exv10w17



 





Exhibit 10.17




Execution Copy




CREDIT AGREEMENT




Dated as of

December 13, 2007




among




EAGLE ROCK ENERGY PARTNERS, L.P.,

as Borrower,




WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent and Swingline Lender,




BANK OF AMERICA, N.A.,

as Syndication Agent,




HSH NORDBANK AG, NEW YORK BRANCH,

THE ROYAL BANK OF SCOTLAND, plc, and

BNP PARIBAS,

as Co-Documentation Agents




and




The Lenders Party Hereto




Wachovia Capital Markets, LLC And Banc Of America Securities LLC

as Joint Lead Arrangers and Joint Bookrunners





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
	 	 	1	 
	Section 1.01 Defined Terms
	 	 	1	 
	Section 1.02 Types of Loans and Borrowings
	 	 	28	 
	Section 1.03 Terms Generally; Rules of Construction
	 	 	28	 
	Section 1.04 Accounting Terms and Determinations; GAAP
	 	 	29	 
	 
	 	 	 	 
	ARTICLE II THE CREDITS
	 	 	29	 
	Section 2.01 Commitments
	 	 	29	 
	Section 2.02 Loans and Borrowings
	 	 	29	 
	Section 2.03 Requests for Borrowings
	 	 	30	 
	Section 2.04 Swingline Loans
	 	 	31	 
	Section 2.05 Interest Elections
	 	 	32	 
	Section 2.06 Funding of Borrowings
	 	 	34	 
	Section 2.07 Termination, Reduction and Increase of Commitments
	 	 	34	 
	Section 2.08 Borrowing Base
	 	 	37	 
	Section 2.09 Letters of Credit
	 	 	39	 
	 
	 	 	 	 
	ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
	 	 	44	 
	Section 3.01 Repayment of Loans
	 	 	44	 
	Section 3.02 Interest
	 	 	44	 
	Section 3.03 Alternate Rate of Interest
	 	 	45	 
	Section 3.04 Prepayments
	 	 	45	 
	Section 3.05 Fees
	 	 	48	 
	 
	 	 	 	 
	ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
	 	 	49	 
	Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	49	 
	Section 4.02 Presumption of Payment by the Borrower
	 	 	50	 
	Section 4.03 Certain Deductions by the Administrative Agent
	 	 	50	 
	Section 4.04 Disposition of Proceeds
	 	 	50	 
	 
	ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
	 	 	51	 
	Section 5.01 Increased Costs
	 	 	51	 
	Section 5.02 Break Funding Payments
	 	 	52	 
	Section 5.03 Taxes
	 	 	52	 
	Section 5.04 Mitigation Obligations; Replacement of Lenders
	 	 	54	 
	Section 5.05 Illegality
	 	 	54	 






i









 






	 	 	 	 	 
	 	 	Page	 
	ARTICLE VI CONDITIONS PRECEDENT
	 	 	55	 
	Section 6.01 Effective Date
	 	 	55	 
	Section 6.02 Each Credit Event
	 	 	57	 
	 
	 	 	 	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES
	 	 	58	 
	Section 7.01 Organization; Powers
	 	 	58	 
	Section 7.02 Authority; Enforceability
	 	 	58	 
	Section 7.03 Approvals; No Conflicts
	 	 	58	 
	Section 7.04 Financial Condition; No Material Adverse Change
	 	 	59	 
	Section 7.05 Litigation
	 	 	59	 
	Section 7.06 Environmental Matters
	 	 	60	 
	Section 7.07 Compliance with the Laws and Agreements; No Defaults
	 	 	61	 
	Section 7.08 Investment Company Act
	 	 	61	 
	Section 7.09 Taxes
	 	 	61	 
	Section 7.10 ERISA
	 	 	62	 
	Section 7.11 Disclosure; No Material Misstatements
	 	 	63	 
	Section 7.12 Insurance
	 	 	63	 
	Section 7.13 Restriction on Liens
	 	 	63	 
	Section 7.14 Subsidiaries
	 	 	64	 
	Section 7.15 Location of Business and Offices
	 	 	64	 
	Section 7.16 Properties; Titles, Etc
	 	 	64	 
	Section 7.17 Maintenance of Properties
	 	 	65	 
	Section 7.18 Gas Imbalances, Prepayments
	 	 	66	 
	Section 7.19 Marketing of Production
	 	 	66	 
	Section 7.20 Security Instruments
	 	 	66	 
	Section 7.21 Hedging Agreements
	 	 	67	 
	Section 7.22 Use of Loans and Letters of Credit
	 	 	67	 
	Section 7.23 Solvency
	 	 	68	 
	Section 7.24 Anti-Terrorism Laws
	 	 	68	 
	 
	 	 	 	 
	ARTICLE VIII AFFIRMATIVE COVENANTS
	 	 	69	 
	Section 8.01 Financial Statements; Ratings Change; Other Information
	 	 	69	 
	Section 8.02 Notices of Material Events
	 	 	72	 
	Section 8.03 Existence; Conduct of Business
	 	 	72	 
	Section 8.04 Payment of Obligations
	 	 	72	 
	Section 8.05 Performance of Obligations under Loan Documents
	 	 	73	 
	Section 8.06 Operation and Maintenance of Properties
	 	 	73	 
	Section 8.07 Insurance
	 	 	73	 
	Section 8.08 Books and Records; Inspection Rights
	 	 	74	 
	Section 8.09 Compliance with Laws
	 	 	74	 
	Section 8.10 Environmental Matters
	 	 	74	 
	Section 8.11 Further Assurances
	 	 	75	 
	Section 8.12 Reserve Reports
	 	 	76	 
	Section 8.13 Title Information
	 	 	77	 
	Section 8.14 Additional Collateral; Additional Guarantors
	 	 	78	 
	Section 8.15 ERISA Compliance
	 	 	79	 
	Section 8.16 Unrestricted Subsidiaries
	 	 	80	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	ARTICLE IX NEGATIVE COVENANTS
	 	 	80	 
	Section 9.01 Financial Covenants
	 	 	80	 
	Section 9.02 Indebtedness
	 	 	83	 
	Section 9.03 Liens
	 	 	84	 
	Section 9.04 Restricted Payments
	 	 	85	 
	Section 9.05 Investments, Loans and Advances
	 	 	85	 
	Section 9.06 Designation and Conversion of Restricted and Unrestricted Subsidiaries;
Indebtedness of Unrestricted Subsidiaries
	 	 	87	 
	Section 9.07 Nature of Business
	 	 	87	 
	Section 9.08 Proceeds of Loans
	 	 	87	 
	Section 9.09 ERISA Compliance
	 	 	88	 
	Section 9.10 Sale or Discount of Receivables
	 	 	89	 
	Section 9.11 Mergers, Etc
	 	 	89	 
	Section 9.12 Sale of Properties
	 	 	90	 
	Section 9.13 Environmental Matters
	 	 	91	 
	Section 9.14 Transactions with Shareholders and Affiliates
	 	 	91	 
	Section 9.15 Subsidiaries
	 	 	91	 
	Section 9.16 Negative Pledge Agreements; Dividend Restrictions
	 	 	91	 
	Section 9.17 Limitation on Issuance of Equity Interests
	 	 	92	 
	Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments
	 	 	92	 
	Section 9.19 Hedging Agreements
	 	 	92	 
	Section 9.20 Sale and Leaseback
	 	 	92	 
	Section 9.21 Amendments to Organization Documents or Fiscal Year End; Prepayments of other Indebtedness
	 	 	92	 
	Section 9.22 Marketing Activities
	 	 	93	 
	Section 9.23 Anti-Terrorism Law; Anti-Money Laundering
	 	 	93	 
	Section 9.24 Embargoed Person
	 	 	93	 
	 
