrowing Base Properties during the twelve months immediately preceding such
date.


 


“Maturity Date”
means December 31, 2010.


 


“Maximum Facility
Amount” means $1,250,000,000.


 


“Maximum Liability”
has the meaning assigned to such term in Section 8.10.


 


“Maximum Rate” has
the meaning assigned to such term in Section 11.13.


 


“Moody’s” means
Moody’s Investors Service, Inc.


 


“Mortgaged Properties”
means the Oil and Gas Interests described in one or more duly executed,
delivered and filed Mortgages evidencing a first and prior Lien in favor of the
Administrative Agent for the benefit of the Secured Parties and subject only to
the Liens permitted pursuant to Section 7.02.


 


“Mortgages” means
all mortgages, deeds of trust, amendments to mortgages, security agreements,
assignments of production, pledge agreements, collateral mortgages, collateral
chattel mortgages, collateral assignments, financing statements and other
documents, instruments and agreements evidencing, creating, perfecting or
otherwise establishing the Liens required by Section 6.09. All Mortgages shall
be in form and substance satisfactory to Administrative Agent in its sole
discretion


 


“Multiemployer Plan”
means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.


 


“Natural Gas”
means all natural gas, distillate or sulphur, natural gas liquids and all
products recovered in the processing of natural gas (other than condensate)
including, without limitation, natural gasoline, coalbed methane gas,
casinghead gas, iso-butane, normal butane, propane and ethane (including such
methane allowable in commercial ethane).


 


“Net Cash Proceeds”
means, with respect to the sale of Borrowing Base Properties by the Borrower or
any Restricted Subsidiary, the excess, if any, of (a) the sum of cash and cash
equivalents received in connection with such sale, but only as and when so
received, over (b) the sum of (i) the principal amount of any Indebtedness that
is secured by such asset and that is required to be repaid in connection with
the sale thereof (other than the Loans), (ii) the out-of-pocket expenses incurred
by the Borrower or such Restricted Subsidiary in connection with such sale,
(iii) all legal, title and recording tax expense and all federal, state,
provincial, foreign and local taxes required to be accrued as a liability under
GAAP as a consequence of such sale, (iv) all distributions and other payments
required to be made to minority interest holders in Restricted Subsidiaries as
a result of such sale, (v) the deduction of


 


15

















 


appropriate amounts provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the property or other assets
disposed of in such sale and retained by the Borrower or any Restricted
Subsidiary after such sale, and (vi) any portion of the purchase price from
such sale placed in escrow, whether as a reserve for adjustment of the purchase
price, for satisfaction of indemnities in respect of such sale or otherwise in
connection with such sale; provided  however, that upon the
termination of that escrow, Net Cash Proceeds will be increased by any portion
of funds in the escrow that are released to the Borrower or any Restricted
Subsidiary.


 


“New Commitments”
has the meaning assigned to such term in Section 2.03.


 


“New Lender” has
the meaning assigned to such term in Section 2.03.


 


“Non-Consenting Lender”
has the meaning assigned to such term in Section 2.20(c).


 


“North Coast”
means North Coast Energy, Inc., a Delaware corporation and its successors.


 


“Obligations”
means all obligations of every nature of the Borrower from time to time owed to
the Administrative Agent, the Issuing Bank, the Lenders or any of them and the
Lender Counterparties under any Loan Document or Swap Agreement (including,
with respect to any transaction under any Swap Agreement, obligations owed
under the Existing Swap Agreements and obligations owed under any other Swap
Agreement with any Person that was a Lender Counterparty at the time any Credit
Party entered into such transaction), whether for principal, interest, reimbursement
of amounts drawn under any Letter of Credit, payments for early termination of
Swap Agreements, funding indemnification amounts, fees, expenses,
indemnification or otherwise.


 


“Off-Balance Sheet
Liability” of a Person means (i) any repurchase obligation or liability of
such Person with respect to accounts or notes receivable sold by such Person,
(ii) any liability under any Sale and Leaseback Transaction which is not a
Capital Lease Obligation, (iii) any liability under any so-called “synthetic
lease” transaction entered into by such Person, (iv) any Material Gas
Imbalance, (v) any Advance Payment Contract, or (vi) any obligation arising
with respect to any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the
balance sheets of such Person, but excluding from the foregoing clauses (iii)
through (vi) operating leases and usual and customary oil, gas and mineral
leases.


 


“Oil and Gas
Interest(s)” means: (a) direct and indirect interests in and rights with
respect to oil, gas, mineral and related properties and assets of any kind and
nature, direct or indirect, including, without limitation, working, royalty and
overriding royalty interests, mineral interests, leasehold interests,
production payments, operating rights, net profits interests, other non-working
interests, contractual interests, non-operating interests and rights in any
pooled, unitized or communitized acreage by virtue of such interest being a
part thereof; (b) interests in and rights with respect to Hydrocarbons other
minerals or revenues therefrom and contracts and agreements in connection
therewith and claims and rights thereto (including oil and gas leases,


 


16

















 


operating agreements, unitization, communitization and pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and agreements and,
in each case, interests thereunder), and surface interests, fee interests,
reversionary interests, reservations and concessions related to any of the
foregoing; (c) easements, rights-of-way, licenses, permits, leases, and other
interests associated with, appurtenant to, or necessary for the operation of
any of the foregoing; (d) interests in oil, gas, water, disposal and injection
wells, equipment and machinery (including well equipment and machinery), oil
and gas production, gathering, transmission, compression, treating, processing
and storage facilities (including tanks, tank batteries, pipelines and
gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible or intangible, movable or
immovable, real or personal property and fixtures located on, associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (e)
all seismic, geological, geophysical and engineering records, data,
information, maps, licenses and interpretations.


 


“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.


 


“Original Credit
Agreement” means, that certain Third Amended and Restated Credit Agreement
dated January 27, 2004, among Borrower, EXCO Operating, LP, a Delaware limited
partnership, North Coast and North Coast Eastern, as borrowers, the lenders
from time to time a party thereto, JPMorgan Chase Bank, as administrative
agent, BNP Paribas, as syndication agent, The Bank of Nova Scotia, as
co-documentation agent and Toronto-Dominion (Texas), as co-documentation agent,
as amended, supplemented or otherwise modified from time to time prior to the
Effective Date.


 


“Original Loans”
means the loans and other extensions of credit outstanding under the Original
Credit Agreement as of the Effective Date.


 


“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.


 


“Participant” has
the meaning assigned to such term in Section 11.04.


 


“Payment Currency”
has the meaning assigned to such term in Section 8.07.


 


“PBGC” means the
Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.


 


17

















 


“Permitted
Encumbrances” means:


 


(a) Liens imposed by law
for Taxes that are not yet due or are being contested in compliance with
Section 6.04;


 


(b) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, and contractual Liens granted to operators and non-operators
under oil and gas operating agreements, in each case, arising in the ordinary
course of business or incident to the exploration, development, operation and
maintenance of Oil and Gas Interests and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with Section
6.04;


 


(c) pledges and deposits
made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations;


 


(d) deposits to
secure the performance of bids, trade contracts, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;


 


(e) judgment liens
in respect of judgments that do not constitute an Event of Default under clause
(k) of Article IX;


 


(f) easements,
zoning restrictions, rights-of-way, servitudes, permits, surface leases, and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere with
the ordinary conduct of business of any Credit Party;


 


(g) royalties, overriding
royalties, reversionary interests and similar burdens with respect to the Oil
and Gas Interests owned by the Borrower or such Restricted Subsidiary, as the
case may be, if the net cumulative effect of such burdens does not operate to
deprive the Borrower or any Restricted Subsidiary of any material right in
respect of its assets or properties (except for rights customarily granted with
respect to such interests);


 


(h) Liens arising from
Uniform Commercial Code financing statement filings regarding operating leases
entered into by the Borrower or any Restricted Subsidiary in the ordinary
course of business covering the property under the lease; and


 


(i) preferential rights
to purchase, and provisions requiring a third party’s consent prior to
assignment and similar restraints on alienation, in each case, granted pursuant
to an oil and gas operating agreement and arising in the ordinary course of
business or incident to the exploration, development, operation and maintenance
of Oil and Gas Interests; provided such right, requirement or restraint does
not material affect the value of such Oil and Gas Interests;


 


provided
that the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness (other than contractual Liens described in the foregoing clause
(b) granted to


 


18

















 


operators and non-operators under oil and gas operating agreements to
the extent the obligations secured by such Liens constitute Indebtedness).


 


“Permitted Investments”
means:


 


(a) U.S. Government
Securities;


 


(b) investments in
demand and time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by
a bank or trust company which is organized under the laws of the United States
of America, any State thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated “A” (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act of 1933, as amended) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor;


 


(c) investments in
deposits available for withdrawal on demand with any commercial bank that is
organized under the laws of any country in which the Borrower or any Restricted
Subsidiary maintains an office or is engaged in the oil and gas business; provided,
however, that (i) all such deposits have been made in such accounts in
the ordinary course of business and (ii) such deposits do not at any one time
exceed $10,000,000 in the aggregate;


 


(d) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (a) above entered into with a bank meeting the
qualifications described in clause (b) above;


 


(e) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of Holdings or the Borrower)
organized and in existence under the laws of the United States of America or
any foreign country recognized by the United States of America with a rating at
the time as of which any investment therein is made of “P-1” (or higher)
according to Moody’s or “A-l” (or higher) according to S&P;


 


(f) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least “A” by S&P or “A” by Moody’s; and


 


(g) investments in
money market funds that invest substantially all their assets in securities of
the types described in clauses (a) through (f) above


 


“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 (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code or
Section 302


 


19

















 


of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.


 


“Platform” has the
meaning assigned to such term in Section 6.01.


 


“Pledge Agreement”
means a Pledge and Security Agreement in favor of the Administrative Agent for
the benefit of the Secured Parties covering, among other things, the rights and
interests of Borrower or any Restricted Subsidiary in the Equity Interest of
each Restricted Subsidiary and otherwise in form and substance satisfactory to
the Administrative Agent and the Required Lenders.


 


“Prime Rate” means
the rate of interest per annum publicly announced from time to time by JPMorgan
Chase Bank as its prime rate in effect at its principal office in Chicago, Illinois,
each change in the Prime Rate shall be effective from and including the date
such change is publicly announced as being effective.


 


“Projections”
means the Borrower’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a basis consistent
with the historical financial statements described in Section 4.04 and after
giving effect to the Transactions, together with appropriate supporting details
and a statement of underlying assumptions, in each case in form and substance
satisfactory to the Lenders.


 


“Public Lender”
has the meaning assigned to such term in Section 6.01.


 


“Redetermination”
means any Scheduled Redetermination or Special Redetermination.


 


“Redetermination Date”
means (a) with respect to any Scheduled Redetermination, each May 1 and
November 1 of each year, commencing November 1, 2006, and (b) with
respect to any Special Redetermination, the first day of the first month which
is not less than twenty (20) Business Days following the date of a request for
a Special Redetermination.


 


“Register” has the
meaning assigned to such term in Section 11.04.


 


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


 


“Required Lenders”
means, at any time, Lenders having Credit Exposures and Unused Commitments
representing at least 66-2/3% (or if there are less than four Lenders, at least
75%) of the sum of the Aggregate Credit Exposure and all Unused Commitments of
all Lenders at such time or, if the Aggregate Commitment has been terminated,
Lenders having Credit Exposures representing at least 66-2/3% (or if there are
less than four Lenders, at least 75%) of the Aggregate Credit Exposure of all
Lenders at such time; provided that the


 


20

















 


Commitment of and the Credit Exposures held or deemed held by any
Defaulting Lender shall be excluded for purposes of making a determination of
the Required Lenders.


 


“Reserve Report”
means an unsuperseded engineering analysis of the Borrowing Base Properties, in
form and substance reasonably acceptable to the Administrative Agent, prepared
in accordance with customary and prudent practices in the petroleum engineering
industry.


 


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


 


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


 


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


 


“Revolving Loan”
means a Loan made pursuant to Section 2.05.


 


“S&P” means
Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation.


 


“Sale and Leaseback
Transaction” means any sale or other transfer of any property by any Person
with the intent to lease such property as lessee.


 


“Scheduled
Redetermination” means any redetermination of the Borrowing Base pursuant
to Section 3.02.


 


“Secured Party”
means the Administrative Agent, any Lender and any Lender Counterparty and
shall include Lenders and Lender Counterparties to the extent that any
Obligations owing to such Persons were incurred while such Persons were Lenders
or Lender Counterparties.


 


“Security Instruments”
means collectively, all Guarantees of the Obligations evidenced by the Loan
Documents and all mortgages, security agreements, pledge agreements, collateral
assignments and other collateral documents covering the Oil and Gas Interests
of the Borrower and the Restricted Subsidiaries and the Equity Interests of the
Restricted Subsidiaries and other personal property, equipment, oil and gas
inventory and proceeds of the foregoing, all such documents to be in form and
substance reasonably satisfactory to the Administrative Agent.


 


21

















 


“Senior Note Documents” means the Senior Notes, the Indenture,
the Senior Notes Guaranty, collectively, or each of such documents singularly,
and any documents or instruments contemplated by or executed in connection with
any of them.


 


“Senior Notes” means the 7 1⁄4% Senior Notes due 2011 of the
Borrower issued pursuant to the Indenture, as amended, modified or supplemented
from time to time in accordance with the terms hereof.


 


“Senior Notes Guaranty” means a supplemental indenture, in a
form satisfactory to the Agent, pursuant to which a Subsidiary guarantees the
Borrower’s obligations with respect to the Senior Notes on the terms provided
for in the Indenture.


 


“Special Redetermination” means any redetermination of the
Borrowing Base made pursuant to Section 3.03.


 


“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 (a) with respect to the Base CD Rate, for new negotiable nonpersonal
time deposits in dollars over $100,000 with maturities approximately equal to
three months and (b) 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 be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.


 


“Subsidiary” means, with respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the ordinary
voting power or, in the case of a partnership, more than 50% of the general
partnership interests are, as of such date, owned, controlled or held, or
(b) that is, as of such date, otherwise Controlled, by the parent or one
or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent any subsidiary of the Borrower. Unless the context
otherwise clearly requires, references herein to a “Subsidiary” refer to 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
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or pricing indices or measures of economic, financial or pricing risk or value


 


22

















 


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 Credit
Parties shall be a Swap Agreement.


 


 “Swingline Exposure”
means, at any time, the aggregate principal amount of all Swingline Loans
outstanding at such time. The Swingline Exposure of any Lender at any time
shall be its Applicable Percentage of the total Swingline Exposure at such
time.


 


“Swingline Lender” means JPMorgan Chase Bank, in its capacity as
lender of Swingline Loans hereunder.


 


“Swingline Loan” means a Loan made pursuant to Section 2.06.


 


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


 


“Three-Month Secondary CD Rate” means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next
preceding Business Day) by the Board through the public information telephone line
of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day) or, if such rate is
not so reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day is not a
Business Day, on the next preceding Business Day) by the Administrative Agent
from three negotiable certificate of deposit dealers of recognized standing
selected by it.


 


“Transactions” means the (i) the prepayment and termination of
the TXOK Revolving Facility, (ii), the execution, delivery and performance by
the Credit Parties of this Agreement and the Loan Documents, (iii) the
borrowing of Loans, (iv) the use of the proceeds thereof, and (v) the issuance
of Letters of Credit hereunder.


 


“Trustee” means Wilmington Trust Company, in its capacity as
trustee under the Indenture and its permitted successors under the Indenture.


 


“TXOK” means TXOK Acquisition, Inc., a Delaware corporation, and
its successors.


 


“TXOK Revolving Facility” means that certain revolving credit
facility evidenced by that certain Credit Agreement dated September 27, 2005,
by and among TXOK, as borrower, certain Subsidiaries of TXOK , as guarantors,
the banks and other financial institutions and entities from time to time a
party thereto as lenders, and JPMorgan Chase Bank, as Administrative Agent, and
any promissory notes executed in connection therewith, security instruments and
any other agreements executed in connection with such Credit Agreement as the
same may be amended, modified, supplemented or restated from time to time.


 


23

















 


“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 Adjusted LIBO Rate or the
Alternate Base Rate.


 


“Unrestricted Subsidiary” means (a) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the Board
of Directors of the Borrower in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Borrower may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries is a Material Domestic Subsidiary or a Subsidiary
owning Oil and Gas Interests included in the Borrowing Base Properties.


 


“Unused Commitment” means, with respect to each Lender at any
time, such Lender’s Commitment at such time minus such Lender’s Credit Exposure
(other than such Lender’s Swingline Exposure) at such time.


 


“Unused Commitment Fee” has the meaning assigned to such term in
Section 2.13(a).


 


“U.S. Government Securities” means direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the date of
acquisition thereof.


 


“Withdrawal Liability” means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part I of Subtitle E of Title IV of
ERISA.


 


Section 1.02.          Classification of Loans and Borrowings.  For
purposes of this Agreement, Loans may be classified and referred to by Class (e.g.,
a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class
and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be
classified and referred to by Class (e.g., a “Revolving Borrowing”) or
by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g.,
a “Eurodollar Revolving Borrowing”).


 


Section 1.03.          Terms Generally.  The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the
same meaning and effect as the word “shall.” Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the
words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not


 


24





















 


to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e)
the words “asset” and “property” shall be construed to have the same meaning
and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.


 


Section 1.04.          Accounting Terms; GAAP.  Except
as otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided that, if the Borrower notifies the Administrative Agent
that the Borrower request an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies the Borrower that the Required Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any such notice
is given before or after such change in GAAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.


 


Section 1.05.          Oil and Gas Definitions.  For
purposes of this Agreement, the terms “proved [or] proven reserves,” “proved
developed reserves,” “proved [or] proven undeveloped reserves,” “proved [or]
proven developed nonproducing reserves” and “proved [or] proven developed
producing reserves,” have the meaning given such terms from time to time and at
the time in question by the Society of Petroleum Engineers of the American
Institute of Mining Engineers.