	 	 	 	 
	ARTICLE X EVENTS OF DEFAULT; REMEDIES
	 	 	94	 
	Section 10.01 Events of Default
	 	 	94	 
	Section 10.02 Remedies
	 	 	96	 
	 
	 	 	 	 
	ARTICLE XI THE AGENTS
	 	 	97	 
	Section 11.02 Duties and Obligations of Administrative Agent
	 	 	97	 
	Section 11.03 Action by Administrative Agent
	 	 	98	 
	Section 11.04 Reliance by Administrative Agent
	 	 	99	 
	Section 11.05 Subagents
	 	 	99	 
	Section 11.06 Resignation or Removal of Administrative Agent
	 	 	99	 
	Section 11.07 Agents as Lenders
	 	 	100	 
	Section 11.08 No Reliance
	 	 	100	 
	Section 11.09 Administrative Agent May File Proofs of Claim
	 	 	100	 
	Section 11.10 Authority of Administrative Agent to Release Collateral and Liens
	 	 	101	 
	Section 11.11 The Arrangers, the Syndication Agent and the Co-Documentation Agents
	 	 	101	 






iii









 






	 	 	 	 	 
	 	 	Page	 
	ARTICLE XII MISCELLANEOUS
	 	 	101	 
	Section 12.01 Notices
	 	 	101	 
	Section 12.02 Waivers; Amendments
	 	 	103	 
	Section 12.03 Expenses, Indemnity; Damage Waiver
	 	 	104	 
	Section 12.04 Assignments and Participations
	 	 	106	 
	Section 12.05 Survival; Revival; Reinstatement
	 	 	109	 
	Section 12.06 Counterparts; Integration; Effectiveness
	 	 	110	 
	Section 12.07 Severability
	 	 	110	 
	Section 12.08 Right of Setoff
	 	 	110	 
	Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
	 	 	111	 
	Section 12.10 Headings
	 	 	112	 
	Section 12.11 Confidentiality
	 	 	112	 
	Section 12.12 Interest Rate Limitation
	 	 	113	 
	Section 12.13 EXCULPATION PROVISIONS
	 	 	113	 
	Section 12.14 Collateral Matters; Hedging Agreements; Treasury Management Agreements
	 	 	114	 
	Section 12.15 No Third Party Beneficiaries
	 	 	114	 
	Section 12.16 USA Patriot Act Notice
	 	 	114	 






iv









 






EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit A

	 	Form of Note
	Exhibit B

	 	Form of Borrowing Request
	Exhibit C

	 	Form of Interest Election Request
	Exhibit D-1

	 	Form of Compliance Certificate (Effective Date)
	Exhibit D-2

	 	Form of Compliance Certificate (Ongoing)
	Exhibit E

	 	Form of Guaranty and Collateral Agreement
	Exhibit F

	 	Form of Assignment and Assumption
	Exhibit G-1

	 	Form of Commitment Increase Certificate
	Exhibit G-2

	 	Form of Additional Lender Certificate
	 
	 	 
	Schedule 1.01(a)

	 	Existing Letters of Credit
	Schedule 1.01(b)

	 	Security Instruments
	Schedule 7.05

	 	Litigation
	Schedule 7.06

	 	Environmental Matters
	Schedule 7.14

	 	Subsidiaries
	Schedule 7.15

	 	Location of Business and Offices
	Schedule 7.18

	 	Gas Imbalances
	Schedule 7.19

	 	Marketing Contracts
	Schedule 7.20

	 	Jurisdictions for Security Instrument Filings
	Schedule 7.21

	 	Hedging Agreements
	Schedule 9.02

	 	Existing Indebtedness
	Schedule 9.03

	 	Existing Liens
	Schedule 9.05

	 	Existing Investments
	Schedule 9.12(i)

	 	Identified Asset Swaps
	Schedule 9.14

	 	Certain Shareholder and Affiliate Transactions






v









 





     THIS
CREDIT AGREEMENT dated as of December 13, 2007, is among: EAGLE ROCK ENERGY PARTNERS,
L.P., a limited partnership duly formed and existing under the laws of the State of Delaware (the
“Borrower”); each of the Lenders from time to time party hereto; and WACHOVIA BANK,
NATIONAL ASSOCIATION, as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); BANK OF AMERICA, N.A., as
syndication agent for the Lenders (in such capacity, together with its successors in such capacity,
the “Syndication Agent”); and HSH NORDBANK AG, NEW YORK BRANCH, THE ROYAL BANK OF SCOTLAND
plc and BNP PARIBAS, as co-documentation agents for the Lenders (in such capacity, together with
their successors in such capacity, the “Co-Documentation Agents”)



R E C I T A L S




     A. The Borrower has requested that the Lenders provide certain loans to and extensions of
credit on behalf of the Borrower.



     B. The Lenders have agreed to make such loans and extensions of credit subject to the terms
and conditions of this Agreement.



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



ARTICLE I

Definitions and Accounting Matters




     Section 1.01 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, means that any such Loan, or
the Loans comprising any such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.



     “Additional Lender” has the meaning assigned to such term in Section
2.07(d)(i).



     “Additional Lender Certificate” has the meaning assigned to such term in Section
2.07(d)(ii)(G).



     “Adjusted Consolidated EBITDA” means Consolidated EBITDA excluding Consolidated EBITDA
attributable to the Borrowing Base Properties of the Borrower and its Restricted Subsidiaries and
the Hedging Agreements related thereto; provided that no more than fifteen percent (15%) of
Adjusted Consolidated EBITDA may be attributable to the Royalty 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 1/100 of 1%) equal
to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.



 









 





     “Administrative Agent” has the meaning assigned to such term in the introductory
paragraph hereto.



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



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



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



     “Agents” means, collectively, the Administrative Agent, the Syndication Agent, and the
Co-Documentation Agents; and “Agent” means the Administrative Agent, the Syndication Agent
or any Co-Documentation Agent, as the context requires.



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



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



     “Anti-Terrorism Law” has the meaning assigned to such term in Section 7.24(a).



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



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Borrowing Base Utilization Percentage	 	 
	 	 	£ 50%	 	> 50%	 	Commitment
	Total Leverage Ratio	 	ABR	 	LIBOR	 	ABR	 	LIBOR	 	Fee Rate
	Less than or equal to
3.00 to 1.00

	 	 	0.250	%	 	 	1.250	%	 	 	0.500	%	 	 	1.500	%	 	 	0.25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Greater than 3.00 to
1.00 but less than or
equal to 4.00 to 1.00

	 	 	0.500	%	 	 	1.500	%	 	 	0.750	%	 	 	1.750	%	 	 	0.30	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Greater than 4.00 to
1.00 but less than or
equal to 5.00 to 1.00

	 	 	0.750	%	 	 	1.750	%	 	 	0.875	%	 	 	1.875	%	 	 	0.35	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Greater than 5.00 to 1.00

	 	 	0.875	%	 	 	1.875	%	 	 	1.000	%	 	 	2.000	%	 	 	0.35	%






2









 






     Each change in the Applicable Margin resulting from changes in the Total Leverage Ratio or a
redesignation of the Borrowing Base Indebtedness shall become effective on the Business Day
immediately following the date on which financial statements or a compliance certificate, as
applicable, is delivered to the Lenders pursuant to Section 8.01(a), (b) or
(c) and shall remain in effect until the next change to be effected pursuant to this
paragraph; provided, however, that if at any time the Borrower fails to deliver any
financial statements required by Section 8.01(a) or (b) within the time periods
specified therein, then, until the Business Day immediately following the date on which such
financial statements are delivered, the “Applicable Margin” shall mean the rate per annum
set forth on the grid when the Total Leverage Ratio is at its highest level and at the then current
Borrowing Base Utilization Percentage; provided, further, that if at any time the
Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the
“Applicable Margin” shall mean the rate per annum set forth on the grid when the Borrowing
Base Utilization Percentage is at its highest level and at the then current Total Leverage Ratio
then in effect until such time as the Reserve Report is delivered, whereupon the Applicable Margin
shall be determined as if the Reserve Report had been timely delivered, and is to be effective as
of the first Business Day immediately following the date such Reserve Report was delivered; and
provided, further, that for the period commencing on the Effective Date and until
the Business Day immediately following the date on which the March 31, 2008 financial statements
are delivered pursuant to Section 8.01(b), the “Applicable Margin” for ABR Loans,
Eurodollar Loans and the Commitment Fee Rate shall not be less than 0.750%, 1.750% and 0.30%,
respectively. In the event that any financial statement or compliance certificate delivered
pursuant to Section 6.01(d) or Section 8.01(c) is shown to be inaccurate
(regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is
discovered) (an “Applicable Period”), then the Borrower shall immediately (a) deliver to
the Administrative Agent a corrected compliance certificate for such Applicable Period, (b)
determine the Applicable Margin for such Applicable Period based upon the corrected compliance
certificate, and (c) pay to the Administrative Agent an accrued additional interest owing as a
result of an increased Applicable Margin for such Applicable Period, which payment shall be
promptly applied by the Administrative Agent in accordance with Section 4.01, or receive
from the Lenders any excess interest previously paid by the Borrower as a result of a decreased
Applicable Margin for such Applicable Period. The preceding sentence is in addition to rights of
the Administrative Agent and Lenders with respect to Sections 3.02(d) and 10.01 and
other of their respective rights under this Agreement.



     “Applicable Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment, as such percentage is agreed between the Administrative
Agent and such Lender and is set forth on
documentation on file with the Administrative Agent.



     “Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and (b) any
other Person whose long term senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their
equivalent) or higher.



3









 





     “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.



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



     “Arrangers” means Wachovia Capital Markets, LLC and Banc of America Securities LLC, in
their capacities as the joint lead arrangers and joint bookrunners hereunder.



     “Asset Sale” means any sale, transfer, assignment, conveyance or other disposition by
the Borrower or any Restricted Subsidiary to any Person (including by way of redemption by such
Person) of any Property (including, without limitation, any capital stock or other securities of,
or Equity Interests in, another Person), but excluding (a) dispositions resulting from Casualty
Events, (b) sales of Property pursuant to Section 9.12(a)-(h) and (c) sales of Borrowing
Base Properties.



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



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



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



     “Borrower” has the meaning assigned to such term in the introductory paragraph hereto.



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



     “Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.08, as the same may be adjusted from time to time pursuant to
Section 8.13(c), Section 9.11 or Section 9.12(f).



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



     “Borrowing Base Hedges” means all commodity Hedging Agreements entered into by the
Borrower and its Restricted Subsidiaries related to the Borrowing Base Properties.



4









 





     “Borrowing Base Indebtedness” means the amount of the total Credit Exposures
designated against the available Borrowing Base in the Borrower’s most recent quarterly compliance
certificate submitted in accordance with Section 8.01(c), and as may be redesignated by the
Borrower upon a Borrowing Base Redetermination in accordance with Section 8.01(p).



     “Borrowing Base Properties” means the Oil and Gas Properties, other than Royalty
Interests, evaluated in the most recently delivered Reserve Report.



     “Borrowing Base Redetermination” means a Scheduled Redetermination or an Interim
Redetermination.



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



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



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



     “Capital Expenditures” means, in respect of any Person, for any period, the aggregate
(determined without duplication) of all exploration and development and purchase and construction
expenditures and costs that are capital in nature and any other expenditures that are capitalized
on the balance sheet of such Person in accordance with GAAP.



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



     “Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or similar proceeding of,
any Property of the Borrower or any of its Restricted Subsidiaries.