 


Section 1.06.          Time of Day.  Unless
otherwise specified, all references to times of day shall be references to
Central time (daylight or standard, as applicable).


 


Article II


 


The Credits


 


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


 


Section 2.02.          Termination and Reduction of the Aggregate
Commitment.


 


(a)           Unless previously terminated, the Aggregate
Commitment shall terminate on the Maturity Date.


 


(b)           The Borrower may at any time terminate, or
from time to time reduce, the Aggregate Commitment; provided that (i)
each reduction of the Aggregate Commitment shall be in an amount that is an
integral multiple of $5,000,000 and not less than


 


25

















 


$10,000,000, (ii) no such reduction shall reduce the Aggregate
Commitment to an amount that is less than the lesser of (1) the Borrowing Base
and (2) $300,000,000, and (iii) the Borrower shall not terminate or reduce the
Aggregate Commitment if, after giving effect to any concurrent prepayment of
the Loans in accordance with Section 2.11 and Section 2.12, the Aggregate
Credit Exposure would exceed the Aggregate Commitment.


 


(c)           The Borrower shall notify the Administrative
Agent of any election to terminate or reduce the Aggregate Commitment under
paragraph (b) of this Section at least three Business Days prior to the
effective date of such termination or reduction, specifying such election and
the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
notice delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Aggregate Commitment
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination of the Aggregate Commitment shall be permanent. Each reduction of
the Aggregate Commitment shall be made ratably among the Lenders in accordance
with their respective Commitment.


 


(d)           With respect to any sale, transfer or
disposition of Borrowing Base Properties (other than sales, transfers or
dispositions permitted under Section 7.04(a)(vi)), the Borrowing Base shall be
automatically reduced by an amount equal to the value assigned to such
Borrowing Base Properties by the Administrative Agent in connection with the
most recent Redetermination of the Borrowing Base preceding the date of such
sale (or in connection with the determination of the Initial Borrowing Base
with respect to any sale occurring prior to the first Redetermination of the
Borrowing Base).


 


Section 2.03.          Increases in the Aggregate Commitment. So long as no Default has occurred and is
continuing or would be caused by such increase, the Borrower may by written
notice to the Administrative Agent, elect to increase the existing Aggregate
Commitment in a minimum amount of $10,000,000 and integral multiples of
$5,000,000 in excess of that amount (any such increase, the “New Commitments”);
provided that the amount of such increase together with the existing
Aggregate Commitment does not, in the aggregate, exceed the lesser of (a) the
Maximum Facility Amount, or (b) the Borrowing Base then in effect. Each such
notice shall specify the date (each an “Increased Commitment Date”) on
which the Borrower proposes that the New Commitments shall be effective, which
shall be a date no less than 20 days after the date on which such notice is
delivered to the Administrative Agent. Within 5 days of such notice from the
Borrower, the Administrative Agent shall notify each Lender of the amount of
the New Commitments and each Lender’s allocation of the New Commitments based
on each Lender’s Applicable Percentage of the existing Aggregate Commitment.
Within 10 days of such notice from the Borrower, each Lender, in its sole
discretion, may elect or decline to provide its allocation of the New
Commitments. In the event any Lender declines to provide its allocation of the
New Commitments or fails to respond within ten days of such notice, each Lender
that has elected to provide its allocation, in its sole discretion, may elect
or decline to provide a portion of any other Lender’s declined allocation in
the same proportion that such Lender’s allocation bears


 


26

















 


to the aggregate amount of the allocations of all Lenders electing to
provide their respective allocations. In the event the Lenders do not elect to
provide all of the New Commitments, the Arranger and the Administrative Agent
shall, in consultation with the Borrower, use commercially reasonable efforts
to identify one or more Eligible Assignees to provide the New Commitments the
existing Lenders have declined to provide (each, a “New Lender”). Such
New Commitments shall become effective as of such Increased Commitment Date in
an aggregate amount equal to the amount the Lenders and any New Lenders have
elected to provide as of such date; provided that (1) no Default exists on such
Increased Commitment Date before or after giving effect to such New
Commitments, (2) the Borrower and its Subsidiaries are in pro forma compliance
with each of the financial covenants set forth in Section 7.11 as of the last
day of the most recently ended fiscal quarter of the Borrower after giving
effect to such New Commitments, (3) if any portion of the New Commitments are
provided by a New Lender, the New Commitments of such New Lender shall be
effected pursuant to an Assignment and Assumption, (4) the Borrower shall make
any payments required pursuant to Section 2.13 in connection with the New
Commitments (5) the Administrative Agent has received (i) copies, certified by
the secretary of the Borrower and each Guarantor, of their respective Board of
Directors’ resolutions and of resolutions or actions of any other body
authorizing the increase in the Aggregate Commitment and the confirmation and
ratification of the Guarantees and all other Loan Documents, (ii) a
certificate, signed by a Responsible Officer, showing that before and after
giving effect to the New Commitments, no Default or Event of Default shall
exist and the Borrower is in compliance with all covenants in this Agreement
and in pro forma compliance with the financial covenants set forth in Section
7.11, (iii) copies of all governmental and nongovernmental consents, approvals,
authorizations, declarations, registrations or filings required on the part of
the Borrower or any Guarantor in connection with the New Commitments, certified
as true and correct in full force and effect as of the date of the increase by
a duly authorized officer of the Borrower, or if none are required, a
certificate of such officer to that effect, (iv) evidence satisfactory to the
Administrative Agent that no event, change or circumstance shall have occurred
with respect to the Borrower and its Subsidiaries since the most recent
financial statements provided to the Lenders hereunder that could result in a
Material Adverse Effect and (v) such other documents and conditions as the
Administrative Agent or its counsel may have reasonably requested.


 


On any Increased Commitment
Date on which New Commitments are effected, subject to the satisfaction of the
foregoing terms and conditions, (a) each of the Lenders shall assign to each of
the New Lenders, and each of the New Lenders shall purchase from each of the Lenders,
at the principal amount thereof (together with accrued interest), such
interests in the Revolving Loans outstanding on such Increased Commitment Date
as shall be necessary in order that, after giving effect to all such
assignments and purchases, such Revolving Loans will be held by existing
Lenders and New Lenders ratably in accordance with their Commitments after
giving effect to the addition of such New Commitments to the Commitments, (b)
each New Commitment shall be deemed for all purposes a Commitment and each
Revolving Loan made thereunder shall be deemed, for all purposes, a Revolving
Loan and (c) each New Lender shall become a Lender with respect to the New
Commitment and all matters relating thereto.


 


27

















 


Section 2.04.          Loans and Borrowings.


 


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


 


(b)           Subject to Section 2.15, each Revolving
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith. Each Swingline Loan shall be an
ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan; provided
that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of this Agreement.


 


(c)           At the commencement of each Interest Period
for any Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $5,000,000.
At the time that each ABR Revolving Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $500,000 and not less
than $2,000,000; provided that an ABR Revolving Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the Aggregate
Commitment or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.07(e). Each Swingline Loan shall be
in an amount that is not less than $500,000. Borrowings of more than one Type
may be outstanding at the same time; provided that there shall not at
any time be more than a total of six (6) Eurodollar Revolving Borrowings
outstanding.


 


(d)           Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Eurodollar Borrowing if the Interest Period requested
with respect thereto would end after the Maturity Date.


 


Section 2.05.          Requests for Revolving Borrowings.  To
request a Revolving Borrowing, the Borrower shall notify the Administrative
Agent of such request by telephone (a) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., three Business Days before the date of the proposed
Eurodollar Borrowing or (b) in the case of an ABR Revolving Borrowing, not
later than 11:00 a.m., one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Revolving Borrowing
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.07(e) may be given not later than 10:00 a.m., on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request in a form approved by the Administrative
Agent and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section
2.04:


 


(i)            the aggregate amount of the requested Borrowing;


 


28

















 


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


 


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


 


(iv)          in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period contemplated
by the definition of the term “Interest Period”; 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 2.08.


 


If no election as to the Type of Revolving Borrowing is specified, then
the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest
Period is specified with respect to any requested Eurodollar Revolving Borrowing,
then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration. Promptly following receipt of a 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 2.06.          Swingline Loans.


 


(a)           Subject to the terms and conditions set forth
herein, the Swingline Lender agrees to make Swingline Loans to the Borrower
from time to time during the Availability Period, in an aggregate principal
amount at any time outstanding that will not result in (i) the aggregate
principal amount of outstanding Swingline Loans exceeding $10,000,000 or (ii)
the Aggregate Credit Exposure exceeding the Aggregate Commitment, provided that
the Swingline Lender shall not be required to make a Swingline Loan to
refinance an outstanding Swingline Loan. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Swingline Loans.


 


(b)           To request a Swingline Loan, the Borrower
shall notify the Administrative Agent of such request by telephone (confirmed
by telecopy), not later than 11:00 a.m., on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline
Loan. The Administrative Agent will promptly advise the Swingline Lender of any
such notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.07(e),
by remittance to the Issuing
Bank) by 3:00 p.m., on the requested date of such Swingline Loan.


 


(c)           The Swingline Lender may by written notice
given to the Administrative Agent not later than 10:00 a.m., on any Business
Day require the Lenders to acquire participations on such Business Day in all
or a portion of the Swingline Loans outstanding. Such notice shall specify the
aggregate amount of Swingline Loans in


 


29

















 


which Lenders will participate. Promptly upon receipt of such notice,
the Administrative Agent will give notice thereof to each Lender, specifying in
such notice such Lender’s Applicable Percentage of such Swingline Loan or
Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt
of notice as provided above, to pay to the Administrative Agent, for the
account of the Swingline Lender, such Lender’s Applicable Percentage of such
Swingline Loan or Loans. Each Lender acknowledges and agrees that its
obligation to acquire participations in Swingline Loans pursuant to this
paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph
by wire transfer of immediately available funds, in the same manner as provided
in Section 2.08 with respect to Loans made by such Lender (and Section 2.08
shall apply, mutatis mutandis, to the payment obligations of the Lenders), and
the Administrative Agent shall promptly pay to the Swingline Lender the amounts
so received by it from the Lenders. The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender. Any amounts
received by the Swingline Lender from the Borrower (or other party on behalf of
the Borrower) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear; provided that any such
payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Borrower for any reason. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.


 


Section 2.07.          Letters of Credit.


 


(a)           General.  Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters
of Credit for its own or the account of any Restricted Subsidiary in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.


 


(b)           Notice of Issuance, Amendment, Renewal,
Extension; Certain Conditions.  To request the issuance of a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit),
the Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance


 


30

















 


of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit the Borrower shall be deemed to represent and warrant
that), after giving effect to such issuance, amendment, renewal or extension
(i) the LC Exposure shall not exceed $50,000,000 and (ii) the Aggregate
Credit Exposure shall not exceed the Aggregate Commitment.


 


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


 


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


 


(e)           Reimbursement.  If
the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon on the date that such LC Disbursement is made, if the Borrower shall
have received notice of such LC Disbursement prior to 10:00 a.m. on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 12:00 noon on (i) the Business Day that the
Borrower receives such notice, if such notice is received prior to 10:00 a.m.
on the day of receipt, or (ii) the Business


 


31

















 


Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of
receipt; provided that the Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing or Swingline Loan. If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender’s Applicable Percentage thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.08 with respect to Loans made by such Lender
(and Section 2.08 shall apply, mutatis  mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a
Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC
Disbursement (other than the funding of ABR Loans or Swingline Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.


 


(f)            Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank,
nor any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not
be construed to excuse the Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages,


 


32

















 


claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross negligence
or willful misconduct on the part of the Issuing Bank (as finally determined by
a court of competent jurisdiction), the Issuing Bank shall be deemed to have
exercised care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect
to documents presented which appear on their face to be in substantial
compliance with the terms of a Letter of Credit, the Issuing Bank may, in its
sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.


 


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


 


(h)           Interim Interest.  If
the Issuing Bank shall make any LC Disbursement, then, unless the Borrower
shall reimburse such LC Disbursement in full on the date such LC Disbursement
is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to ABR Loans; provided that, if the Borrower fails to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section, then Section 2.14(c) shall apply. Interest accrued pursuant to this
paragraph shall be for the account of the Issuing Bank, except that interest
accrued on and after the date of payment by any Lender pursuant to paragraph
(e) of this Section to reimburse the Issuing Bank shall be for the account of
such Lender to the extent of such payment.


 


(i)            Replacement of the Issuing Bank.  The
Issuing Bank may be replaced at any time by written agreement among the
Borrower, the Administrative Agent, the replaced Issuing Bank and the successor
Issuing Bank. The Administrative Agent shall notify the Lenders of any such
replacement of the Issuing Bank. At the time any such replacement shall become
effective, the Borrower shall pay all unpaid fees accrued for the account of
the replaced Issuing Bank pursuant to Section 2.13(b). From and after the effective
date of any such replacement, (i) the successor Issuing Bank shall have all the
rights and obligations of the Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the
term “Issuing Bank” shall be deemed to refer to such successor or to any
previous Issuing Bank, or to such successor and all previous Issuing Banks, as
the context shall require. After the


 


33

















 


replacement of an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.


 


(j)            Cash Collateralization.  If
any Event of Default shall occur and be continuing, on the Business Day that
the Borrower receives notice from the Administrative Agent or the Required
Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC
Exposure representing greater than 66-2/3% of the total LC Exposure) demanding
the deposit of cash collateral pursuant to this paragraph, the Borrower shall
deposit in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash
equal to the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or
(i) of Article IX. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits and interest
at the rate per annum in effect for accounts of the same type maintained with
the Administrative Agent at such time, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower’s
risk and expense, such deposits shall not bear interest. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the
maturity of the Loans has been accelerated (but subject to the consent of
Lenders with LC Exposure representing 66-2/3% or more of the total LC
Exposure), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived.


 


Section 2.08.          Funding of Borrowings.


 


(a)           Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 12:00 noon to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders; provided
that Swingline Loans shall be made as provided in Section 2.06. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an Eligible Account of the
Borrower designated by the Borrower in the applicable Borrowing Request; provided


 


34

















 


that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.07(e) shall be remitted by the Administrative Agent to
the Issuing Bank.


 


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


 


Section 2.09.          Interest Elections.


 


(a)           Each Revolving Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Revolving Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request; provided that all “LIBOR Loans” (as defined
in the Original Credit Agreement) outstanding as of the Effective Date shall
continue as Eurodollar Revolving Borrowings for the Interest Period applicable
to such Borrowings. Thereafter, the Borrower may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the case of
a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Revolving Borrowing. This Section shall not apply to
Swingline Borrowings, which may not be converted or continued.


 


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


 


35

















 


(c)           Each telephonic and written Interest Election
Request shall specify the following information in compliance with Section
2.04:


 


(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
clauses (iii) and (iv) below 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)           Promptly following receipt of an Interest
Election Request, the Administrative Agent shall advise each Lender of the
details thereof and of such Lender’s portion of each resulting Borrowing.


 


(e)           If the Borrower fails to deliver a timely
Interest Election Request with respect to a Eurodollar Revolving 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 and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrower, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.


 


Section 2.10.          Repayment of Loans; Evidence of Debt.


 


(a)           The Borrower hereby unconditionally promises
to pay (i) to the Administrative Agent for the account of each Lender the then
unpaid principal amount of each Revolving Loan on the Maturity Date and (ii) to
the Swingline Lender the then unpaid principal amount of each Swingline Loan on
the earlier of the Maturity Date and the first date after such Swingline Loan
is made that is the 15th or last day of any calendar month and is at
least two Business Days after such Swingline Loan is made; provided that each
date that a Revolving Borrowing is made, the Borrower shall repay all Swingline
Loans then outstanding.


 


36

















 


(b)           Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.


 


(c)           The Administrative Agent shall maintain
accounts in which it shall record (i) the amount of each Loan made
hereunder, the Class and Type thereof and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.


 


(d)           The entries made in the accounts maintained
pursuant to paragraph (b) or (c) of this Section shall be prima
facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of any Lender or the Administrative
Agent to maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loans in accordance with the
terms of this Agreement.


 


(e)           Any Lender or Participant may request that
Loans made by it be evidenced by a promissory note. In such event, the Borrower
shall prepare, execute and deliver to such Lender or Participant a promissory
note payable to the order of such Lender or Participant (or, if requested by such
Lender or Participant, to such Lender or Participant and its registered
assigns) and in the form attached hereto as Exhibit E. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 11.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).


 


Section 2.11.          Optional Prepayment of Loans.


 


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


 


(b)           The Borrower shall notify the Administrative
Agent (and, in the case of prepayment of a Swingline Loan, the Swingline
Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Revolving Borrowing, not later than
11:00 a.m. three Business Days before the date of prepayment, (ii) in the case
of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m. one
Business Day before the date of prepayment or (iii) in the case of prepayment
of a Swingline Lender, not later than 12:00 noon on the date of prepayment.
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with a conditional
notice of termination or reduction of the Aggregate Commitment as contemplated
by Section 2.02, then such notice of prepayment may be revoked if such notice
of termination or reduction is


 


37

















 


revoked in accordance with Section 2.02. Promptly following receipt of
any such notice relating to a Revolving Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of
any Revolving Borrowing shall be in an amount that would be permitted in the
case of an advance of a Revolving Borrowing of the same Type as provided in
Section 2.04. Each prepayment of a Revolving Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.14.


 


Section 2.12.          Mandatory Prepayment of Loans.