     “Change in Control” means (a) the Sponsor and the members of the executive management
team of the Ultimate General Partner shall cease to beneficially own and control, directly or
indirectly, at least fifty percent (50%) on a fully diluted basis of the economic and voting
interests in the Equity Interests of the General Partner, (b) the General Partner shall cease to
beneficially own and control, directly or indirectly, all of the general partner interests of the
Borrower, (c) the majority of the seats (other than vacant seats) on the board of directors (or
similar governing body) of the Ultimate General Partner shall cease to be occupied by Persons who
either (i) were members of the board of directors of the Ultimate General Partner as of the date
hereof or (ii) were nominated for election by the board of directors of the Ultimate General



5









 







Partner, a majority of whom were directors as of the date hereof, or whose election or
nomination for election was previously approved by a majority of such directors.



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



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



     “Co-Documentation Agents” has the meaning assigned to such term in the introductory
paragraph hereto.



     “Collateral” means all Property of the Loan Parties that is secured by a Lien under
one or more Security Instruments.



     “Commercial Operation Date” means, with respect to a Material Project, the date on
which such Material Project achieves commercial operation.



     “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such
commitment may be (a) modified from time to time pursuant to Section 2.07 and (b) modified
from time to time pursuant to assignments by or to such Lender pursuant to Section
12.04(b). The amount of each Lender’s Commitment shall be the amount as agreed between the Administrative Agent
and such Lender and set forth on documentation on file with the Administrative Agent.
The total Commitments for all Lenders on the Effective Date equal $800,000,000.



     “Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.



     “Commitment Increase Certificate” has the meaning assigned to such term in Section
2.07(d)(ii)(F).



     “Conflicts Committee” has the meaning assigned to such term in the Partnership
Agreement, as in effect on the date hereof.



     “Consolidated EBITDA” means, for any period, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: Consolidated Interest Expense, income taxes, depreciation, depletion,
amortization, and other similar non-cash charges (excluding any such non-cash charge to the extent
that it represents an accrual or reserve for potential cash charges in any future period or
amortization of a prepaid cash charge that was paid in a prior period), minus all non-cash income
added to Consolidated Net Income (excluding any such non-cash income to the extent it represents
the reversal of an accrual or reserve for potential cash charge in any prior period).



6









 





     “Consolidated Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate interest expense of the Borrower and the Consolidated Restricted
Subsidiaries for such period, including to the extent included in interest expense under GAAP: (a)
amortization of debt discount, (b) capitalized interest and (c) the portion of any payments or
accruals under Capital Leases allocable to interest expense, plus the portion of any payments or
accruals under Synthetic Leases allocable to interest expense whether or not the same constitutes
interest expense under GAAP, plus the net costs under the Interest Rate Hedges and minus the net
benefits under the Interest Rate Hedges.



     “Consolidated Net Income” means with respect to the Borrower and the Consolidated
Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower
and the Consolidated Restricted Subsidiaries after allowances for taxes for such period determined
on a consolidated basis in accordance with GAAP; provided that there shall be excluded from
such net income (to the extent otherwise included therein) the following: (a) the net income of any
Person in which the Borrower or any Consolidated Restricted Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated with the net income
of the Borrower and the Consolidated Restricted Subsidiaries in accordance with GAAP), except to
the extent of the amount of dividends or distributions actually paid in cash during such period by
such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as the case may be;
(b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Restricted Subsidiary is not at the time permitted by operation of the
terms of its charter or any agreement, instrument or Governmental Requirement applicable to such
Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in each case
determined in accordance with GAAP; (c) any extraordinary non-cash gains or losses during such
period and (d) any gains or losses attributable to writeups or writedowns of assets, including
ceiling test write downs; and provided further that if the Borrower or any
Consolidated Restricted Subsidiary shall dispose of any Property during such period or a Subsidiary
shall be redesignated as either an Unrestricted Subsidiary or a Restricted Subsidiary, then
Consolidated Net Income shall be calculated after giving pro forma effect to such disposition or
redesignation, as if such disposition or redesignation had occurred on the first day of such
period.



     “Consolidated Net Tangible Assets” means, at any date of determination, the total
amount of consolidated assets of the Borrower and its Consolidated Restricted Subsidiaries after
deducting therefrom: (a) all current liabilities (excluding (i) any current liabilities that by
their terms are extendable or renewable at the option of the obligor thereon to a time more than
twelve (12) months after the time as of which the amount thereof is being computed, and (ii)
current maturities of long-term Indebtedness) and (b) the value (net of any applicable reserves) of
all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth,
or on a pro forma basis would be set forth, on the consolidated balance sheet of the Borrower and
its Consolidated Restricted Subsidiaries for the most recently completed fiscal quarter, prepared
in accordance with GAAP.



     “Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that are
Consolidated Subsidiaries.



7









 





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



     “Consolidated Tangible Net Worth” means, at any date of determination, all amounts
that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower
and its Consolidated Restricted Subsidiaries under stockholders’ equity at such date, minus the net
book amount of all assets of the Borrower and its Consolidated Restricted Subsidiaries (after
deducting any reserves applicable thereto) which would be shown as intangible assets on a
consolidated balance sheet of the Borrower and its Consolidated Restricted Subsidiaries as of such
time prepared in accordance with GAAP.



     “Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries that are
Consolidated Subsidiaries.



     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling” and “Controlled”
have meanings correlative thereto.



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



     “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.



     “Deficiency Amount” means, at the time of determination, the amount by which (a) the
total Borrowing Base Indebtedness exceeds (b) the lesser of (i) the Borrowing Base then in effect
and (ii) the total Commitments.



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



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



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



8









 





     “Earnout” means (a) any initially contingent payment obligation related to a Permitted
Acquisition, including, without limitation, in the form of earnout payments, purchase price
adjustments, deferred purchase price payments and bonuses and other forms of compensation to
directors, officers, employees or consultants, in each case so long as (i) such payment obligations
are contingent at the time such obligation is incurred or entered into, and subject to adjustment
based on the performance of the Person and/or Property so acquired, (ii) such payment obligations
are not subject, at the time such obligation is entered into, to any minimum payment, in whole or
in part, by the Borrower or any Subsidiary, and (iii) prior to becoming fixed or matured, such
payment obligations are not evidenced by a promissory note or secured by a pledge of Property by
the Borrower or any Subsidiary, or (b) the portion of a payment obligation described in clause (a)
which has become fixed and matured.



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



     “Embargoed Person” has the meaning assigned to such term in Section 9.24.