 


(a)           Except as otherwise provided in Section
2.12(b), in the event a Borrowing Base Deficiency exists, the Borrower shall
either (a) within fifteen (15) days after written notice from the
Administrative Agent to the Borrower of such Borrowing Base Deficiency, by
instruments satisfactory in form and substance to the Required Lenders, provide
the Lenders with additional security consisting of Oil and Gas Interests with
value and quality satisfactory to the Lenders in their sole discretion to
eliminate such Borrowing Base Deficiency, or prepay, without premium or
penalty, the principal amount of the Loans in an amount sufficient to eliminate
such Borrowing Base Deficiency (or by a combination of such additional security
and such prepayment eliminate such Borrowing Base Deficiency), or (b) within
fifteen (15) days after written notice from the Administrative Agent to the
Borrower of such Borrowing Base Deficiency, elect to prepay, without premium or
penalty, the principal amount of such Borrowing Base Deficiency in not more
than six (6) equal monthly installments plus accrued interest thereon with the
first such monthly payment being due upon the 30th day after the Borrower’s
receipt of notice of such Borrowing Base Deficiency.


 


(b)           If the Borrower or any Restricted Subsidiary
sells, transfers or otherwise disposes of any Borrowing Base Properties at any
time a Borrowing Base Deficiency exists or would exist after giving effect to
such sale, transfer or disposition, the Borrower shall prepay the Borrowings in
an amount equal to the Net Cash Proceeds received from such sale, transfer or
other disposition on the date it or any Restricted Subsidiary receives such Net
Cash Proceeds; provided, however that amounts applied to the payment of
Borrowings pursuant to this Section may be reborrowed subject to and in
accordance with the terms of this Agreement. Amounts applied to the prepayment
of Borrowings pursuant to this Section shall be first applied to Swingline
Borrowings then outstanding and upon payment in full of all outstanding
Borrowings, second, ratably to ABR Revolving Borrowings then outstanding and,
upon payment in full of all outstanding ABR Revolving Borrowings, third, to
Eurodollar Revolving Borrowings then outstanding, and if more than one
Eurodollar Revolving Borrowing is then outstanding, to each such Eurodollar
Revolving Borrowing beginning with the Eurodollar Revolving Borrowing with the
least number of days remaining in the Interest Period applicable thereto and
ending with the Eurodollar Revolving Borrowing with the most number of days
remaining in the Interest Period applicable thereto, subject to the payment of
any funding indemnification amounts required by Section 2.17 but without
penalty or premium.


 


38

















 


Section 2.13.          Fees.


 


(a)           The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender, an unused commitment fee
(the “Unused Commitment Fee”) equivalent to the Applicable Rate times
the daily average of the total Unused Commitments. Such Unused Commitment Fee
shall be calculated on the basis of a year consisting of 360 days. The Unused
Commitment Fee shall be payable in arrears on the last day of March, June,
September and December of each year, commencing with the first such date to
occur after the Effective Date, and on the Maturity Date for any period then
ending for which the Unused Commitment Fee shall not have been theretofore
paid. In the event the Aggregate Commitment terminates on any date other than
the last day of March, June, September or December of any year, the Borrower
agrees to pay to the Administrative Agent, for the account of each Lender, on
the date of such termination, the total Unused Commitment Fee due for the
period from the last day of the immediately preceding March, June, September or
December, as the case may be, to the date such termination occurs.


 


(b)           The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
same Applicable Rate used to determine the interest rate applicable to
Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date on which such Lender’s Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank
a fronting fee, which shall accrue at the rate or rates per annum separately
agreed upon between the Borrower and the Issuing Bank on the average daily
amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date of termination of the
Aggregate Commitment and the date on which there ceases to be any LC Exposure,
as well as the Issuing Bank’s standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the Effective Date; provided that
all such fees shall be payable on the date on which the Aggregate Commitment
terminates and any such fees accruing after the date on which the Aggregate
Commitment terminates shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within 10 days after
demand. All participation fees and fronting fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).


 


(c)           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,
including fees payable upon any increase in the Aggregate Commitment pursuant
to Section 2.03.


 


39

















 


(d)           All fees payable hereunder shall be paid on
the dates due, in immediately available funds, to the Administrative Agent (or
to the Issuing Bank, in the case of fees payable to it) for distribution, in
the case of Unused Commitment Fees and participation fees, to the Lenders. Fees
paid shall not be refundable under any circumstances.


 


Section 2.14.          Interest.


 


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


 


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


 


(c)           Notwithstanding the foregoing, if any
principal of or interest on any Loan or any fee or other amount payable by the
Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to (i) in the case of
overdue principal of any Loan, 2% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii) in the
case of any other amount, 2% plus the rate applicable to ABR Loans as provided
in paragraph (a) of this Section.


 


(d)           Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and upon
termination of the Aggregate Commitment and on the Maturity Date; provided
that (i) interest accrued pursuant to paragraph (c) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of an ABR Loan prior to the end of the Availability
Period at a time when no Borrowing Base Deficiency exists), 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)           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.


 


Section 2.15.          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


 


40

















 


ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or


 


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


 


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


 


Section 2.16.          Increased Costs.


 


(a)           If any Change in Law shall:


 


(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 the Issuing Bank;
or


 


(ii)           impose on any Lender or the Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein;


 


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


 


(b)           If any Lender or the Issuing Bank determines
that any Change in Law regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s or the Issuing Bank’s
capital or on the capital of such Lender’s or the Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or the


 


41

















 


Issuing Bank’s policies and the policies of such Lender’s or the
Issuing Bank’s holding company with respect to capital adequacy), then from
time to time the Borrower will pay to such Lender or the Issuing Bank, as the
case may be, such additional amount or amounts as will compensate such Lender
or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for
any such reduction suffered.


 


(c)           A certificate of a Lender or the Issuing Bank
setting forth (i) the amount or amounts reasonably necessary to compensate such
Lender or the Issuing Bank or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section, (ii) the factual basis
for such compensation and (iii) the manner in which such amount or amounts were
calculated shall be delivered to the Borrower. Such certificate shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.


 


(d)           Failure or delay on the part of any Lender or
the Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such
compensation; provided that the Borrower shall not be required to
compensate a Lender or the Issuing Bank pursuant to this Section for any
increased costs or reductions incurred more than 180 days prior to the date
that such Lender or the Issuing Bank, as the case may be, notifies the Borrower
of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s or the Issuing Bank’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 180-day period referred to above shall
be extended to include the period of retroactive effect thereof.


 


Section 2.17.          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 other than
on the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified
in any notice delivered pursuant hereto (regardless of whether such notice may
be revoked under Section 2.11(b) and is revoked in accordance therewith),
(d) the assignment of any Eurodollar Loan other than on the last day of
the Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.20, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the 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 shall be


 


42

















 


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 2.18.          Taxes.


 


(a)           Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that
if the Borrower 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) the Administrative
Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant Governmental Authority in accordance with
applicable law.


 


(b)           In addition, the Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.


 


(c)           The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) 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 delivered to the Borrower by a Lender or the Issuing
Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender
or the Issuing Bank, setting forth (i) the amount of such payment or liability
reasonably necessary to compensate the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, (ii) the factual basis for such compensation
and (iii) the manner in which such amount or amounts were calculated, shall be
conclusive absent manifest error.


 


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


 


(e)           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 shall
deliver to the Borrower (with a copy to the Administrative Agent), at the


 


43

















 


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.


 


(f)            If the Administrative Agent or a Lender
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower have paid additional amounts pursuant to this
Section 2.18, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.18 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or
such Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Administrative Agent, the Swingline Lender or
such Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This Section shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.


 


Section 2.19.          Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.


 


(a)           The Borrower shall make each payment required
to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 2.16,
Section 2.17 or Section 2.18, or otherwise) prior to 12:00 noon on the date
when due, in immediately available funds, without set-off or counterclaim. 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 at JPMorgan Loan
Services, 21 South Clark St., 19th Floor, Chicago, Illinois 60603-2003, except
payments to be made directly to the Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Section 2.16,
Section 2.17, Section 2.18 and Section 11.03 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)           If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest, fees and other
Obligations then due hereunder, such funds shall be applied (i) first, towards
payment of interest and fees then due hereunder, ratably


 


44

















 


among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties; provided that in the
event such funds are received by and available to the Administrative Agent as a
result of the exercise of any rights and remedies with respect to any
collateral under the Security Instruments, the parties entitled to a ratable
share of such funds pursuant to the foregoing clause (ii) and the determination
of each parties’ ratable share shall include, on a pari passu basis, the Lender Counterparties and the actual aggregate
amounts then due and owing to each Lender Counterparty by the Borrower or any
Guarantor as a result of the early termination of any transactions under any
Swap Agreements included in the Obligations (after giving effect to any netting
agreements).


 


(c)           If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Loans and participations in
LC Disbursements or Swingline 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
and participations in LC Disbursements and Swingline 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 and participations in LC
Disbursements and Swingline 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 paragraph shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.


 


(d)           Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower have made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower have not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative


 


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Agent forthwith on demand the amount so distributed to such Lender or
Issuing Bank with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.


 


(e)           If any Lender shall fail to make any payment
required to be made by it pursuant to Section 2.07(d) or Section 2.07(e),
Section 2.08(b), Section 2.19(d) or Section 11.03(c), 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 2.20.          Mitigation Obligations; Replacement of
Lenders.


 


(a)           If any Lender requests compensation under
Section 2.16, 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 2.18, 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
2.16 or Section 2.18, 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.


 


(b)           If any Lender requests compensation under
Section 2.16, 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 2.18, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 11.04), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent (and if a Commitment is being assigned, the Issuing Bank),
which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans
and participations in LC Disbursements and Swingline Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under Section
2.16 or payments required to be made pursuant to Section 2.18, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or


 


46

















 


otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.


 


(c)           If in connection with any proposed amendment,
modification, termination, waiver or consent with respect to any of the
provisions of this Agreement or any other Loan Document as contemplated by
Section 11.02, the consent of Required Lenders shall have been obtained but the
consent of one or more of such other Lenders (each a “Non-Consenting Lender”)
whose consent is required has not been obtained or if Lender is a Defaulting
Lender; then, the Borrower may elect to replace such Non-Consenting Lender or
Defaulting Lender, as the case may be, as a Lender party to this Agreement in
accordance with and subject to the restrictions contained in, and consents
required by Section 11.04; provided that (i) the Borrower shall have
received the prior written consent of the Administrative Agent (and if a Commitment
is being assigned, the Issuing Bank), which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.16 or payments required to be made pursuant to
Section 2.18, such assignment will result in a reduction in such compensation
or payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply or, in the case of a Defaulting Lender, such
Lender is no longer a Defaulting Lender.


 


Article III


 


Borrowing Base


 


Section 3.01.          Reserve Report; Proposed Borrowing Base. During the period from the Effective Date
until the first Redetermination after the Effective Date, the Borrowing Base
shall be $750,000,000 (the “Initial Borrowing Base”). As soon as
available and in any event by April 1 and October 1 of each year, beginning
October 1, 2006, the Borrower shall deliver to the Administrative Agent and
each Lender a Reserve Report, prepared as of the immediately preceding December
31 and June 30, respectively, in form and substance reasonably satisfactory to
the Administrative Agent and prepared by an Approved Petroleum Engineer (or, in
the case of the Reserve Report due on October 1 of each year, by petroleum
engineers employed by the Borrower), said Reserve Report to utilize economic
and pricing parameters established from time to time by the Administrative
Agent, together with such other information, reports and data concerning the
value of the Borrowing Base Properties as the Administrative Agent shall deem
reasonably necessary to determine the value of such Borrowing Base Properties.
Simultaneously with the delivery to the Administrative Agent and the Lenders of
each Reserve Report, the Borrower shall submit to the Administrative Agent and
each Lender the Borrower’s requested amount of the Borrowing Base as of the
next Redetermination Date. Promptly after the receipt by the Administrative
Agent of such Reserve Report and Borrower’s requested amount for the Borrowing
Base, the Administrative Agent shall submit to the Lenders a recommended amount


 


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of the Borrowing Base to become effective for
the period commencing on the next Redetermination Date.


 


Section 3.02.          Scheduled Redeterminations of the
Borrowing Base; Procedures and Standards. Based in part on the Reserve
Reports made available to the Administrative Agent and the Lenders pursuant to
Section 3.01, the Lenders shall redetermine the Borrowing Base on or prior to
the next Redetermination Date (or such date promptly thereafter as reasonably
possible based on the engineering and other information available to the
Lenders). Any Borrowing Base which becomes effective as a result of any
Redetermination shall be subject to the following restrictions: (a) such
Borrowing Base shall not exceed the Maximum Facility Amount, (b) to the extent
such Borrowing Base represents an increase in the Borrowing Base in effect
prior to such Redetermination, such Borrowing Base must be approved by all
Lenders, and (c) to the extent such Borrowing Base represents a decrease in the
Borrowing Base in effect prior to such Redetermination or a reaffirmation of
such prior Borrowing Base, such Borrowing Base must be approved by the
Administrative Agent and Required Lenders. If a redetermined Borrowing Base is
not approved by the Administrative Agent and Required Lenders within twenty
(20) days after the submission to the Lenders by the Administrative Agent of
its recommended Borrowing Base pursuant to Section 3.01, or by all Lenders
within such twenty (20) day period in the case of any increase in the Borrowing
Base, the Administrative Agent shall notify each Lender that the recommended
Borrowing Base has not been approved and request that each Lender submit to the
Administrative Agent within ten (10) days thereafter its proposed Borrowing
Base. Promptly following the 10th day after the Administrative Agent’s request
for each Lender’s proposed Borrowing Base, the Administrative Agent shall
determine the Borrowing Base for such Redetermination by calculating the
highest Borrowing Base then acceptable to the Administrative Agent and a number
of Lenders sufficient to constitute Required Lenders (or all Lenders in the
case of an increase in the Borrowing Base). Each Redetermination shall be made
by the Lenders in their sole discretion, but based on the Administrative
Agent’s and such Lender’s usual and customary procedures for evaluating Oil and
Gas Interests as such exist at the time of such Redetermination, and including
adjustments to reflect the effect of any Swap Agreements of the Borrower and
the Restricted Subsidiaries as such exist at the time of such Redetermination.
The Borrower acknowledges and agrees that each Redetermination shall be based
upon the loan collateral value which the Administrative Agent and each Lender
in its sole discretion (using such methodology, assumptions and discount rates
as the Administrative Agent and such Lender customarily uses in assigning collateral
value to Oil and Gas Interests) assigns to the Borrowing Base Properties at the
time in question and based upon such other credit factors consistently applied
(including, without limitation, the assets, liabilities, cash flow, business,
properties, prospects, management and ownership of the Credit Parties) as the
Administrative Agent and such Lender customarily considers in evaluating
similar oil and gas credits. It is expressly understood that the Administrative
Agent and Lenders have no obligation to designate the Borrowing Base at any
particular amount, except in the exercise of their discretion, whether in
relation to the Aggregate Commitment or otherwise. If the Borrower does not
furnish all information, reports and data required to be delivered by any date
specified in this Article III, unless such failure is not the fault of the
Borrower, the Administrative Agent and Lenders may nonetheless designate the
Borrowing Base at any amounts which the Administrative Agent and Lenders in
their reasonable discretion determine and may redesignate the Borrowing Base
from time to time thereafter until the Administrative Agent and Lenders receive
all such information, 


 


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reports and data, whereupon the
Administrative Agent and Lenders shall designate a new Borrowing Base, as
described above.


 


Section 3.03.          Special Redeterminations. In
addition to Scheduled Redeterminations, the Borrower shall be permitted to
request a Special Redetermination of the Borrowing Base once between each
Scheduled Redetermination and the Required Lenders shall be permitted to
request a Special Redetermination at any time. Any request by Borrower pursuant
to this Section 3.03 shall be submitted to the Administrative Agent and each
Lender and at the time of such request (or within twenty (20) days thereafter
in the case of the Reserve Report) Borrower shall (1) deliver to the Administrative
Agent and each Lender a Reserve Report prepared as of a date prior to the date
of such request that is reasonably acceptable to the Administrative Agent and
such other information which the Administrative Agent shall reasonably request,
and (2) notify the Administrative Agent and each Lender of the Borrowing Base
requested by Borrower in connection with such Special Redetermination. Any
request by Required Lenders for a Special Redetermination pursuant to this
Section 3.03 shall be submitted to the Administrative Agent and the Borrower.
Any Special Redetermination shall be made by the Administrative Agent and
Lenders in accordance with the procedures and standards set forth in Section
3.02; provided that no Reserve Report is required to be delivered to the
Administrative Agent or the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section
3.03.


 


Section
3.04.          Notice of
Redetermination. Promptly following any Redetermination of the
Borrowing Base, the Administrative Agent shall notify the Borrower of the
amount of the redetermined Borrowing Base, which Borrowing Base shall be
effective as of the date specified in such notice, and such Borrowing Base
shall remain in effect for all purposes of this Agreement until the next
Redetermination.


 


Article IV


 


Representations
and Warranties


 


Each Credit Party represents
and warrants to the Lenders that: (it being understood and agreed that with
respect to the Effective Date such representations and warranties are deemed to
be made concurrently with and after giving effect to the consummation of the
Transactions):


 


Section
4.01.          Organization; Powers.
Each Credit Party is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such qualification is
required.


 


Section
4.02.          Authorization;
Enforceability. The Transactions are within each Credit Party’s corporate,
limited liability company or partnership powers and have been duly authorized
by all necessary corporate, limited liability company or partnership and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each Credit Party and


 


49

















 


constitutes a legal, valid
and binding obligation of each Credit Party, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law.


 


Section
4.03.          Governmental 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, except such as have been obtained or made and are in full force and
effect and, after the Effective Date, the filing of the Credit Agreement
and related Loan Documents by the Borrower with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, (b) will not violate any applicable law or
regulation or the charter, by-laws or other Organizational Documents of the
Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument evidencing Material Indebtedness or a Material
Sales Contract binding upon the Borrower or any Restricted Subsidiary or any of
their respective assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any Restricted Subsidiary, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any Restricted Subsidiary not otherwise permitted under Section
7.02.