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



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



     “Environmental Permit” means any permit, registration, license, approval, consent,
exemption, variance, or other authorization required under or issued pursuant to applicable
Environmental Laws.



9









 





     “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 Interests.



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



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



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



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



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



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



10









 







production agreements, injection, repressuring and recycling agreements, salt water or other
disposal agreements, seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are not delinquent or
which are being contested in good faith by appropriate action and for which adequate reserves have
been maintained in accordance with GAAP, provided that any such Lien referred to in this
clause does not materially impair the use of the Property covered by such Lien for the purposes for
which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of any statutory or
common law provision relating to banker’s liens, rights of set-off or similar rights and remedies
and burdening only deposit accounts or other funds maintained with a creditor depository
institution, provided that no such deposit account is a dedicated cash collateral account
or is subject to restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by Borrower or any of
its Restricted Subsidiaries to provide collateral to the depository institution; (f) easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of the Borrower or any Restricted Subsidiary for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, that do not secure any monetary obligations and which in
the aggregate do not materially impair the use of such Property for the purposes of which such
Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of
such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of
tenders, surety and appeal bonds, government contracts, performance and return of money bonds,
plugging and abandonment bonds, bids, trade contracts, leases, statutory obligations, regulatory
obligations and other obligations of a like nature incurred in the ordinary course of business not
to exceed $10,000,000 in the aggregate at any time; (h) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in connection with the
importation of goods; (i) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real property; and (i) judgment
and attachment Liens not giving rise to an Event of Default, provided that any appropriate
legal proceedings which may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceeding may be initiated shall not have
expired and no action to enforce such Lien has been commenced; provided, further
that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as
no action to enforce such Lien has been commenced and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied
or expressed by the permitted existence of such Excepted Liens.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of America or such other
jurisdiction under the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office is located, (b)
any branch profits taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which the Borrower or any Guarantor is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the



11









 







Borrower under Section 5.04(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 5.03(e), except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new lending office (or assignment), to receive
additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or
Section 5.03(c).



     “Executive Order” has the meaning assigned to such term in Section 7.24(a).



     “Existing Credit Agreement” means that certain Amended and Restated Credit and
Guaranty Agreement, dated as of August 31, 2006, by and among the Borrower, the guarantors party
thereto, the lenders party thereto, and Goldman Sachs Credit Partners L.P., as administrative
agent, as amended from time to time.



     “Existing Letters of Credit” means the Letters of Credit described on Schedule
1.01(a) that were issued by Wachovia Bank, National Association under the Existing Credit
Agreement and that shall be transferred to and deemed issued under this Agreement, as such Letters
of Credit may be renewed or amended from time to time.



     “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.



     “Fee Letter” means that certain letter agreement from the Administrative Agent, the
Arrangers, and the Syndication Agent to the Borrower dated October 3, 2007 concerning certain fees
in connection with this Agreement.



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



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



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



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



     “GAAP” means generally accepted accounting principles in the United States of America
as in effect from time to time subject to the terms and conditions set forth in Section
1.04.



12









 





     “General Partner” means Eagle Rock Energy GP, L.P., a Delaware limited partnership.



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



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



     “Guarantors” means:



     (a) each Person listed on Schedule 7.14, and



     (b) each other Material Domestic Subsidiary or other Domestic Subsidiary that guarantees the
Secured Obligations pursuant to Section 8.14(b).



     “Guaranty and Collateral Agreement” means an agreement executed by the Loan Parties in
substantially the form of Exhibit E granting security interests in certain Collateral and
unconditionally guarantying on a joint and several basis, payment of the Secured Obligations, as
the same may be amended, modified or supplemented from time to time.



     “Hazardous Material” means any substance regulated or as to which liability might
arise under any applicable Environmental Law and including, without limitation: (a) any chemical,
compound, material, product, byproduct, substance or waste defined as or included in the definition
or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of
similar meaning or import found in any applicable Environmental Law; (b) petroleum hydrocarbons,
petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any
components, fractions, or derivatives thereof; and (c) radioactive materials, asbestos containing
materials, polychlorinated biphenyls, or radon.



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



     “Hedging Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter”
or otherwise, involving, or settled by reference to, one or more rates, currencies,



13









 







commodities, equity or debt instruments or securities, or economic, financial or pricing
indices or measures of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided, that no phantom stock or similar plan
providing for payments only on account of services provided by current or former directors,
officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedging
Agreement.



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



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



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



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



14









 







Person or for the creation of which such Person directly or indirectly received payment. The
Indebtedness of any Person shall include all obligations of such Person of the character described
above to the extent such Person remains legally liable in respect thereof notwithstanding that any
such obligation is not included as a liability of such Person under GAAP.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Initial Quarter” has the meaning assigned to such term in Section
9.01(e)(ii)(A).



     “Initial Reserve Report” means the report of Cawley, Gillespie & Associates, dated as
of July 1, 2007, with respect to certain Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries as of January 1, 2007.



     “Interest Election Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.05.



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



     “Interest Rate Hedges” means all Hedging Agreements entered into by the Borrower and
its Restricted Subsidiaries for the purpose of hedging the interest rate exposure associated with
the operations of the Borrower and its Restricted Subsidiaries.



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



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



15









 





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



     “Issuing Bank” means (a) Wachovia Bank, National Association, and (b) any other Lender
agreed to by the Borrower, the Administrative Agent and such Lender, as applicable, in its capacity
as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.09(i). Any Issuing Bank may, in its discretion, arrange for one or more Letters
of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing
Bank” shall include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.



     “LC Commitment” means, at any time, $200,000,000.



     “LC Disbursement” means a payment made by any 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.



     “Lenders” means the lenders party hereto and any Person that shall have become a party
hereto pursuant to an Assignment and Assumption or as an Additional Lender pursuant to Section
2.07(d), other than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.



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



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



16









 





     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute
page of such Service, or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is
not available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to
the next 1/100 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period.



     “LIBOR Reference Rate” means a rate of interest for Swingline Loans determined by
reference to the Adjusted LIBO Rate for a one (1) month interest period, as that rate may fluctuate
in accordance with changes in the Adjusted LIBO Rate as determined on a day-to-day basis.



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



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



     “Loan Parties” means, collectively, the Borrower and the Guarantors.



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



     “Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having greater than fifty percent (50%) of the total Commitments, and at any time while any
Loans or LC Exposure is outstanding, Lenders having greater than fifty (50%) of the outstanding
aggregate principal amount of the Loans and participation interests in Letters of Credit (without
regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)).