 


Section 4.04.          Financial Condition; No Material
Adverse Change.


 


(a)           The Borrower has heretofore furnished to the
Lenders the unaudited consolidated balance sheet and related statements of
income and cash flows of the Borrower and its Consolidated Subsidiaries as of
and for the nine (9) month period ended September 30, 2005 certified by a
Responsible Officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of
the Borrower and its Consolidated Subsidiaries as of such dates and for such
periods in accordance with GAAP, subject to year-end audit adjustments and the
absence of footnotes.


 


(b)           Since September 30, 2005, there has been no material adverse change
in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole (it being
understood that neither (i) the Borrower’s initial public offering and the
related transactions, including the acquisition of TXOK, nor (ii) changes in
commodity prices for Hydrocarbons affecting the oil and gas industry as a whole
constitute a material adverse change).


 


Section
4.05.          Properties.


 


(a)           Except as otherwise provided in Section 4.15 with respect
to Oil and Gas Interests, the Borrower and each Restricted Subsidiary has good
title to, or valid leasehold interests in, all such real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.


 


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(b)           The Borrower and each Restricted 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 Restricted Subsidiaries, as the case may be, 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.


 


Section
4.06.          Litigation and
Environmental Matters.


 


(a)           There are no actions, suits 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 Restricted
Subsidiary, (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.


 


(b)           Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any Restricted Subsidiary to the Borrower’s knowledge (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental
Law, (ii) has become subject to any Environmental Liability, (iii) has
received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.


 


(c)           Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.


 


Section
4.07.          Compliance with Laws and
Agreements. The Borrower and each Restricted Subsidiary is in compliance
with all laws, regulations and orders of any Governmental Authority applicable
to it or its property and all indentures, agreements and other instruments
binding upon 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. No Default has occurred and is continuing.


 


Section
4.08.          Investment Company
Status. Neither the Borrower nor any Restricted Subsidiary is an
“investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.


 


Section
4.09.          Taxes. The Borrower
and each Restricted Subsidiary 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 Restricted Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect.


 


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Section
4.10.          ERISA. No ERISA
Event has occurred or is reasonably expected to occur that, when taken together
with all other such ERISA Events for which liability is reasonably expected to
occur, could reasonably be expected to result in a Material Adverse Effect. The
present value of all accumulated benefit obligations under each Plan (based on
the assumptions used for purposes of FASB Statement 87) did not, as of the
date of the most recent financial statements reflecting such amounts, exceed by
more than $5,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of FASB Statement 87) did not,
as of the date of the most recent financial statements reflecting such amounts,
exceed by more than $5,000,000 the fair market value of the assets of all such
underfunded Plans.


 


Section
4.11.          Disclosure. The
Borrower has disclosed to the Lenders all agreements, instruments and corporate
or other restrictions to which it or any Restricted Subsidiary is subject, and
all other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. None of the
other reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower or any Restricted Subsidiary to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (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 the Projections, the Borrower represents only that such
information was prepared in good faith based on assumptions believed to be
reasonable at the time.


 


Section
4.12.          Labor Matters. There
are no strikes, lockouts or slowdowns against the Borrower or any of its
Restricted Subsidiaries pending or, to the knowledge of the Borrower,
threatened that could reasonably be expected to have a Material Adverse Effect.
The hours worked by and payments made to employees of the Borrower and its
Restricted Subsidiaries have not been in violation of the Fair Labor Standards
Act or any other Law dealing with such matters to the extent that such
violation could reasonably be expected to have a Material Adverse Effect.


 


Section
4.13.          Capitalization and
Credit Party Information. Schedule 4.13 lists, as of the Effective Date (a)
each Subsidiary that is an Unrestricted Subsidiary, (b) for the Borrower, its
full legal name, its jurisdiction of organization and its federal tax
identification number, and (c) for each Restricted Subsidiary its full legal
name, its jurisdiction of organization, its federal tax identification number,
the number of shares of capital stock or other Equity Interests outstanding and
the owner(s) of such Equity Interests.


 


Section
4.14.          Margin Stock.
Neither the Borrower nor any Restricted Subsidiary is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Federal Reserve Board), and no part of the proceeds
of any Loan will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying margin stock.


 


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Section 4.15.          Oil and Gas Interests. Each
Credit Party has good and defensible title to all proved reserves included in
the Oil and Gas Interests (for purposes of this Section 4.15, “proved Oil and
Gas Interests”) described in the most recent Reserve Report provided to the
Administrative Agent, free and clear of all Liens except Liens permitted
pursuant to Section 7.02. All such proved Oil and Gas Interests are valid,
subsisting, and in full force and effect, and all rentals, royalties, and other
amounts due and payable in respect thereof have been duly paid. Without regard
to any consent or non-consent provisions of any joint operating agreement
covering any Credit Party’s proved Oil and Gas Interests, such Credit Party’s
share of (a) the costs for each proved Oil and Gas Interest described in the
Reserve Report is not materially greater than the decimal fraction set forth in
the Reserve Report, before and after payout, as the case may be, and described
therein by the respective designations “working interests,” “WI,” “gross
working interest,” “GWI,” or similar terms (except in such cases where there is
a corresponding increase in the net revenue interest), and (b) production
from, allocated to, or attributed to each such proved Oil and Gas Interest is
not materially less than the decimal fraction set forth in the Reserve Report,
before and after payout, as the case may be, and described therein by the
designations “net revenue interest,” “NRI,” or similar terms. Each well drilled
in respect of proved producing Oil and Gas Interests described in the Reserve
Report (1) is capable of, and is presently, either producing Hydrocarbons in commercially
profitable quantities or in the process of being worked over or enhanced, and
the Credit Party that owns such proved producing Oil and Gas Interests is
currently receiving payments for its share of production, with no funds in
respect of any thereof being presently held in suspense, other than any such
funds being held in suspense pending delivery of appropriate division orders,
and (2) has been drilled, bottomed, completed, and operated in compliance with
all applicable laws, in the case of clauses (1) and (2), except where any
failure to satisfy clause (1) or to comply with clause (2) would not have a
Material Adverse Effect, and no such well which is currently producing
Hydrocarbons is subject to any penalty in production by reason of such well having
produced in excess of its allowable production.


 


Section 4.16.          Insurance. The certificate
signed by the Responsible Officer that attests to the existence and adequacy
of, and summarizes, the property and casualty insurance program maintained by
the Credit Parties that has been furnished by the Borrower to the
Administrative Agent and the Lenders as of the Effective Date, is complete and
accurate in all material respects as of the Effective Date and demonstrates the
Borrower’s and the Restricted Subsidiaries’ compliance with Section 6.05.


 


Section 4.17.          Solvency.


 


(a)           Immediately after the consummation of the Transactions and
immediately following the making of the initial Borrowing made on the Effective
Date and after giving effect to the application of the proceeds thereof, (1)
the fair value of the assets of the Credit Parties on a consolidated basis, at
a fair valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of the Credit Parties on a consolidated basis; (2) the
present fair saleable value of the real and personal property of the Credit
Parties on a consolidated basis will be greater than the amount that will be
required to pay the probable liability of the Credit Parties on a consolidated
basis on their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (3)
the Credit Parties on a consolidated basis will be able


 


53

















 


to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; and (4)
the Credit Parties on a consolidated basis will not have unreasonably small
capital with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.


 


(b)           The Credit Parties do not intend to, and do not believe
that they will, incur debts beyond their ability to pay such debts as they
mature, taking into account the timing of and amounts of cash to be received by
it and the timing of the amounts of cash to be payable on or in respect of its
Indebtedness.


 


Section 4.18.          Deposit
Accounts. Except as set forth on Schedule 4.18 and other deposit accounts
maintained at financial institutions other than the Administrative Agent (the
aggregate balance of which does not exceed $100,000 at any time for all such
other deposit accounts taken as a whole), no Credit Party has any deposit or
investment accounts and no Affiliate of any Credit Party has any deposit or
investment account into which proceeds of Hydrocarbon production from the Oil
and Gas Interests included in the Borrowing Base Properties are deposited. All
proceeds of Hydrocarbon production from the Oil and Gas Interests included in
the Borrowing Base Properties and all distributions and dividends on any Equity
Interests owned by any Credit Party are deposited and maintained, from the date
of receipt by any Credit Party, in a deposit or investment account subject to a
first and prior perfected security interest in favor of the Administrative
Agent for the benefit of the Secured Parties.


 


Article V


 


Conditions


 


Section 5.01.          Effective
Date. The obligations of the Lenders and Lender Counterparties to continue
the Original Loans and the Existing Swap Agreements and the obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 11.02):


 


(a)           The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.


 


(b)           The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders and
dated the Effective Date) of Haynes and Boone, LLP, counsel for the Credit
Parties, substantially in the form of Exhibit B, and covering such other
matters relating to the Credit Parties, this Agreement or the Transactions as
the Required Lenders shall reasonably request. The Credit Parties hereby
request such counsel to deliver such opinion.


 


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(c)           The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of each
Credit Party, the authorization of the Transactions and any other legal matters
relating to the Credit Parties, this Agreement or the Transactions, all in form
and substance satisfactory to the Administrative Agent and its counsel.


 


(d)           The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Responsible Officer of
the Borrower, confirming that the Credit Parties have (i) complied with the
conditions set forth in paragraphs (a) and (b) of Section 5.02, (ii)
complied with the covenants set forth in Section 6.05 (and demonstrating such
compliance by the attachment of an insurance summary and insurance certificates
evidencing the coverage described in such summary) and (iii) complied with the
requirements of Section 6.09 and Section 6.10.


 


(e)           The Administrative Agent, the Lenders and the Arranger
shall have received all fees and other amounts due and payable on or prior to
the Effective Date, and, to the extent invoiced, reimbursement or payment of
all out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder, including all fees, expenses and disbursements of counsel for
the Administrative Agent to the extent invoiced on or prior to the Effective
Date, together with such additional amounts as shall constitute such counsel’s
reasonable estimate of expenses and disbursements to be incurred by such
counsel in connection with the recording and filing of Mortgages and financing
statements; provided, that, such estimate shall not thereafter
preclude further settling of accounts between the Borrower and the
Administrative Agent.


 


(f)            The Administrative Agent shall have received the
Mortgages to be executed on the Effective Date pursuant to Section 6.09 of this
Agreement, duly executed and delivered by the appropriate Credit Party,
together with such other assignments, conveyances, amendments, agreements and
other writings, including, without limitation, UCC-1 financing statements, tax
affidavits and applicable department of revenue documentation, creating first
and prior Liens, subject to Permitted Encumbrances, in Oil and Gas Interests
having an Engineered Value equal to or greater than 125% of the Aggregate
Commitment.


 


(g)           The Administrative Agent shall have received the Pledge Agreement
to be executed on the Effective Date pursuant to Section 6.14 of this
Agreement, duly executed and delivered by the appropriate Credit Party,
together with such other assignments, conveyances, amendments, agreements and
other writings, including, without limitation, UCC-1 financing statements and
control agreements, creating first and prior Liens, subject to the Liens
permitted under Section 7.02, in all Equity Interests of each Restricted
Subsidiary now or hereafter owned by Borrower or any Restricted Subsidiary.


 


(h)           On or prior to the Effective Date, the Administrative
Agent shall have received a Borrowing Request acceptable to the Administrative
Agent setting forth the Loans requested by the Borrower on the Effective Date,
the Type and amount of each


 


55

















 


Loan and the accounts to
which such Loans are to be funded; provided that all Borrowings on the
Effective Date shall be ABR Borrowings.


 


(i)            The Administrative Agent shall have received a Solvency
Certificate in the form attached hereto as Exhibit D, dated the Effective Date,
and signed by a Responsible Officer of the Borrower.


 


(j)            The Lenders shall have received from the Borrower (i) a
pro forma consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at the Effective Date, and reflecting the consummation of the
Transactions, the related financings and other transactions contemplated by the
Loan Documents to occur on or prior to the Effective Date, which pro forma
balance sheet shall be prepared consistent in all respects with the information
previously provided by the Borrower to the Administrative Agent and the Lenders
and otherwise in form and substance satisfactory to the Administrative Agent
and (ii) the Projections.


 


(k)           Each Credit Party shall have obtained all approvals
required from any Governmental Authority and all consents of other Persons, in
each case that are necessary or advisable in connection with the Transactions
and each of the foregoing shall be in full force and effect and in form and
substance reasonably satisfactory to the Administrative Agent. All applicable
waiting periods shall have expired without any action being taken or threatened
by any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the transactions contemplated by the Loan Documents or
the financing thereof and no action, request for stay, petition for review or
rehearing, reconsideration, or appeal with respect to any of the foregoing
shall be pending, and the time for any applicable agency to take action to set
aside its consent on its own motion shall have expired.


 


(l)            There shall not exist any action, suit, investigation,
litigation or proceeding or other legal or regulatory developments, pending or
threatened in any court or before any arbitrator or Governmental Authority
that, in the reasonable opinion of Administrative Agent, singly or in the
aggregate, materially impairs the Transactions, the financing thereof or any of
the other transactions contemplated by the Loan Documents or that could have a
Material Adverse Effect.


 


(m)          The Administrative Agent shall have received
evidence or assurances satisfactory to it that the TXOK Revolving Facility
shall have been (or concurrently with the effectiveness of this Agreement and
the funding of the initial Loans hereunder, will be) paid in full and that all
Liens securing the TXOK Revolving Facility, have been (or concurrently with the
funding of the initial Loans, will be) released, together with original
executed instruments releasing and terminating any such Liens in a form
suitable for filing in the applicable jurisdiction.


 


The Administrative Agent
shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the
obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters
of Credit hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to


 


56

















 


Section 11.02) at or prior
to 3:00 p.m. on March 17, 2006 (and, in the event such conditions are not so
satisfied or waived, the Aggregate Commitment shall terminate at such time).


 


Section 5.02.          Each Credit Event. The
obligation of each Lender to make a Loan on the occasion of any Borrowing, and
of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is
subject to the satisfaction of the following conditions:


 


(a)           The representations and warranties of each Credit Party
set forth in the Loan Documents shall be true and correct in all material
respects on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date.


 


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


 


(c)           At the time of and immediately after giving effect
to such Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Borrowing Base Deficiency exists or would
be caused thereby.


 


Each
Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.


 


Article VI


 


Affirmative Covenants


 


Until the Aggregate
Commitment has expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder shall have been paid in full and all
Letters of Credit shall have expired or terminated and all LC Disbursements
shall have been reimbursed, each Credit Party covenants and agrees with the
Lenders that:


 


Section 6.01.          Financial Statements; Other
Information. The Borrower will furnish to the Administrative Agent and each
Lender:


 


(a)           within 90 days after the end of each fiscal year of the
Borrower, the audited consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows of the Borrower and its
Consolidated Subsidiaries as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by a firm of independent public accountants reasonably acceptable to
Administrative Agent (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated and consolidating financial
statements present fairly in all material respects the financial condition and
results of operations of


 


57

















 


the Borrower and its
Consolidated Subsidiaries on a consolidated and consolidating basis in
accordance with GAAP consistently applied;


 


(b)           within 45 days after the end of each fiscal quarter
of the Borrower, the consolidated balance sheet and related statements of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by a Responsible Officer as
presenting fairly in all material respects the financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;


 


(c)           concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate in a form reasonably
acceptable to Administrative Agent signed by a Responsible Officer
of the Borrower (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, and (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section 7.11;


 


(d)           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 Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be;


 


(e)           as soon as available, and in any event no later than April
1 and October 1 of each year, the Reserve Reports required on such dates
pursuant to Section 3.01;


 


(f)            together with the Reserve Reports required under clause
(e) above, (i) a report, in reasonable detail, setting forth the Swap
Agreements then in effect, the notional volumes of and prices for, on a monthly
basis and in the aggregate, the Crude Oil and Natural Gas for each such Swap
Agreement and the term of each such Swap Agreement; (ii) a true and correct
schedule of the Mortgaged Properties, (iii) the percentage of the Aggregate
Commitment that the Engineered Value of the Mortgaged Properties represents and
(iv) a description of the additional Oil and Gas Interests, if any, to be
mortgaged by the Credit Parties to comply with Section 6.09;


 


(g)           if requested by Required Lenders and within thirty
(30) days of such request, a monthly report, in form and substance satisfactory
to the Administrative Agent, indicating the next preceding month’s sales
volumes, sales revenues, production taxes, operating expenses and net operating
income from the Borrowing Base Properties, with detail, calculations and
worksheets, all in form and substance reasonably satisfactory to the
Administrative Agent; and


 


58

















 


(h)           promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of any Credit Party, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.


 


Documents
required to be delivered pursuant to Section 6.01(a) or Section 6.01(b) or
Section 6.01(d) may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date (i) on which the Borrower posts such
documents, or provides a link thereto on the Borrower’s website on the Internet
at the website address identified in Section 11.01 on which such documents are
posted on the Borrower’s behalf on an Internet or intranet website, if any, to
which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative
Agent); provided that: (i) the Borrower shall deliver paper copies of
such documents to the Administrative Agent or any Lender that requests the
Borrower to deliver such paper copies until a written request to cease
delivering paper copies is given by the Administrative Agent or such Lender and
(ii) the Borrower shall notify the Administrative Agent and each Lender (by
telecopier or electronic mail) of the posting of any such documents and provide
to the Administrative Agent by electronic mail electronic versions (i.e.,
soft copies) of such documents. Notwithstanding anything contained herein, in
every instance the Borrower shall be required to provide paper copies of the
Compliance Certificates required by Section 6.01(c) to the Administrative
Agent. Except for such Compliance Certificates, the Administrative Agent shall
have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by the Borrower with any such request for delivery, and each
Lender shall be solely responsible for requesting delivery to it or maintaining
its copies of such documents.