17









 





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



     “Material Domestic Subsidiary” means, as of any date, each Domestic Subsidiary that
owns Property, excluding the value of the Equity Interests of all of its Subsidiaries, exceeding
$10,000,000. If the gross value of the Property of the Domestic Subsidiaries that are not
Guarantors exceeds $20,000,000 in the aggregate, those Domestic Subsidiaries holding a majority of
such Property shall each be a Material Domestic Subsidiary; provided that any Domestic
Subsidiary that guarantees any Indebtedness shall be deemed a Material Domestic Subsidiary.



     “Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the
Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding $20,000,000.
For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the
Borrower or any Restricted Subsidiary in respect of any Hedging Agreement at any time shall be the
Hedge Termination Value.



     “Material Project” means any capital expansion project undertaken by the Borrower or
any Restricted Subsidiary, the capital expenditures (determined in accordance with GAAP)
attributable to which exceed $10,000,000.



     “Material Project EBITDA Adjustments” has the meaning assigned to such term in
Section 9.01(e)(i).



     “Maturity
Date” means December 13, 2012.



     “Midstream Hedges” means all commodity Hedging Agreements entered into by the Borrower
and its Restricted Subsidiaries, other than the Borrowing Base Hedges and the Royalty Interest
Hedges.



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



     “Mortgage” means each mortgage, deed of trust or any other document creating and
evidencing a Lien on real or immovable Property and other Property in favor of the Secured Parties,
which shall be in a form reasonably satisfactory to the Administrative Agent, as the same may be
amended, modified, supplemented or restated from time to time in accordance with the Loan
Documents.



     “Mortgaged Property” means any real Property owned by the Borrower or any Subsidiary
that is subject to a Mortgage.



18









 





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



     “Net Cash Proceeds” means for any Recovery Event requiring a reduction of the total
Commitments and/or a repayment of Loans pursuant to Section 3.04(c)(iii) or (iv), the gross
cash proceeds (including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise,
but only as and when received) from such Recovery Event, net of attorneys’ fees, accountants’ fees,
amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Recovery Event (other than any Lien
pursuant to a Security Instrument) and other customary fees and expenses actually incurred in
connection therewith, and net of taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deductions and any tax sharing
arrangements).



     “Net Sale Proceeds” means for any sale or other disposition of Property pursuant to an
Asset Sale, the gross cash proceeds (including any cash received by way of deferred payment
pursuant to a promissory note, receivable or otherwise, but only as and when received) received
from such Asset Sale, net of (a) reasonable transaction costs (including, without limitation, any
underwriting, brokerage or other customary selling commissions, reasonable legal, advisory and
other fees and expenses (including title and recording expenses), associated therewith and sales,
VAT and transfer taxes arising therefrom), (b) the amount of such gross cash proceeds required to
be used to permanently repay any Indebtedness (other than the Secured Obligations) which is secured
by the respective Property which was sold or otherwise disposed of, (c) the estimated net marginal
increase in income taxes which will be payable by the Borrower or any Subsidiary with respect to
the fiscal year of the Borrower in which the sale or other disposition occurs as a result of such
sale or other disposition, and (d) the amount of all reserves required to be maintained by the
Borrower or any Subsidiary in accordance with GAAP for any potential indemnity obligations that may
be required to be made by the Borrower or any Subsidiary of as a result of such Asset Sale;
provided, however, (i) that such gross proceeds shall not include any portion of
such gross cash proceeds which the Borrower determines in good faith should be reserved for
post-closing adjustments (to the extent the Borrower delivers to the Lenders a certificate signed
by a Responsible Officer as to such determination), it being understood and agreed that on the day
that all such post-closing adjustments have been determined (which shall not be later than six (6)
months following the date of the respective Asset Sale), the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing adjustments payable by the
Borrower or any Subsidiary shall constitute Net Sale Proceeds on such date received by the Borrower
and/or any Subsidiary from such Asset Sale, and (ii) at such time as the Borrower and the
Subsidiaries are no longer required to maintain any indemnity reserves in accordance with GAAP as a
result of any Asset Sale, the amount (if any) by which such reserved amount in respect of such
Asset Sale exceeds the actual amount of indemnity payments made by the Borrower or any Subsidiary
for which such reserves were required to be maintained in respect of such Asset Sale shall
constitute Net Sale Proceeds at such time.



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



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     “Non-Borrowing Base Indebtedness” means the amount of the total Credit Exposures not
designated as Borrowing Base Indebtedness.



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



     “OFAC” has the meaning assigned to such term in Section 7.24(b)(v).



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



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



20









 







organization and, if applicable, any certificate or articles of formation or organization of
such entity.



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



     “Partnership Agreement” means the Agreement of Limited Partnership of the Borrower
dated as of May 25, 2006.



     “Participant” has the meaning assigned to such term in Section 12.04(c)(i).



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



     “Permitted Acquisition” means any acquisition after the Effective Date (whether by
purchase, merger, amalgamation, consolidation or otherwise), by any Loan Party in the form of
acquisitions of all or substantially all of the business or a line of business (whether by the
acquisition of all of the Equity Interests, Property or any combination thereof) of any other
Person if each such acquisition meets all of the following requirements:



     (a) no later than the closing date of such acquisition, the Borrower shall have delivered a
written notice and description of such acquisition to the Administrative Agent and the Lenders;
provided that the filing of a press release or other filing with the SEC on such closing
date describing such acquisition will satisfy the notice requirement of this clause (a);



     (b) the Borrower shall have certified on or before the closing date of such acquisition, in
writing and in a form reasonably acceptable to the Administrative Agent, that such acquisition has
been approved by the board of directors or equivalent governing body of the Person to be acquired;



     (c) the Person or business to be acquired shall be in a substantially similar line of business
as the Borrower and its Restricted Subsidiaries pursuant to Section 9.07;



     (d) if such transaction is a merger or consolidation, no Change in Control shall have been
effected thereby and the transaction shall comply with the requirements of Section 9.11;



     (e) no later than the closing date of such acquisition, the Borrower shall have delivered to
the Administrative Agent and the Lenders a compliance certificate in the form of Exhibit
D-2 for the most recent fiscal quarter end preceding such acquisition demonstrating, in form
and substance reasonably satisfactory to the Administrative Agent and the Lenders, pro forma
compliance (after giving effect to the acquisition and any Loans made or to be made in connection
therewith, as if such acquisition had occurred on the first day of the applicable four (4) quarter
period) with each covenant contained in Section 9.01;



     (f) the Borrower, at the request of the Administrative Agent, shall promptly deliver copies of
the Permitted Acquisition Documents;



21









 





     (g) no Default or Event of Default shall have occurred and be continuing both before and after
giving effect to such acquisition;



     (h) the board of directors of the Person to be acquired (or whose Property is to be acquired)
shall not have indicated publicly its opposition to the consummation of such acquisition (which
opposition has not been publicly withdrawn); and



     (i) the Borrower shall provide such other documents and other information as may be reasonably
requested by the Administrative Agent or the Majority Lenders (through the Administrative Agent) in
connection with the acquisition.



     “Permitted Acquisition Consideration” means the aggregate amount of the purchase price
(including, but not limited to, any assumed debt, Earnouts (valued at the maximum amount reasonably
expected to be payable thereunder as determined in good faith by the Borrower) or deferred
payments, but excluding any Qualified Capital Stock of the Borrower issued to the seller in any
such Permitted Acquisition, net of the applicable acquired company’s cash and cash equivalents
balance (including investments of the type described in Section 9.05(c)-(f)) as shown on
its most recent financial statements delivered in connection with the applicable Permitted
Acquisition) to be paid in connection with any applicable Permitted Acquisition as set forth in the
applicable Permitted Acquisition Documents executed by the applicable Loan Party in order to
consummate the applicable Permitted Acquisition.



     “Permitted Acquisition Documents” means, with respect to any acquisition proposed by a
Loan Party, final copies (or substantially final drafts if not executed at the required time of
delivery) of the purchase agreement, sale agreement, merger agreement or other agreement evidencing
such acquisition, and such legal opinions and other documents executed, delivered, contemplated by
or prepared in connection therewith and any amendment, modification or supplement to any of the
foregoing, as the Administrative Agent may reasonably request.



     “Permitted Refinancing Indebtedness” means Indebtedness (for purposes of this
definition, “new Indebtedness”) incurred in exchange for, or proceeds of which are used to
refinance, all of any other Indebtedness (the “Refinanced Indebtedness”); provided
that (a) such new Indebtedness is in an aggregate principal amount not in excess of the sum of (i)
the aggregate principal amount then outstanding of the Refinanced Indebtedness (or, if the
Refinanced Indebtedness is exchanged or acquired for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) and
(ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange
or refinancing; (b) such new Indebtedness has a stated maturity no earlier than the stated maturity
of the Refinanced Indebtedness and an average life no shorter than the average life of the
Refinanced Indebtedness; (c) such new Indebtedness does not have a stated interest rate in excess
of the stated interest rate of the Refinanced Indebtedness; (d) such new Indebtedness does not
contain any covenants which are more onerous to the Borrower and its Restricted Subsidiaries than
those imposed by the Refinanced Indebtedness and (e) such new Indebtedness (and any guarantees
thereof) is subordinated in right of payment to the Secured Obligations (or, if applicable, the
Guaranty and Collateral Agreement) to at least the same extent as the Refinanced Indebtedness and
is otherwise subordinated on terms substantially reasonably satisfactory to the Administrative
Agent.



22









 





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



     “Plan” means any employee pension benefit plan, as defined in section 3(2) of ERISA,
which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, a
Subsidiary or an ERISA Affiliate or (b) was at any time during the six (6) calendar years preceding
the date hereof, sponsored, maintained or contributed to by the Borrower or a Subsidiary or an
ERISA Affiliate.



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



     “Property” means any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible (including, without limitation, cash, securities, accounts,
contract rights and Equity Interests or other ownership interests of any Person), whether now in
existence or owned or hereafter acquired.



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



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



     “Purchase Money Indebtedness” means Indebtedness, the proceeds of which are used to
finance the acquisition, construction or improvement of inventory, equipment or other property in
the ordinary course of business.



     “Qualified Capital Stock” means, with respect to any Person, the Equity Interests of
such Person that are not Disqualified Capital Stock.



     “Recovery Event” means the receipt by the Borrower or any Restricted Subsidiary of any
cash insurance proceeds or condemnation awards payable by reason of a Casualty Event.



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



     “Redetermination Date” means, with respect to any Scheduled Redetermination or any
Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes
effective pursuant to Section 2.08(d).



23









 





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



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



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



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



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



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



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



     “Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Senior Vice President of such Person (or such Person’s
general partner or manager). Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the General Partner.



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



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



     “Royalty Interest Hedges” means all commodity Hedging Agreements entered into by the
Borrower and its Restricted Subsidiaries related to the Royalty Interests.



24









 





     “Royalty Interests” means all royalty and overriding royalty interests owned by the
Borrower and its Restricted Subsidiaries.



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



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



     “Scheduled Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in
Section 2.08(d).



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



     “Secured Hedging Agreement” means any Hedging Agreement of the Borrower or any
Restricted Subsidiary (a) with a Secured Hedging Agreement
Counterparty that is a Lender or an Affiliate of a Lender or
(b) existing on the Effective Date with J. Aron & Company.



     “Secured
Hedging Agreement Counterparty” means (a) any Person
that is a party to a Hedging Agreement with the Borrower or any
Restricted Subsidiary that enters into such Hedging Agreement while
such Person is or before such Person becomes a Lender
or an Affiliate of a Lender, but if such Person at any time ceases to be a Lender or an Affiliate of a Lender,
as the case may be, such Person shall no longer be a Secured Hedging
Agreement Counterparty, and (b) J. Aron & Company.



     “Secured Obligations” means any and all amounts owing or to be owing (including
interest accruing at any post-default rate and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, any of its Subsidiaries or any Guarantor, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) by the Borrower, any of its Restricted
Subsidiaries or any Guarantor (whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising): (a) to the
Administrative Agent, any Issuing Bank or any Lender under any Loan Document; (b) to any Secured
Hedging Agreement Counterparty under any Secured Hedging Agreement; (c) to any Treasury Management
Counterparty under any Treasury Management Agreement; and (d) all renewals, extensions and/or
rearrangements of any of the above.



     “Secured Parties” means, collectively, the Administrative Agent, each Issuing Bank,
each Lender, each Secured Hedging Agreement Counterparty and each Treasury Management Counterparty.