 


The Borrower
hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will
make available to the Lenders and the Issuing Bank materials and/or information
provided by or on behalf of the Borrower hereunder (collectively, “Borrower
Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the
Lenders may be “public-side” Lenders (i.e., Lenders
that do not wish to receive material non-public information with respect to the
Borrower or its securities) (each, a “Public Lender”). The Borrower hereby
agrees that (w) all Borrower Materials that are to be made available to Public
Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum,
shall mean that the word “PUBLIC” shall appear prominently on the first page
thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be
deemed to have authorized the Administrative Agent, the Arrangers, the Issuing
Bank and the Lenders to treat such Borrower Materials as either publicly
available information or not material information (although it may be sensitive
and proprietary) with respect to the Borrower or its securities for purposes of
United States Federal and state securities laws; (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated “Public Investor;” and (z) the Administrative Agent and the
Arrangers shall be entitled to treat Borrower’s Materials that are not marked
“PUBLIC” as being suitable only for posting on a portion of the Platform not
designated “Public Investor.”


 


Section 6.02.          Notices of Material Events. The
Borrower will furnish to the Administrative Agent and each Lender prompt
written notice of the following:


 


59

















 


(a)           the occurrence of any Default;


 


(b)           the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting any Credit Party or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; 


 


(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 the Restricted Subsidiaries in an aggregate
amount exceeding $5,000,000;


 


(d)           any written notice or written claim to the effect that any
Credit Party is or may be liable to any Person as a result of the release by
any Credit Party, or any other Person of any Hazardous Materials into the
environment, which could reasonably be expected to have a Material Adverse
Effect; 


 


(e)           any written notice alleging any violation of any
Environmental Law by any Credit Party, which could reasonably be expected to
have a Material Adverse Effect;


 


(f)            the occurrence of any material breach or default under,
or repudiation or termination of, any Material Sales Contract that results in,
or could reasonably be expected to result in, a Material Adverse Effect;


 


(g)           the receipt by the Borrower or any Restricted Subsidiary
of any management letter or comparable analysis prepared by the auditors for
the Borrower or any such Restricted Subsidiary; and


 


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


 


Each
notice delivered under this Section shall be accompanied by a statement of a Responsible Officer or other executive
officer of the Borrower 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 6.03.          Existence; Conduct of Business.
The Borrower will, and will cause each Restricted 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; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 7.03.


 


Section 6.04.          Payment of Obligations. The
Borrower will, and will cause each Restricted Subsidiary to, pay its
obligations, including Tax liabilities, that, if not paid, could result in a
Material Adverse Effect 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 Restricted
Subsidiary has set aside on its books adequate


 


60

















 


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.


 


Section 6.05.          Maintenance of Properties;
Insurance. The Borrower will, and will cause each Restricted Subsidiary and
use commercially reasonable efforts to cause each operator of Borrowing Base
Properties to, (a) keep and maintain all property material to the conduct
of its business in good working order and condition, ordinary wear and tear
excepted, and (b) 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. On or prior to the Effective Date and
thereafter, upon request of the Administrative Agent, the Borrower will furnish
or cause to be furnished to the Administrative Agent from time to time a
summary of the respective insurance coverage of the Borrower and its Restricted
Subsidiaries in form and substance reasonably satisfactory to the
Administrative Agent, and, if requested, will furnish the Administrative Agent
copies of the applicable policies. Upon demand by Administrative Agent, the
Borrower will cause any insurance policies covering any such property to be
endorsed (a) to provide that such policies may not be cancelled, reduced or
affected in any manner for any reason without fifteen (15) days prior notice to
Administrative Agent, and (b) to provide for such other matters as the Lenders
may reasonably require.


 


Section
6.06.          Books and Records;
Inspection Rights. The Borrower will, and will cause each Restricted
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 Restricted
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, provided an
officer of the Borrower has the reasonable opportunity to participate, its
independent accountants, all at such reasonable times and as often as
reasonably requested.


 


Section
6.07.          Compliance with Laws.
The Borrower will, and will cause each Restricted 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 6.08.          Use of Proceeds and Letters of
Credit. The proceeds of the Loans will be used only to (a) pay the fees,
expenses and transaction costs of the Transactions, (b) to satisfy
reimbursement obligations with respect to Letters of Credit and (c) finance the
working capital needs of the Borrower, including capital expenditures, and for
general corporate purposes of the Borrower and the Guarantors, in the ordinary
course of business, including the exploration, acquisition and development of
Oil and Gas Interests. No part of the proceeds of any Loan will be used,
whether directly or indirectly, to purchase or carry any margin stock (as
defined in Regulation U issued by the Federal Reserve Board). Letters of Credit
will be issued only to support general corporate purposes of the Borrower and
the Restricted Subsidiaries.


 


61

















 


Section 6.09.          Mortgages.  Each Borrower will, and will cause each
Guarantor to, execute and deliver to the Administrative Agent, for the benefit
of the Secured Parties, Mortgages in form and substance acceptable to the
Administrative Agent together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) as the
Administrative Agent shall deem necessary or appropriate to grant, evidence,
perfect and maintain Liens in Borrowing Base Properties having an Engineered
Value equal to or greater than 125% of the Aggregate Commitment. Administrative
Agent and each Lender hereby acknowledges that, as of the Effective Date, the
Borrower is in compliance with Section 6.09; provided that, on the Effective
Date and thereafter, the Borrower will, and will cause each Guarantor to,
execute and deliver to the Administrative Agent (i) amendments of, or
amendments and restatements of, the mortgages filed pursuant to the Original
Credit Agreement to the extent requested by, and in form and substance
satisfactory to, the Administrative Agent and (ii) Mortgages covering the Borrowing
Base Properties owned by TXOK and its Subsidiaries to the extent requested by,
and in form and substance satisfactory to, the Administrative Agent.


 


Section 6.10.          Title Data. The Borrower will,
and will cause each Guarantor to, deliver to the Administrative Agent such
opinions of counsel and other evidence of title as the Administrative Agent
shall deem reasonably necessary or appropriate to verify (a)  at all times
from and after the Effective Date, (i) eighty percent (80%) of the Engineered
Value of the Mortgaged Properties of the Borrower and the Guarantors (other
than the Appalachia Properties) and (ii) forty-five percent (45%) of the
Engineered Value of the Appalachia Properties and (b) the validity, perfection
and priority of the Liens created by such Mortgages and such other matters
regarding such Mortgages as Administrative Agent shall reasonably request. Administrative
Agent and each Lender hereby acknowledges that as of the Effective Date, the
Borrower is in compliance with Section 6.10.


 


Section 6.11.          Swap
Agreements. The Borrower will, and will cause each Restricted Subsidiary
to, maintain the Existing Swap Agreements and none of the Existing Swap
Agreements may be amended, modified or cancelled without the prior written
consent of the Required Lenders. Upon the request of the Required Lenders, the
Borrower and each Restricted Subsidiary shall use their commercially reasonable
efforts to cause each Swap Agreement to which the Borrower or any Restricted
Subsidiary is a party to (a) expressly permit such assignment and (b) upon the
occurrence of any default or event of default under such agreement or contract,
(i) to permit the Lenders to cure such default or event of default and assume
the obligations of such Credit Party under such agreement or contract and
(ii) to prohibit the termination of such agreement or contract by the
counterparty thereto if the Lenders assume the obligations of such Credit Party
under such agreement or contract and the Lenders take the actions required
under the foregoing clause (i). Upon the request of the Administrative Agent,
the Borrower shall, within thirty (30) days of such request, provide to the
Administrative Agent and each Lender copies of all agreements, documents and
instruments evidencing the Swap Agreements not previously delivered to the
Administrative Agent and Lenders, certified as true and correct by a
Responsible Officer of the Borrower, and such other information regarding such
Swap Agreements as the Administrative Agent and Lenders may reasonably request.


 


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Section
6.12.          Operation of Oil and Gas
Interests.


 


(a)           Each Borrower will, and will cause each Restricted
Subsidiary to, maintain, develop and operate its Oil and Gas Interests in a
good and workmanlike manner, and observe and comply with all of the terms and
provisions, express or implied, of all oil and gas leases relating to such Oil
and Gas Interests so long as such Oil and Gas Interests are capable of
producing Hydrocarbons and accompanying elements in paying quantities, except
where such failure to comply could not reasonably be expected to have a
Material Adverse Effect.


 


(b)           Borrower will, and will cause each Restricted Subsidiary
to, comply in all respects with all contracts and agreements applicable to or
relating to its Oil and Gas Interests or the production and sale of
Hydrocarbons and accompanying elements therefrom, except to the extent a
failure to so comply could not reasonably be expected to have a Material
Adverse Effect. 


 


Section 6.13.          Restricted Subsidiaries. In the
event any Person is or becomes a Restricted Subsidiary, Borrower will (a)
promptly take all action necessary to comply with Section 6.14, (b)
promptly take all such action and execute and deliver, or cause to be executed and
delivered, to the Administrative Agent all such documents, opinions,
instruments, agreements, and certificates similar to those described in Section
5.01(b) and Section 5.01(c) that the Administrative Agent may request, and (c)
promptly cause such Restricted Subsidiary to (i) become a party to this
Agreement and Guarantee the Obligations by executing and delivering to the
Administrative Agent a Counterpart Agreement in the form of Exhibit C, and (ii)
to the extent required to comply with Section 6.09 or as requested by the
Administrative Agent, execute and deliver Mortgages and other Security
Instruments creating first and prior Liens, subject to Permitted Encumbrances,
in such Restricted Subsidiary’s Oil and Gas Interests and other assets. Upon
delivery of any such Counterpart Agreement to the Administrative Agent, notice
of which is hereby waived by each Credit Party, such Restricted Subsidiary
shall be a Guarantor and shall be as fully a party hereto as if such Restricted
Subsidiary were an original signatory hereto. Each Credit Party expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Credit Party hereunder. This
Agreement shall be fully effective as to any Credit Party that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Credit Party hereunder. With respect to each such Restricted Subsidiary,
the Borrower shall promptly send to the Administrative Agent written notice
setting forth with respect to such Person the date on which such Person became
a Restricted Subsidiary of the Borrower, and supplement the data required to be
set forth in the Schedules to this Agreement as a result of the acquisition or
creation of such Restricted Subsidiary; provided that such supplemental data
must be reasonably acceptable to the Administrative Agent and Required Lenders.


 


Section 6.14.          Pledged Equity Interests. On
the date hereof and at the time hereafter that any Restricted Subsidiary of the
Borrower is created or acquired or any Unrestricted Subsidiary becomes a
Restricted Subsidiary, the Borrower and the Subsidiaries (as applicable) shall
execute and deliver to the Administrative Agent for the benefit of the Secured
Parties, a Pledge Agreement, in form and substance acceptable to the
Administrative Agent, from the Borrower and/or the Subsidiaries (as applicable)
covering all Equity Interests owned by the Borrower or such Restricted
Subsidiaries in such Restricted Subsidiaries, together with all certificates
(or other evidence acceptable to Administrative Agent) evidencing the issued
and outstanding


 


63

















 


Equity Interests of each such Restricted
Subsidiary of every class owned by such Credit Party (as applicable) which, if
certificated, shall be duly endorsed or accompanied by stock powers executed in
blank (as applicable), as Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect a first priority security interest
in the issued and outstanding Equity Interests owned by Borrower or any
Restricted Subsidiary in each Restricted Subsidiary.


 


Section 6.15.          Production Proceeds and Bank
Accounts. Subject
to the terms and conditions of the Mortgages, each Credit Party shall cause all production proceeds and
revenues attributable to the Oil and Gas Interests of such Credit Party to be
paid and deposited into deposit accounts of such Credit Party maintained with
the Administrative Agent or with other financial institutions acceptable to the
Administrative Agent and cause all such deposit accounts at such other
financial institutions to be subject to a control agreement in favor of the
Administrative Agent for the benefit of the Secured Parties, in form and substance
satisfactory to the Administrative Agent (an “Eligible Account”).


 


Article VII


 


Negative
Covenants


 


Until the Aggregate
Commitment has expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, each Credit Party covenants and agrees with the Lenders that:


 


Section 7.01.          Indebtedness.
The Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, create, incur, assume or permit to exist any Indebtedness, except:


 


(a)           The Obligations;


 


(b)           Indebtedness existing on the date hereof and set forth in
Schedule 7.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof;


 


(c)           Indebtedness of the Borrower to any Guarantor and of any
Guarantor to the Borrower or any other Guarantor; provided, that (i) all
such Indebtedness shall be unsecured and subordinated in right of payment to
the payment in full of all of the Obligations as provided in Section 8.06 and
(ii) all such Indebtedness is evidenced by promissory notes in form and
substance reasonably satisfactory to the Administrative Agent, and such
promissory notes are subject to a first priority security interest in favor of
the Administrative Agent for the benefit of the Secured Parties on terms and
conditions reasonably satisfactory to the Administrative Agent;


 


(d)           Guarantees of the Obligations;


 


(e)           Indebtedness of the Borrower and the Restricted
Subsidiaries incurred to finance the acquisition, construction or improvement
of any fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the


 


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acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that (i)
such Indebtedness 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 Indebtedness permitted by this clause (e) shall not exceed
$10,000,000 at any time outstanding;


 


(f)            Indebtedness incurred or deposits made by the Borrower
and any Restricted Subsidiary (i) under worker’s compensation laws,
unemployment insurance laws or similar legislation, or (ii) in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Credit Party is a party, (iii) to secure public or statutory
obligations of such Credit Party, and (iv) of cash or U.S. Government
Securities made to secure the performance of statutory obligations, surety,
stay, customs and appeal bonds to which such Credit Party is a party in
connection with the operation of the Oil and Gas Interests, in each case in the
ordinary course of business; 


 


(g)           Indebtedness of any Borrower or any Restricted Subsidiary
under Swap Agreements to the extent permitted under Section 7.05;


 


(h)           Indebtedness under the Senior Notes in an aggregate
principal amount not exceeding $450,000,000 at any time outstanding; and


 


(i)            Other unsecured Indebtedness of the Credit Parties in an
aggregate principal amount not exceeding $5,000,000 at any time outstanding.


 


Section 7.02.          Liens.  The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, create, incur, assume or permit to exist any
Lien on any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in
respect of any thereof, except:


 


(a)           any Lien created pursuant to this Agreement or the Security
Instruments;


 


(b)           Permitted Encumbrances; 


 


(c)           any Lien on any property or asset of the Borrower or any
Restricted Subsidiary existing on the date hereof and set forth in
Schedule 7.02; provided that (i) such Lien shall not apply to any
other property or asset of the Borrower or any other Restricted Subsidiary and
(ii) such Lien shall secure only those obligations which it secures on the date
hereof and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;


 


(d)           any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Restricted Subsidiary or existing on
any property or asset of any Person that becomes a Restricted Subsidiary after
the date hereof prior to the time such Person becomes a Restricted Subsidiary; provided
that (i) such Lien secures Indebtedness permitted by Section 7.01(e),
(ii) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Restricted Subsidiary, as the case
may be, (iii) such Lien shall not apply to any other property or assets of
the


 


65

















 


Borrower or any other Restricted Subsidiary and (iv) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Restricted Subsidiary, as the case may be and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof; and


 


(e)           Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Restricted Subsidiary; provided that
(i) such Liens, secure Indebtedness permitted by Section 7.01,
(ii) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 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 other
Restricted Subsidiaries.


 


Section 7.03.          Fundamental Changes.


 


(a)           The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of its assets, or any of its
Borrowing Base Properties or any of the Equity Interests of any Restricted
Subsidiary (in each case, whether now owned or hereafter acquired), or
liquidate or dissolve, except that, the Borrower or any Restricted
Subsidiary may sell Hydrocarbons produced from its Oil and Gas Interests in the
ordinary course of business, and if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing,
(i) any Restricted Subsidiary may merge into the Borrower in a transaction
in which the Borrower is the surviving entity, (ii) any Restricted
Subsidiary may merge into any other Restricted Subsidiary in a transaction in
which the surviving entity is a Restricted Subsidiary, (iii) any Restricted
Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the
Borrower or to another Restricted Subsidiary, (iv) any Restricted Subsidiary
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lenders, (v) the
Borrower or any Restricted Subsidiary may sell, transfer, lease or otherwise
dispose of equipment and related items in the ordinary course of business, that
are obsolete or no longer necessary in the business of the Borrower or any of
its Restricted Subsidiaries or that is being replaced by equipment of
comparable value and utility, (vi) subject to Section 2.12(b), the
Borrower or any Restricted Subsidiary may sell, transfer, lease, exchange,
abandon or otherwise dispose of Borrowing Base Properties with a value not
exceeding, in the aggregate for the Borrower and its Restricted Subsidiaries
taken as a whole, 5% of the Borrowing Base between Scheduled Redeterminations
and (vii) with the prior written consent of Required Lenders and subject to
Section 2.12(b), the Borrower or any Restricted Subsidiary may sell, transfer,
lease, exchange, abandon or otherwise dispose of Borrowing Base Properties not
otherwise permitted pursuant to the foregoing clause (vi). For purposes of the
foregoing clause (vi), the value of any Oil and Gas Interests included in the
Borrowing Base Properties shall be the Engineered Value of such Oil and Gas
Interests and the value of all other Oil and Gas Interests shall be the value
which would be assigned to such Oil


 


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and Gas Interests using the
same methodology, assumptions and discount rates used to determine the
Engineered Value of the Borrowing Base Properties as of the most recent
Redetermination.
In addition, for purposes of determining compliance with clause (vi) of this
Section with respect to any exchange of Oil and Gas Interests, the value of
such exchange shall be the net reduction, if any, in Engineered Value realized
or resulting from such exchange.


 


(b)           The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, engage to any material extent in any business other
than businesses of the type conducted by the Borrower and its Restricted
Subsidiaries on the date of execution of this Agreement and after giving effect
to the Transactions and businesses reasonably related thereto.


 


Section 7.04.          Investments, Loans, Advances,
Guarantees and Acquisitions. The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly owned Restricted
Subsidiary prior to such merger) any capital stock, evidences of Indebtedness
or other securities (including any option, warrant or other right to acquire
any of the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any Indebtedness of, or make or permit to exist any investment or any
other interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:


 


(a)           Permitted Investments;


 


(b)           investments by the Borrower in the Equity Interests of any
Restricted Subsidiary;


 


(c)           investments by the Borrower or Guarantor consisting of
intercompany Indebtedness permitted under Section 7.01(c)


 


(d)           Guarantees constituting Indebtedness permitted by Section
7.01;


 


(e)           investments by the Borrower and its Restricted Subsidiaries
that are (1) customary in the oil and gas business, (2) made in the
ordinary course of the Borrower’s or such Restricted Subsidiary’s business, and
(3) made in the form of, or pursuant to, oil, gas and mineral leases, operating
agreements, farm-in agreements, farm-out agreements, development agreements,
unitization agreements, joint bidding agreements, services contracts and other
similar agreements that a reasonable and prudent oil and gas industry owner or
operator would find acceptable;


 


(f)            investments consisting of Swap Agreements to the extent
permitted under Section 7.05; and


 


(g)           other investments by the Borrower and the Restricted
Subsidiaries; provided that, on the date any such other
investment is made, the amount of such investment, together with all other
investments made pursuant to this clause (g) of


 


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Section 7.04 (in each case determined based
on the cost of such investment) since the Effective Date, does not exceed in
the aggregate, $10,000,000.


 


Section 7.05.          Swap
Agreements. The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, enter into or maintain any Swap Agreement, except the Existing
Swap Agreements, and Swap Agreements entered into in the ordinary course of
business with Approved Counterparties and not for speculative purposes to (a)
hedge or mitigate Crude Oil and Natural Gas price risks to which the Borrower
or any Restricted Subsidiary has actual exposure, and (b) effectively cap,
collar or exchange interest rates (from fixed to floating rates, from one
floating rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of any Credit Party; provided
that such Swap Agreements (at the time each transaction under such Swap
Agreement is entered into) would not cause the aggregate notional amount of
Hydrocarbons under all Swap Agreements then in effect (including the Existing
Swap Agreements) to exceed at any time (i) ninety percent (90%) of the
“forecasted production from proved producing reserves” (as defined below) of
the Borrower and the Restricted Subsidiaries for each of the first two years of
the forthcoming five year period and (ii) eighty percent (80%) of the
forecasted production from proved producing reserves of the Borrower and the
Restricted Subsidiaries for each of the third, fourth and fifth years of the forthcoming
five year period. As used in this Section, “forecasted production from proved
producing reserves” means the forecasted production of Crude Oil and Natural
Gas as reflected in the most recent Reserve Report delivered to the
Administrative Agent pursuant to Section 6.01, after giving effect to any pro
forma adjustments for the consummation of any acquisitions or dispositions
since the effective date of such Reserve Report. Once the Borrower or any
Restricted Subsidiaries enters into a Swap Agreement or any hedge transaction
pursuant to any Swap Agreement, the terms and conditions of such Swap Agreement
and such hedge transaction may not be amended or modified, nor may such Swap
Agreement or hedge transaction be cancelled without the prior written consent
of Required Lenders. Each Credit Party and each Lender agrees
and acknowledges that (i) the Existing Swap Agreements are Swap Agreements permitted
under this Section 7.05, (ii) as of the Effective Date, the counterparty to
each Existing Swap Agreement is a Lender Counterparty, and (iii) the
obligations of the Credit Parties under the Existing Swap Agreements are
included in the defined term “Obligations” and such obligations are entitled to
the benefits of, and are secured by the Liens granted under, the Security
Instruments.


 


Section 7.06.          Restricted
Payments. The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except that (a) the Borrower may declare
and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (b) the Borrower may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Borrower and its Restricted
Subsidiaries in an aggregate amount not to exceed $2,000,000 in any fiscal
year, and (c) any Restricted Subsidiary may make Restricted Payments to the
Borrower or any Guarantor.


 


Section
7.07.          Transactions with
Affiliates. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on
terms and conditions not less favorable to the Borrower or such Restricted


 


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Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties, (b)
transactions between or among the Borrower and its Restricted Subsidiaries not
involving any other Affiliate, (c) transactions described on Schedule 7.07, and
(d) any Restricted Payment permitted by Section 7.05.


 


Section
7.08.          Restrictive Agreements.
The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Borrower or any Restricted
Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Restricted Subsidiary to pay
dividends or other distributions with respect to any of its Equity Interests or
to make or repay loans or advances to the Borrower or any Restricted Subsidiary
or to Guarantee Indebtedness of the Borrower or any Restricted Subsidiary; provided
that (i) the foregoing shall not apply to restrictions and conditions imposed
by law or by this Agreement, (ii) the foregoing shall not apply to restrictions
and conditions set forth in the Indenture, (iii) the foregoing shall not apply
to restrictions and conditions existing on the date hereof identified on
Schedule 7.08 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases and other contracts restricting the
assignment thereof.


 


Section
7.09.          Disqualified Stock. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries
to, issue any Disqualified Stock.


 


Section 7.10.          Amendments
to Organizational Documents and Senior Note Documents.
The Borrower will not, nor will it permit any of its Restricted
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. The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, enter into or permit any
modification or amendment of the Senior Note Documents the effect of
which is to (a) increase the maximum principal amount of the Senior Notes or
the rate of interest on any of the Senior Notes (other than as a result of the
imposition of a default rate of interest in accordance with the terms of the
Senior Note Documents), (b) change or add any event of default or any covenant
with respect to the Senior Note Documents if the effect of such change or
addition is to cause any one or more of the Senior Note Documents to be more
restrictive on the Borrower or any of its Subsidiaries than such Senior Note
Documents were prior to such change or addition, (c) change the dates upon
which payments of principal or interest on the Senior Notes are due, (d) change
any redemption or prepayment provisions of the Senior Notes, (e) alter the
subordination provisions, if any, with respect to any of the Senior Note
Documents, (f) change any of Sections 4.07(a), 10.06, 10.07 or 12.03 of the
Indenture or the penultimate paragraphs of each of Sections 9.01 or 9.02 of the
Indenture, (g) grant any Liens in any assets of the Borrower or any of its
Subsidiaries, or (h) permit any Subsidiary to Guarantee the Senior Notes unless
such Subsidiary is (or concurrently with any such Guarantee becomes) a
Guarantor.


 


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Section 7.11.          Financial Covenants.


 


(a)           Consolidated Current Ratio. The Borrower will not
permit the Consolidated Current Ratio as of the end of any fiscal quarter
ending on or after March 31, 2006 to be less than 1.00 to 1.00.


 


(b)           Leverage Ratio. The Borrower will not permit the
ratio, determined as of the end of any fiscal quarter ending on or after March
31, 2006, of (A) Consolidated Funded Indebtedness as of the end of such fiscal
quarter, to (B) Consolidated EBITDAX for the trailing (4) four fiscal quarter
period ending on such date to be greater than 3.50 to 1.0.


 


Section 7.12.          Sale and
Leaseback Transactions and other Off-Balance Sheet Liabilities. The
Borrower will not, nor will it permit any Restricted Subsidiary to, enter into
or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other
transaction pursuant to which it incurs or has incurred Off-Balance Sheet
Liabilities, except for Swap Agreements permitted under the terms of Section
7.05 and Advance Payment Contracts; provided, that the aggregate
amount of all Advance Payments received by any Credit Party that have not been
satisfied by delivery of production at any time does not exceed, in the aggregate
$1,000,000.


 


Article VIII


Guarantee
of Obligations


 


Section 8.01.          Guarantee of Payment.  Each Guarantor unconditionally and irrevocably
guarantees to the Administrative Agent for the benefit of the Secured Parties,
the punctual payment of all Obligations now or which may in the future be owing
by the Borrower under the Loan Documents and all Obligations which may now or
which may in the future be owing by the Borrower or any other Guarantor to any
Secured Party under any Swap Agreement (the “Guaranteed Liabilities”).
This Guarantee is a guaranty of payment and not of collection only. The
Administrative Agent shall not be required to exhaust any right or remedy or
take any action against the Borrower or any other Person or any collateral. The
Guaranteed Liabilities include interest accruing after the commencement of a
proceeding under bankruptcy, insolvency or similar laws of any jurisdiction at
the rate or rates provided in the Loan Documents, or the Swap Agreements
between any Credit Party and any Secured Party, as the case may be, regardless
of whether such interest is an allowed claim. Each Guarantor agrees that, as
between the Guarantor and the Administrative Agent, the Guaranteed Liabilities
may be declared to be due and payable for the purposes of this Guarantee
notwithstanding any stay, injunction or other prohibition which may prevent,
delay or vitiate any declaration as regards the Borrower or any other Guarantor
and that in the event of a declaration or attempted declaration, the Guaranteed
Liabilities shall immediately become due and payable by each Guarantor for the
purposes of this Guarantee.


 


Section
8.02.          Guarantee Absolute.
Each Guarantor guarantees that the Guaranteed Liabilities shall be paid
strictly in accordance with the terms of this Agreement and the Swap Agreements
to which any Secured Party is a party. The liability of each Guarantor
hereunder is absolute and unconditional irrespective of:  (a) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Loan Documents or the
Guaranteed Liabilities, or any other amendment or waiver of or any consent to
departure from any of the terms of any Loan Document or Guaranteed Liability,
including any increase or decrease in the rate of interest thereon; (b) any
release or amendment or waiver of, or consent to departure from, any other


 


70

















 


guaranty or support
document, or any exchange, release or non-perfection of any collateral, for all
or any of the Loan Documents or Guaranteed Liabilities; (c) any present or
future law, regulation or order of any jurisdiction (whether of right or in
fact) or of any agency thereof purporting to reduce, amend, restructure or
otherwise affect any term of any Loan Document or Guaranteed Liability; (d)
without being limited by the foregoing, any lack of validity or enforceability
of any Loan Document or Guaranteed Liability; and (e) any other setoff, defense
or counterclaim whatsoever (in any case, whether based on contract, tort or any
other theory) with respect to the Loan Documents or the transactions
contemplated thereby which might constitute a legal or equitable defense
available to, or discharge of, the Borrower or a Guarantor.


 


Section
8.03.          Guarantee Irrevocable.
This Guarantee is a continuing guaranty of the payment of all Guaranteed
Liabilities now or hereafter existing under this Agreement and such Swap
Agreements to which any Secured Party is a party and shall remain in full force
and effect until payment in full of all Guaranteed Liabilities and other
amounts payable hereunder and until this Agreement and the Swap Agreements are
no longer in effect or, if earlier, when the Guarantor has given the
Administrative Agent written notice that this Guarantee has been revoked; provided
that any notice under this Section shall not release the revoking Guarantor
from any Guaranteed Liability, absolute or contingent, existing prior to the
Administrative Agent’s actual receipt of the notice at its branches or
departments responsible for this Agreement and such Swap Agreements and
reasonable opportunity to act upon such notice.


 


Section
8.04.          Reinstatement. This
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Guaranteed Liabilities is rescinded or
must otherwise be returned by any Secured Party on the insolvency, bankruptcy
or reorganization of the Borrower, or any other Credit Party, or otherwise, all
as though the payment had not been made.


 


Section
8.05.          Subrogation. No
Guarantor shall exercise any rights which it may acquire by way of subrogation,
by any payment made under this Guarantee or otherwise, until all the Guaranteed
Liabilities have been paid in full and this Agreement and the Swap Agreements
to which any Lender Counterparty is a party are no longer in effect. If any
amount is paid to the Guarantor on account of subrogation rights under this
Guarantee at any time when all the Guaranteed Liabilities have not been paid in
full, the amount shall be held in trust for the benefit of the Lenders and the
Lender Counterparties and shall be promptly paid to the Administrative Agent to
be credited and applied to the Guaranteed Liabilities, whether matured or
unmatured or absolute or contingent, in accordance with the terms of this
Agreement and such Swap Agreements. If any Guarantor makes payment to the
Administrative Agent, Lenders, or any Lender Counterparties of all or any part
of the Guaranteed Liabilities and all the Guaranteed Liabilities are paid in
full and this Agreement and such Swap Agreements are no longer in effect, the
Administrative Agent, Lenders and Lender Counterparties shall, at such
Guarantor’s request, execute and deliver to such Guarantor appropriate
documents, without recourse and without representation or warranty, necessary
to evidence the transfer by subrogation to such Guarantor of an interest in the
Guaranteed Liabilities resulting from the payment.


 


Section 8.06.          Subordination. Without limiting
the rights of the Administrative Agent, the Lenders and the Lender
Counterparties under any other agreement, any liabilities owed by the Borrower
to any Guarantor in connection with any extension of credit or financial
accommodation


 


71

















 


by any Guarantor to or for the account of the Borrower, including but
not limited to interest accruing at the agreed contract rate after the
commencement of a bankruptcy or similar proceeding, are hereby subordinated to
the Guaranteed Liabilities, and such liabilities of the Borrower to such
Guarantor, if the Administrative Agent so requests, shall be collected,
enforced and received by any Guarantor as trustee for the Administrative Agent
and shall be paid over to the Administrative Agent on account of the Guaranteed
Liabilities but without reducing or affecting in any manner the liability of
the Guarantor under the other provisions of this Guarantee.


 


Section 8.07.          Payments Generally. All
payments by the Guarantors shall be made in the manner, at the place and in the
currency (the “Payment Currency”) required by the Loan Documents and the
Swap Agreement to which any Lender Counterparty is a party, as the case may be;
provided, however, that (if the Payment Currency is other than
Dollars) any Guarantor may, at its option (or, if for any reason whatsoever any
Guarantor is unable to effect payments in the foregoing manner, such Guarantor
shall be obligated to) pay to the Administrative Agent at its principal office
the equivalent amount in Dollars computed at the selling rate of the
Administrative Agent or a selling rate chosen by the Administrative Agent, most
recently in effect on or prior to the date the Guaranteed Liability becomes
due, for cable transfers of the Payment Currency to the place where the
Guaranteed Liability is payable. In any case in which any Guarantor makes or is
obligated to make payment in Dollars, the Guarantor shall hold the
Administrative Agent, the Lenders and the Lender Counterparties harmless from
any loss incurred by the Administrative Agent, any Lender or any Lender
Counterparty arising from any change in the value of Dollars in relation to the
Payment Currency between the date the Guaranteed Liability becomes due and the
date the Administrative Agent, such Lender or such Lender Counterparty is actually
able, following the conversion of the Dollars paid by such Guarantor into the
Payment Currency and remittance of such Payment Currency to the place where
such Guaranteed Liability is payable, to apply such Payment Currency to such
Guaranteed Liability.


 


Section 8.08.          Setoff. Each Guarantor agrees
that, in addition to (and without limitation of) any right of setoff, banker’s
lien or counterclaim the Administrative Agent, any Lender or any Lender
Counterparty may otherwise have, the Administrative Agent, such Lender or such
Lender Counterparty shall be entitled, at its option, to offset balances
(general or special, time or demand, provisional or final) held by it for the
account of any Guarantor at any office of the Administrative Agent, such Lender
or such Lender Counterparty, in Dollars or in any other currency, against any
amount payable by such Guarantor under this Guarantee which is not paid when
due (regardless of whether such balances are then due to such Guarantor), in
which case it shall promptly notify such Guarantor thereof; provided
that the failure of the Administrative Agent, such Lender, or such Lender
Counterparty to give such notice shall not affect the validity thereof.


 


Section
8.09.          Formalities. Each
Guarantor waives presentment, notice of dishonor, protest, notice of acceptance
of this Guarantee or incurrence of any Guaranteed Liability and any other
formality with respect to any of the Guaranteed Liabilities or this Guarantee.


 


Section 8.10.          Limitations on Guarantee.
The provisions of the Guarantee under this Article VIII are severable, and in
any action or proceeding involving any state corporate law, or any state,
federal or foreign bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any
Guarantor under this Guarantee would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such


 


72

















 


Guarantor’s liability under this Guarantee,
then, notwithstanding any other provision of this Guarantee to the contrary,
the amount of such liability shall, without any further action by the
Guarantors, the Administrative Agent, any Lender or any Lender Counterparty, be
automatically limited and reduced to the highest amount that is valid and
enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the relevant Guarantor's "Maximum
Liability"). This Section 8.10 with respect to the Maximum Liability of
the Guarantors is intended solely to preserve the rights of the Administrative
Agent, Lenders and Lender Counterparties hereunder to the maximum extent not
subject to avoidance under applicable law, and no Guarantor nor any other
Person shall have any right or claim under this Section 8.10 with respect to
the Maximum Liability, except to the extent necessary so that none of the
obligations of any Guarantor hereunder shall not be rendered voidable under
applicable law.


 


Article IX


 


Events of Default


 


If any of the following
events (“Events of Default”) shall occur:


 


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


 


(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 clause
(a) of this Article) payable under this Agreement, when and as the same
shall become due and payable, and such failure shall continue unremedied for a
period of three days;


 


(c)           any representation or warranty made or deemed made by or
on behalf of the Borrower or any Restricted Subsidiary in or in connection with
this Agreement or any amendment or modification hereof or waiver hereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder or in any Loan Document furnished
pursuant to or in connection with this Agreement or any amendment or
modification thereof or waiver hereunder, shall prove to have been incorrect in
any material respect when made or deemed made;


 


(d)           the Borrower or any Restricted Subsidiary shall fail to
observe or perform any covenant, condition or agreement contained in Section
6.01, Section 6.02, Section 6.03
(with respect to the Borrower or any Restricted Subsidiary’s existence),
Section 6.05 (with respect to insurance), Section 6.08, or in Article VII;


 


(e)           the Borrower or any Restricted Subsidiary shall fail to
observe or perform any covenant, condition or agreement contained in this
Agreement (other than those specified in clause (a), (b) or (d) of this
Article) or any Loan Document, and such failure shall continue unremedied for a
period of 30 days after notice thereof from the


 


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Administrative
Agent to the Borrower (which notice will be given at the request of any
Lender);


 


(f)            the Borrower or any Restricted Subsidiary 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;


 


(g)           any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits 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 prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity; provided that this clause (g)
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;


 


(h)           an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or any Restricted
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 Borrower or any
Restricted Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;


 


(i)            the Borrower or any Restricted 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 or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any Restricted 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;


 


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


 


(k)           one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the Borrower
or any Restricted 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 Borrower or any
Restricted Subsidiary to enforce any such judgment;


 


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(l)            an ERISA Event shall have occurred that, in the opinion
of the Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in a Material Adverse
Effect;


 


(m)          the delivery by any Guarantor to the Administrative Agent
of written notice that its Guarantee under Article VIII has been revoked or is
otherwise declared invalid or unenforceable;


 


(n)           a Change of Control shall occur.


 


then,
and in every such event (other than an event with respect to the Borrower or
any Restricted Subsidiary described in clause (h) or (i) of this Article), and
at any time thereafter during the continuance of such event, the Administrative
Agent may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or
different times:  (i) terminate the Aggregate Commitment, and
thereupon the Aggregate Commitment shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or
in part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
become due and payable immediately, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or
(i) of this Article, the Aggregate Commitment shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
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.


 


Article X


 


The
Administrative Agent


 


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


 


The bank serving as the
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Credit Party or other Affiliate thereof as if it were not the
Administrative Agent hereunder.


 


The Administrative Agent
shall not have any duties or obligations except those expressly set forth
herein. 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,
(b) the Administrative Agent shall not have


 


75

















 


any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing as directed by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 11.02), 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 any Credit Party 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 not be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or
in connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article V or elsewhere herein, other than to confirm receipt
of items expressly required to be delivered to the Administrative Agent.


 


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. 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
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 paragraphs 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.


 


Subject to the appointment
and acceptance of a successor Administrative Agent as provided in this
paragraph, the Administrative Agent may resign at any time by notifying the
Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the


 


76

















 


retiring Administrative
Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent which shall be a bank with an office in Chicago, Illinois
or New York, New York, or an Affiliate of any such bank. Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent’s
resignation hereunder, the provisions of this Article and Section 11.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.


 


Each Lender acknowledges
that it has, independently and without reliance upon the Administrative 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. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative 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 related agreement or any document furnished
hereunder or thereunder.


 


Article XI


 


Miscellaneous


 


Section 11.01.        Notices.


 


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


 


(i)            if to the Borrower, to EXCO Resources, Inc., 12377 Merit
Drive, Suite 1700, Dallas, Texas 75251, Attention:  Douglas H. Miller, Chief Executive Officer
and Attention:  J. Douglas Ramsey, Chief
Financial Officer, Telecopy No. (214) 368-2087. For purposes of delivering the
documents pursuant to Section 6.01(a), Section 6.01(b) and Section 6.01(d), the
website address is www.excoresources.com;


 


(ii)           if to the Administrative Agent or Issuing Bank, to
JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 21 South Clark St.,
19th Floor, Chicago, Illinois 60603-2003, Telecopy No.: (312) 732-4840, Attention: Jim Moore, with a copy to
JPMorgan Chase Bank, N.A., 1717 Main Street, TX1-2448, Dallas, Texas 75201,
Telecopy No. (214) 290-2332, Attention: 
Wm. Mark Cranmer, Vice President;


 


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(iii)          if to the Swingline Lender, JPMorgan Chase Bank,
N.A., JPMorgan Loan Services, 21 South Clark St., 19th Floor, Chicago, Illinois
60603-2003, Telecopy No.: (312) 732-4840, Attention:  Jim Moore, with a
copy to JPMorgan Chase Bank, N.A., 1717 Main Street, Mail Code TX1-2448,
Dallas, Texas 75201, Telecopy No. (214) 290-2332, Attention:  Wm. Mark Cranmer; and


 


(iv)          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 unless otherwise agreed by
the Administrative Agent and the applicable Lender. The Administrative Agent or
the Borrower may, in their 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 11.02.        Waivers;
Amendments.


 


(a)           No failure or delay by the Administrative Agent, the
Issuing Bank or any Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Issuing Bank and the Lenders hereunder 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 consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making
of a Loan or issuance of a Letter of Credit shall not be construed as a waiver
of any Default, regardless of whether the Administrative Agent, any Lender or
the Issuing Bank may have had notice or knowledge of such Default at the time.


 


(b)           Neither this Agreement nor any
provision hereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Credit Parties and the
Required Lenders or by the Credit Parties and the Administrative Agent with the
consent of the Required Lenders; provided that no such agreement shall (1)
increase the Borrowing Base without the written consent of each Lender, (2)
increase the Applicable Percentage or Commitment of any Lender without the
written consent of


 


78

















 


such Lender or the Aggregate Commitment above the
Maximum Facility Amount without the written consent of all Lenders, (3) reduce
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (4) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of any of
the Aggregate Commitment, without the written consent of each Lender affected
thereby, (5) change Section 2.19(b) or Section 2.19(c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (6) release any Credit Party from its obligations under
the Loan Documents or, except in connection with any sales, transfers, leases
or other dispositions permitted in Section 7.03, release any of the Collateral
without the written consent of each Lender, or (7) change any of the provisions
of this Section or the definition of “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or make any determination or grant any consent
hereunder, 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, the Issuing Bank or the Swingline Lender
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank or the Swingline Lender, as the case may be. Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such
Lender may not be increased or extended without the consent of such Lender.


 


Section 11.03.        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),
(ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder and (iii) all out-of-pocket
expenses incurred by the Administrative Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank 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
or Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit. 


 


(b)           THE CREDIT PARTIES SHALL
INDEMNIFY THE ADMINISTRATIVE AGENT, THE ISSUING BANK AND EACH LENDER, AND EACH
RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH 


 


79

















 


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 LOAN OR LETTER OF CREDIT OR THE
USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING BANK TO
HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED
IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH
LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER
OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE
BORROWER OR ANY SUBSIDIARY, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY 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 HAVE RESULTED FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.


 


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


 


(d)           To the 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


 


80

















 


agreement
or instrument contemplated hereby, the Transactions, any Loan or Letter of
Credit 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
11.04.        Successors and Assigns.


 


(a)           The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that (i) no Credit Party may 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
such Credit Party 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. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), Participants
(to the extent provided in paragraph (c) of this Section) and, to the extent
expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.


 


(b)           


 


(i)            Subject to the conditions set forth in 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 its
Commitment and the Loans at the time owing to it) with the prior written
consent (such consent not to be unreasonably withheld) of:


 


(A)          the
Borrower, provided that no consent of the Borrower shall be required 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; and


 


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


 


(C)           the
Issuing Bank; or


 


(D)          the
Swingline Lender.


 


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


 


81

















 


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


 


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


 


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


 


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


 


For
the purposes of this Section 11.04(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 acceptance and recording thereof pursuant to
paragraph (b)(iv) of this Section, 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 2.16, Section 2.17, Section 2.18 and Section 11.03).
Any assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 11.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in


 


82

















 


accordance
with paragraph (c) of this Section except that any attempted assignment or
transfer by any Lender that does not comply with clause (C) of Section
11.04(b)(ii) shall be null and void.


 


(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 Commitment and
Applicable Percentage of, and principal amount of the Loans and LC Disbursements
owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, and the Credit Parties, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Credit Parties,
the Issuing Bank 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 (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
paragraph (b) of this Section any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall
accept such Assignment and Assumption and record the information contained
therein in the Register; provided that if either the assigning Lender or
the assignee shall have failed to make any payment required to be made by it
pursuant to Section 2.07(d) or Section 2.07(e), Section 2.08, Section 2.19(d)
or Section 11.03(c), the Administrative Agent shall have no obligation to
accept such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon. No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.


 


(c)           


 


(i)            Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that
(A) such Lender’s obligations under this Agreement shall remain unchanged,
(B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrower, the
Administrative Agent, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement


 


83

















 


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 first proviso to Section
11.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Section 2.16, Section 2.17 and Section 2.18 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 11.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.19(c) as
though it were a Lender.


 


(ii)           A Participant shall not be entitled to receive any greater
payment under Section 2.16 or Section 2.18 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the prior written consent of the Borrower. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.18 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 2.18(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
shall not apply to any such pledge or assignment of a security interest; provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.


 


Section
11.05.        Survival. All
covenants, agreements, representations and warranties made by the Credit
Parties herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Aggregate Commitment has not expired or terminated. The
provisions of Section 2.16, Section 2.17, Section 2.18 and Section 11.03 and
Article X shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the Aggregate
Commitment or the termination of this Agreement or any provision hereof.


 


84

















 


Section
11.06.        Counterparts;
Integration; Effectiveness. 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. This Agreement 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 supersede
any and all previous agreements and understandings, oral or written, relating
to the subject matter hereof. THIS WRITTEN
CREDIT AND GUARANTY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Except as provided in
Section 5.01, 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
11.07.        Severability. Any
provision of this Agreement 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; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.


 


Section
11.08.        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 at any time owing by such Lender or Affiliate to or for the
credit or the account of the Borrower against any of and all the obligations of
any Credit Party now or hereafter existing under this Agreement held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement and although such obligations may be unmatured. The rights
of each Lender under this Section and Section 8.08 are in addition to other
rights and remedies (including other rights of setoff) which such Lender may
have.


 


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


 


(a)           THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF TEXAS.


 


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


 


85

















 


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 TEXAS 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, THE ISSUING BANK 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 11.01. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.


 


Section
11.10.        WAIVER OF JURY TRIAL.
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
11.11.        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.


 


86

















 


Section
11.12.        Confidentiality. Each
of the Administrative Agent, the Issuing Bank and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates’ directors,
officers, employees and agents, including 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, (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii)  any actual or prospective counterparty (or
its advisors) to any swap or derivative transaction relating to the Credit
Parties and their obligations, (g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than a Credit Party. For the purposes
of this Section, “Information” means all information received from any
Credit Party relating to any Credit Party or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by any Credit Party; provided
that, in the case of information received from any Credit Party after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.


 


Section 11.13.        Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated
as interest on such Loan under applicable law (collectively the “Charges”),
shall exceed the maximum lawful rate (the “Maximum Rate”) which may be
contracted for, charged, taken, received or reserved by the Lender holding such
Loan in accordance with applicable law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender. Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit accounts (formerly Tex. Rev. Civ.
Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to any
Loan, nor shall this Agreement or any Loan be governed by or be subject to the
provisions of such Chapter 346 in any manner whatsoever.


 


Section
11.14.        USA PATRIOT Act. Each
Lender that is subject to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies
each Credit Party that pursuant to the requirements of the Act, it is required
to


 


87

















 


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 each Credit Party in
accordance with the Act.


 


Section
11.15.        Original
Credit Agreement. Upon the Effective Date and notwithstanding that certain
Guarantors under this Agreement were “Borrowers” under the Original Credit
Agreement, this Agreement shall supersede and replace in its entirety the
Original Credit Agreement; provided, however, that (i) all loans, letters of
credit, and other indebtedness, obligations and liabilities outstanding under
the Original Credit Agreement on such date shall continue to constitute Loans,
Letters of Credit and other indebtedness, obligations and liabilities under
this Agreement, (ii) the execution and delivery of this Agreement or any of the
Loan Documents hereunder shall not constitute a novation, refinancing or any
other fundamental change in the relationship among the parties and (iii) the
Loans, Letters of Credit, and other indebtedness, obligations and liabilities
outstanding hereunder, to the extent outstanding under the Original Credit
Agreement immediately prior to the date hereof, shall constitute the same
loans, letters of credit, and other indebtedness, obligations and liabilities
as were outstanding under the Original Credit Agreement.


 


Section
11.16.        Reaffirmation
and Grant of Security Interest. Each Credit Party hereby (i) confirms that
each Security Instrument (as defined in the Original Credit Agreement) to which
it is a party or is otherwise bound and all collateral encumbered thereby, will
continue to guarantee or secure, as the case may be, to the fullest extent
possible in accordance with the Loan Documents and regardless of whether any
Guarantor under this Agreement was a “Borrower” under the Original Credit
Agreement, the payment and performance of all Obligations and Guaranteed
Liabilities under this Agreement and the Secured Obligations (as such term is
defined in the Security Instruments) under the Security Instruments, as the case
may be, including without limitation the payment and performance of all such
Obligations and Guaranteed Liabilities under this Agreement and the Secured
Obligations under the Security Instruments, and (ii) grants to the
Administrative Agent for the benefit of the Secured Parties a continuing Lien
on and security interest in and to such Credit Party’s right, title and
interest in, to and under all Collateral as collateral security for the prompt
payment and performance in full when due of the Obligations and Guaranteed
Liabilities under this Agreement and the Secured Obligations under the Security
Instruments (whether at stated maturity, by acceleration or otherwise) in
accordance with the terms thereof. With respect to the other Loan Documents,
(a) the defined term “Bank One” shall be deemed to mean JPMorgan Chase Bank,
(b) the defined term “Agent” shall be deemed to mean JPMorgan Chase Bank, in
its capacity as Administrative Agent and (c) the defined term “Rate Management
Obligations” shall be deemed to mean indebtedness liabilities and obligations
of any Credit Party with respect to transactions under Swap Agreements between
such Credit Party and any Lender Counterparty that are included in the defined
term “Obligations” under this Agreement.


 


Section 11.17.        Reallocation
of Aggregate Commitment. The Lenders (as defined in the Original Credit
Agreement) have agreed among themselves to reallocate the Revolving Commitment
(as defined in the Original Credit Agreement) as contemplated by this Agreement
and to adjust their interests in the Revolving Commitment and the Revolving
Loans (as defined in the Original Credit Agreement) accordingly. On the
Effective Date and after giving effect to such reallocation and adjustment of
such Revolving Commitment and such Revolving Liens, the


 


88

















 


Lenders (as defined in this Agreement) shall
own the Applicable Percentages set forth on Schedule 2.01. The outstanding
Revolving Loans (as defined in the Original Credit Agreement) and the funds
delivered to the Administrative Agent on the Effective Date by the Lenders
(other than the Lenders under the Original Credit Agreement) and the other
Lenders shall be allocated such that after giving effect to such allocation
each of the Lenders (as defined in this Agreement) shall own the Applicable
Percentages of the Aggregate Commitment and the Commitments set forth on
Schedule 2.01 and such Lenders shall own the Revolving Loans (as defined in
this Agreement) consistent with the Applicable Percentages set forth on
Schedule 2.01.


 


89

















 


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


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  EXCO RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXCO OPERATING, LP

  	
   

  
	
   

  	
  a Delaware limited partnership

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Investment II, LLC,

  
	
   

  	
   

  	
  its sole general partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  EXCO Resources, Inc.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  NORTH COAST ENERGY, INC.

  	
   

  
	
   

  	
  a Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President 

  
														



 

















 


	
   

  	
  NORTH COAST ENERGY EASTERN, INC.

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROJO PIPELINE, INC.

  	
   

  
	
   

  	
  (f/k/a Taurus Acquisition,
  Inc.)

  	
   

  
	
   

  	
  a Texas corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXCO INVESTMENT I, LLC

  	
   

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Resources, Inc.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title: 

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  EXCO INVESTMENT II, LLC

  	
   

  
	
   

  	
  a Delaware limited liability
  company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Resources, Inc.,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
												



 

















 


	
   

  	
  PINESTONE RESOURCES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TXOK
  ACQUISITION, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TXOK
  ENERGY RESOURCES COMPANY,

  
	
   

  	
  a Delaware corporation (formerly known as ONEOK Energy Resources
  Company)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TXOK
  ENERGY RESOURCES HOLDINGS, L.L.C.,

  
	
   

  	
  a Delaware limited liability company (formerly known as ONEOK Energy
  Resource Holdings, L.L.C.)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
											



 

















 


	
   

  	
  TXOK
  TEXAS ENERGY HOLDINGS, LLC,

  
	
   

  	
  a Delaware limited liability company (formerly known as ONEOK Texas
  Energy Holdings, LLC)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  TXOK
  TEXAS ENERGY RESOURCES, L.P.,

  
	
   

  	
  a Delaware limited partnership (formerly known as ONEOK Texas Energy
  Resources, L.P.)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TXOK Texas Energy Holdings, LLC,

  
	
   

  	
   

  	
  as general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. DOUGLAS RAMSEY

  	
   

  
	
   

  	
  Name:

  	
  J. Douglas Ramsey, Ph.D.

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
					



 

















 


	
   

  	
  JPMORGAN CHASE BANK, N.A., individually and
  as Administrative Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Wm. Mark Cranmer

  	
   

  
	
   

  	
   

  	
  Name: Wm. Mark Cranmer

  
	
   

  	
   

  	
  Title: Vice President

  



 

















 


	
   

  	
  KEY BANK, NA

  	
   

  
	
   

  	
  as a Lender and as Syndication
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/ THOMAS RAJAN

  	
   

  
	
   

  	
  Name:

  	
  Thomas Rajan

  
	
   

  	
  Title:

  	
  Senior Vice President

  
						



 

















 


	
   

  	
  CITIBANK TEXAS, N.A.

  
	
   

  	
  as a Lender and as Syndication
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  ANGELA MCCRACKEN

  
	
   

  	
  Name:

  	
  Angela McCracken

  
	
   

  	
  Title:

  	
  Vice President

  
				



 

















 


	
   

  	
  SCOTIABANC INC.

  
	
   

  	
  as a Lender and as
  Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ WILLIAM E. ZARRETT

  
	
   

  	
  Name: William E. Zarrett

  
	
   

  	
  Title: Managing Director

  	
   

  
				



 

















 


	
   

  	
  BNP PARIBAS

  
	
   

  	
  as a Lender and as
  Documentation Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID DODD

  
	
   

  	
  Name:

  	
  David Dodd

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BETSY JOCHER

  
	
   

  	
  Name:

  	
  Betsy Jocher

  
	
   

  	
  Title: Director

  
						



 

















 


	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION

  
	
   

  	
  as a Lender and as Senior
  Managing Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DWIGHT BATTLE

  
	
   

  	
  Name:

  	
  Dwight Battle

  
	
   

  	
  Title:

  	
  Vice President

  
				



 

















 


	
   

  	
  BANK OF AMERICA, NA

  
	
   

  	
  as a Lender and as Senior
  Managing Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SCOTT F. DAVIS

  
	
   

  	
  Name:

  	
  Scott F. Davis

  
	
   

  	
  Title:

  	
  Vice President

  
				



 

















 


	
   

  	
  FORTIS CAPITAL CORP.

  
	
   

  	
  as a Lender and as Senior Managing Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MICHELE JONES

  
	
   

  	
  Name:

  	
  Michele Jones

  
	
   

  	
  Title:

  	
  SVP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TROND O. ROKHOLT

  
	
   

  	
  Name:

  	
  Trond O. Rokholt

  
	
   

  	
  Title:

  	
  Managing Director

  
				



 

















 


	
   

  	
  BANK
  OF SCOTLAND

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ KAREN WELCH

  	
   

  
	
   

  	
  Name:

  	
  Karen Welch

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  



 

















 


	
   

  	
  SUNTRUST
  BANK

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ SEAN M. ROCHE

  	
   

  
	
   

  	
  Name:

  	
  Sean M. Roche

  
	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  UNION
  BANK OF CALIFORNIA, N.A.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ KIMBERLY COLL

  	
   

  
	
   

  	
  Name:

  	
  Kimberly Coll

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ ALISON FUQUA

  	
   

  
	
   

  	
  Name:

  	
  Alison Fuqua

  
	
   

  	
  Title:

  	
  Investment Banking
  Officer

  



 

















 


	
   

  	
  WELLS
  FARGO BANK, N.A.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ REED V. THOMPSON

  	
   

  
	
   

  	
  Name:

  	
  Reed V. Thompson

  
	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  COMERICA
  BANK

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ PETER L. SEFZIK

  	
   

  
	
   

  	
  Name:

  	
  Peter L. Sefzik

  
	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  TORONTO DOMINION (TEXAS) LLC

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ JIM BRIDWELL

  	
   

  
	
   

  	
  Name:

  	
  Jim Bridwell

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 

















 


	
   

  	
  CREDIT SUISSE, Cayman Islands
  Branch

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ VANESSA GOMEZ

  	
   

  
	
   

  	
  Name:

  	
  Vanessa Gomez

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ NUPUR KUMAR

  	
   

  
	
   

  	
  Name:

  	
  Nupur Kumar

  
	
   

  	
  Title:

  	
  Associate

  



 

















 


	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
  CORPORATION

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ SIMON DUNCAN

  	
   

  
	
   

  	
  Name:

  	
  Simon Duncan

  
	
   

  	
  Title:

  	
  Authorized Signatory

  



 

















 


	
   

  	
  NATEXIS BANQUES POPULAIRES

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ DONOVAN C.
  BROUSSARD

  	
   

  
	
   

  	
  Name:

  	
  Donovan C. Broussard

  
	
   

  	
  Title:

  	
  Vice President &
  Group Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ TIMOTHY L. POLVADO

  	
   

  
	
   

  	
  Name:

  	
  Timothy L. Polvado

  
	
   

  	
  Title:

  	
  Vice President &
  Group Manager

  



 

















 


	
   

  	
  BARCLAYS CAPITAL PLC

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ NICHOLAS BELL

  	
   

  
	
   

  	
  Name:

  	
  Nicholas Bell

  
	
   

  	
  Title:

  	
  Director

  



 

















 


	
   

  	
  SOCIÉTÉ GÉNÉRALE

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ JOSH ROGERS

  	
   

  
	
   

  	
  Name:

  	
  Josh Rogers

  
	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  WESTLB AG, NY BRANCH

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ DUNCAN ROBERTSON

  	
   

  
	
   

  	
  Name:

  	
  Duncan Robertson

  
	
   

  	
  Title:

  	
  Executive Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ JAMES D. MCPARTLAN

  	
   

  
	
   

  	
  Name:

  	
  James D. McPartlan

  
	
   

  	
  Title:

  	
  Managing Director

  



 

















 


EXHIBIT A


ASSIGNMENT AND ASSUMPTION


 


This Assignment and Assumption (the “Assignment
and Assumption”) is dated as of the Effective Date set forth below and is
entered into by and between [Insert name of Assignor] (the “Assignor”)
and [Insert name of Assignee] (the “Assignee”). Capitalized terms used
but not defined herein shall have the meanings given to them in the Credit
Agreement identified below (as amended, the “Credit Agreement”), receipt
of a copy of which is hereby acknowledged by the Assignee. The Standard Terms
and Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.


 


For an agreed consideration,
the Assignor hereby irrevocably sells and assigns to the Assignee, and the
Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Standard Terms and Conditions and the Credit
Agreement, as of the Effective Date inserted by the Administrative Agent as
contemplated below (i) all of the Assignor’s rights and obligations in its
capacity as a Lender under the Credit Agreement and any other documents or
instruments delivered pursuant thereto to the extent related to the amount and
percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below
(including any letters of credit, guarantees and swingline loans included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including
contract claims, tort claims, malpractice claims, statutory claims and all
other claims at law or in equity related to the rights and obligations sold and
assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is
without recourse to the Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by the Assignor.


 


	
  1.

  	
  Assignor:

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  
	
   

  	
   

  	
  [and is an Affiliate/Approved Fund of [identify Lender]]

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower(s):

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Administrative Agent:

  	
  JPMorgan Chase Bank, N.A. (as the administrative agent under the
  Credit Agreement)

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Credit Agreement:

  	
  Amended and Restated Credit Agreement dated as of March 17, 2006
  among EXCO Resources, Inc., as Borrower, Certain

  



 

















 


	
   

  	
   

  	
  Subsidiaries of Borrower, as Guarantors, the Lenders parties thereto,
  and JPMorgan Chase Bank, N.A., as Administrative Agent

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Assigned Interest:

  	
   

  



 


	
  Facility Assigned

  	
   

  	
  Aggregate

  Commitment/Loans

  for all Lenders

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned

  	
   

  	
  Applicable

  Percentage of

  Commitment/Loans

  	
   

  
	
  Commitment

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  



 


 


Effective
Date:                             
      , 20    


 


The
terms set forth in this Assignment and Assumption are hereby agreed to:


 


	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 






 


 


[Consented
to and] Accepted:


 


JPMORGAN
CHASE BANK, N.A.


as
Administrative Agent


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  



 


[Consented
to:]


 


	
  EXCO
  RESOURCES, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 

















 


ANNEX 1


 


Amended
and Restated Credit Agreement dated March 17, 2006 among EXCO Resources, Inc.,
as Borrower, Certain Subsidiaries of Borrower, as Guarantors, the Lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.


 


STANDARD TERMS AND CONDITIONS FOR


ASSIGNMENT AND ASSUMPTION


 


1. Representations and Warranties.


 


1.1  Assignor. The Assignor (a) represents
and warrants that (i) it is the legal and beneficial owner of the Assigned
Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance
or other adverse claim and (iii) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and
to consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any collateral
thereunder, (iii) the financial condition of the Borrower, any Subsidiary or
Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by the Borrower, any Subsidiary or
Affiliates or any other Person of any of their respective obligations under any
Loan Document.


 


1.2. Assignee. The Assignee (a) represents
and warrants that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) it satisfies the requirements, if any, specified in
the Credit Agreement that are required to be satisfied by it in order to
acquire the Assigned Interest and become a Lender, (iii) from and after the
Effective Date, it shall be bound by the provisions of the Credit Agreement as
a Lender thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 6.01 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
and Assumption is any documentation required to be delivered by it pursuant to
the terms of the Credit Agreement, duly completed and executed by the Assignee;
and (b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.


 


1

















 


2. Payments. From and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and
after the Effective Date.


 


3. General Provisions. This Assignment and
Assumption shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns. This Assignment and
Assumption may be executed in any number of counterparts, which together shall
constitute one instrument. Delivery of an executed counterpart of a signature
page of this Assignment and Assumption by telecopy shall be effective as
delivery of a manually executed counterpart of this Assignment and Assumption. This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of Texas.


 


2

















 


EXHIBIT B


 


OPINION
OF COUNSEL FOR THE BORROWER


 


1

















 


EXHIBIT C


 


COUNTERPART
AGREEMENT


 


This COUNTERPART AGREEMENT, dated [              ]
(this “Counterpart Agreement”) is
delivered pursuant to that certain Amended and Restated Credit Agreement, dated
as of March 17, 2006 (as it may be amended, supplemented or otherwise modified,
the “Credit Agreement”; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among EXCO RESOURCES, INC., as Borrower, CERTAIN SUBSIDIARIES OF
BORROWER, as Guarantors, the LENDERS party thereto,  and JPMORGAN CHASE BANK, N.A. (successor by
merger to Bank One, N.A. (Illinois)), as
Administrative Agent (the “Administrative
Agent”).


 


Section
1.                  Pursuant
to Section 6.13 of the Credit Agreement, the undersigned hereby:


 


(a)          agrees that this
Counterpart Agreement may be attached to the Credit Agreement and that by the
execution and delivery hereof, the undersigned becomes a Guarantor under the
Credit Agreement and agrees to be bound by all of the terms thereof;


 


(b)         represents and warrants
that each of the representations and warranties set forth in the Credit
Agreement and each other Loan Document and applicable to the undersigned is
true and correct both before and after giving effect to this Counterpart
Agreement, except to the extent that any such representation and warranty
relates solely to any earlier date, in which case such representation and
warranty is true and correct as of such earlier date;


 


(c)          no event has occurred or
is continuing as of the date hereof, or will result from the transactions
contemplated hereby on the date hereof, that would constitute an Event of
Default or a Default;


 


(d)         agrees to irrevocably and
unconditionally guaranty the due and punctual payment in full of all
Obligations when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) and
in accordance with Section 8 of the Credit Agreement;


 


(e)          the undersigned hereby
(i) agrees that this counterpart may also be attached to the Pledge Agreement,
(ii) agrees that the undersigned will comply with all the terms and conditions
of the Pledge Agreement as if it were an original signatory thereto, (iii)
grants to Secured Party (as such term is defined in the Pledge Agreement) a
security interest in all of the undersigned’s right, title and interest in and
to all “Collateral” (as such term is defined in the Pledge Agreement) of the
undersigned, in each case whether now or hereafter existing or in which the
undersigned now has or hereafter acquires an interest and wherever the same may
be located and (iv) delivers to Agent supplements to all schedules attached to
the Pledge Agreement. All such Collateral shall be deemed to be part of the “Collateral”
and hereafter subject to each of the terms and conditions of the Pledge
Agreement.


 


1

















 


Section
2.                 The
undersigned agrees from time to time, upon request of Administrative Agent, to
take such additional actions and to execute and deliver such additional
documents and instruments as Administrative Agent may request to effect the
transactions contemplated by, and to carry out the intent of, this Agreement. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated, except by an instrument in writing signed by the party (including,
if applicable, any party required to evidence its consent to or acceptance of
this Agreement) against whom enforcement of such change, waiver, discharge or
termination is sought. Any notice or other communication herein required or
permitted to be given shall be given in pursuant to Section 11.01 of the Credit
Agreement, and all for purposes thereof, the notice address of the undersigned
shall be the address as set forth on the signature page hereof. In case any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.


 


THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES THEREOF.


 


2

















 


IN
WITNESS WHEREOF, the undersigned has caused this Counterpart
Agreement to be duly executed and delivered by its duly authorized officer as
of the date above first written.


 


 


	
   

  	
  [NAME
  OF SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Address for Notices:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Telecopier

  	
   

  	
   

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Telecopier

  	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND
  ACCEPTED,

  	
   

  
	
  as of the date above
  first written:

  	
   

  
	
   

  	
   

  
	
  JPMORGAN
  CHASE BANK, N.A.,

  	
   

  
	
  as Administrative Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
										



 


3

















 


EXHIBIT
D


 


CERTIFICATE
REGARDING SOLVENCY


 


1

















 


EXHIBIT “A”


Pro-Forma Balance Sheet


(see attached)


 


2

















 


EXHIBIT “B”


Projections


(see attached)


 


3

















 


EXHIBIT E


 


REVOLVING
NOTE


 




	
  Dallas, Texas

  	
   

  	
                      ,       

  






 


FOR VALUE RECEIVED, the
undersigned EXCO RESOURCES, INC., a Texas corporation (“Borrower”) hereby
unconditionally promises to pay to the order of                               
(the “Lender”) the principal amount of the Loans advanced by Lender and
outstanding at any time or from time to time pursuant to the Credit Agreement
(as hereinafter defined) in lawful money of the United States of America
together with interest from the date hereof until paid at the rates specified
in the Credit Agreement (as hereinafter defined). All payments of principal and
interest due hereunder are payable at the offices of at the offices of
Administrative Agent under the Credit Agreement, JPMorgan Loan Services, 21
South Clark St., 19th Floor, Chicago, Illinois 60603-2003, Attention: Jim T.
Moore, Facsimile:  (312) 732-4840,
jim_t_moore@jpmorgan.com, with a copy to JPMorgan Chase Bank, N.A., Mail Code
TX1-2448, 1717 Main Street, Dallas, Texas 75201, Attention: Wm. Mark Cranmer,
Vice President, Facsimile: (214) 290-2332, mark.cranmer@chase.com, or at such
other place, as from time to time may be designated by Administrative Agent in
accordance with the Credit Agreement .


 


The principal and all
accrued interest on this Note shall be due and payable in accordance with the
terms and provisions of the Credit Agreement.


 


This Note is executed
pursuant to that certain Amended and Restated Credit Agreement dated of even
date herewith between Borrower, certain Subsidiaries of the Borrower, as
Guarantors, the Administrative Agent and Lenders (as amended, modified,
supplemented or restated from time to time, the “Credit Agreement”), and is one
of the Notes referred to therein. Reference is made to the Credit Agreement and
the Loan Documents (as that term is defined in the Credit Agreement) for a
statement of prepayment rights and obligations of Borrowers, for a statement of
the terms and conditions under which the due date of this Note may be
accelerated and for statements regarding other matters affecting this Note
(including without limitation the obligations of the holder hereof to advance
funds hereunder, principal and interest payment due dates, voluntary and
mandatory prepayments, exercise of rights and remedies, payment of attorneys’
fees, court costs and other costs of collection and certain waivers by
Borrowers and others now or hereafter obligated for payment of any sums due
hereunder). Upon the occurrence of an Event of Default (as that term is defined
in the Credit Agreement and Loan Documents) the Administrative Agent may
declare forthwith to be entirely and immediately due and payable the principal
balance hereof and the interest accrued hereon, and the Lender shall have all
rights and remedies of the Lender under the Credit Agreement and Loan Documents.
This Note may be prepaid in accordance with the terms and provisions of the
Credit Agreement.


 


Regardless of any
provision contained in this Note, the holder hereof shall never be entitled to
receive, collect or apply, as interest on this Note, any amount in excess of
the Maximum Rate (as such term is defined in the Credit Agreement), and, if the
holder hereof ever receives, collects, or applies as interest, any such amount
which would be excessive interest, it 


 


1

















 


shall be deemed a partial prepayment of principal and treated hereunder
as such; and, if the indebtedness evidenced hereby is paid in full, any
remaining excess shall forthwith be paid to Borrowers. In determining whether
or not the interest paid or payable, under any specific contingency, exceeds
the Maximum Rate, Borrowers and the holder hereof shall, to the maximum extent
permitted under applicable law (i) characterize any non-principal payment
as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) spread the total
amount of interest throughout the entire contemplated term of the obligations
evidenced by this Note and/or referred to in the Credit Agreement so that the
interest rate is uniform throughout the entire term of this Note; provided
that, if this Note is paid and performed in full prior to the end of the full
contemplated term thereof; and if the interest received for the actual period
of existence thereof exceeds the Maximum Rate, the holder hereof shall refund
to Borrowers the amount of such excess or credit the amount of such excess
against the indebtedness evidenced hereby, and, in such event, the holder
hereof shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Rate.


 


If any payment of
principal or interest on this Note shall become due on a day other than a
Business Day (as such term is defined in the Credit Agreement), such payment
shall be made on the next succeeding Business Day and such extension of time
shall in such case be included in computing interest in connection with such
payment.


 


If this Note is placed in
the hands of an attorney for collection, or if it is collected through any
legal proceeding at law or in equity or in bankruptcy, receivership or other
court proceedings, Borrowers agree to pay all costs of collection, including,
but not limited to, court costs and reasonable attorneys’ fees.


 


Borrowers and each
surety, endorser, guarantor and other party ever liable for payment of any sums
of money payable on this Note, jointly and severally waive presentment and
demand for payment, notice of intention to accelerate the maturity, protest,
notice of protest and nonpayment, as to this Note and as to each and all
installments hereof, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases or changes.


 


This Note shall be
governed by and construed in accordance with the applicable laws of the United
States of America and the laws of the State of Texas.


 


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


 


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EXECUTED as of the date
and year first above written.


 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  EXCO RESOURCES, INC.

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


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