     “Security Instruments” means the Guaranty and Collateral Agreement, the Mortgages, the
other agreements, instruments or certificates described or referred to in Schedule 1.01(b),
and any and all other agreements, instruments, consents or certificates now or hereafter executed
and delivered by the Borrower or any other Person (other than Secured Hedging Agreements, Treasury
Management Agreements or participation or similar agreements between any Lender and any other
lender or creditor with respect to any Secured Obligations pursuant to this Agreement) in
connection with, or as security for the payment or performance of the Secured Obligations, the
Notes, this Agreement, or reimbursement obligations under the Letters of Credit, as such agreements
may be amended, modified, supplemented or restated from time to time.



25









 





     “Senior Secured Funded Indebtedness” means Total Funded Indebtedness of the Borrower
and its Consolidated Restricted Subsidiaries that is secured and not expressly subordinated to the
Secured Obligations on terms satisfactory to the Administrative Agent.



     “Senior Secured Leverage Ratio” means the ratio of Senior Secured Funded Indebtedness
to Adjusted Consolidated EBITDA for the four (4) fiscal quarters ending on the last day of the
fiscal quarter immediately preceding the date of determination for which financial statements are
available.



     “Solvent” means, with respect to any Person as of any date, that (a) the value of the
assets of such Person (both at fair value and present fair saleable value) is, on the date of
determination, greater than the total amount of liabilities (including contingent and unliquidated
liabilities) of such Person as of such date, (b) as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature, and (c) as of such date, such Person does
not have unreasonably small capital given the nature of its business. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities shall be computed at the
amount that, in light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.



     “Specified Acquisition” means a Permitted Acquisition for which the Permitted
Acquisition Consideration exceeds five percent (5%) of Consolidated EBITDA.



     “Specified Acquisition Period” means the period beginning on the date on which a
Specified Acquisition is consummated through and including the last day of the second
(2nd) full fiscal quarter following the date of such Specified Acquisition.



     “Sponsor” means one or more investment funds ultimately controlled by Natural Gas
Partners.



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



     “Subject Transaction” has the meaning assigned to such term in Section
9.01(d).



     “Subsidiary” means: (a) any Person of which at least a majority of the outstanding
Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board
of directors, manager or other governing body of such Person (irrespective of whether or not at the
time Equity Interests of any other class or classes of such Person shall have or might have voting



26









 







power by reason of the happening of any contingency) is at the time directly or indirectly
owned or controlled by (i) another Person, (ii) one or more of such other Person’s Subsidiaries or
(iii) collectively, such other Person and one or more of such other Person’s Subsidiaries, and (b)
any partnership of which such other Person or any of such other Person’s Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term “Subsidiary” means
a Subsidiary of the Borrower.



     “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 Wachovia Bank, National Association, in its capacity as
lender of Swingline Loans hereunder.



     “Swingline Loan” means a Loan made pursuant to Section 2.04.



     “Syndication Agent” has the meaning assigned to such term in the introductory
paragraph hereto.



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



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



     “Termination Date” means the earlier of (a) the Maturity Date and (b) the date of
termination of the Commitments.



     “Total Funded Indebtedness” means, at any date and without duplication, all
Indebtedness of the Borrower and the Consolidated Restricted Subsidiaries on a consolidated basis
as described in clauses (a), (d), (e), (f), (g), (h) and (k) of the definition of Indebtedness (but
(i) with respect to clauses (g), (h) and (k), only to the extent such liabilities relate to
Indebtedness described in clauses (a), (d), (e) and (f), and (ii) with respect to clause (k), only
to the extent such liability is not fully covered by partnership assets), excluding amounts
designated as Borrowing Base Indebtedness.



     “Total Leverage Ratio” means the ratio of Total Funded Indebtedness to Adjusted
Consolidated EBITDA for the four (4) fiscal quarters ending on the last day of the fiscal quarter
immediately preceding the date of determination for which financial statements are available.



     “Transactions” means, with respect to (a) the Borrower, the execution, delivery and
performance by the Borrower of this Agreement and each other Loan Document to which it is a party,
the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder, and the grant of Liens by the Borrower on Collateral pursuant to the Security



27









 







Instruments, and the refinancing of the Existing Credit Agreement, and (b) each Guarantor, the
execution, delivery and performance by such Guarantor of each Loan Document to which it is a party,
the guaranteeing of the Secured Obligations and the other obligations under the Guaranty and
Collateral Agreement by such Guarantor and such Guarantor’s grant of the security interests and
provision of Collateral under the Security Instruments, and the grant of Liens by such Guarantor on
Collateral pursuant to the Security Instruments.



     “Treasury Management Agreement” means any agreement governing the provision of
treasury or cash management services, including deposit accounts, funds transfer, automated
clearinghouse, auto-borrow, zero balance accounts, returned check concentration, controlled
disbursement, lockbox, account reconciliation and reporting and trade finance services provided by
a Lender or an Affiliate of a Lender for the benefit of the Borrower or a Restricted Subsidiary.



     “Treasury Management Counterparty” means each Lender or Affiliate of a Lender that
enters into a Treasury Management Agreement.



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



     “Ultimate General Partner” means Eagle Rock Energy G&P, LLC, a Delaware limited
liability company.



     “Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as such on
Schedule 7.14 or which the Borrower has designated in writing to the Administrative Agent
to be an Unrestricted Subsidiary pursuant to Section 9.06.



     “Wholly-Owned Subsidiary” means (a) any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable
law), on a fully-diluted basis, are owned by the Borrower or one or more of the Wholly-Owned
Subsidiaries or are owned by the Borrower and one or more of the Wholly-Owned Subsidiaries or (b)
any Subsidiary that is organized in a foreign jurisdiction and is required by the applicable laws
and regulations of such foreign jurisdiction to be partially owned by the government of such
foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction,
provided that the Borrower, directly or indirectly, owns the remaining Equity Interests in
such Subsidiary and, by contract or otherwise, controls the management and business of such
Subsidiary and derives economic benefits of ownership of such Subsidiary to substantially the same
extent as if such Subsidiary were a Wholly-Owned Subsidiary.



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



     Section 1.03 Terms Generally; Rules of Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to
have the same meaning and effect as



28









 







the word “shall”. Unless the context requires otherwise (a)
any definition of or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law
shall be construed as referring to such law as amended, modified, codified or reenacted, in whole
or in part, and in effect from time to time, (c) any reference herein to any Person shall be
construed to include such Person’s successors and assigns (subject to the restrictions contained in
the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement. No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.



     Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be furnished to the
Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied
on a basis consistent with the Financial Statements except for changes in which Borrower’s
independent certified public accountants concur and which are disclosed to Administrative Agent on
the next date on which financial statements are required to be delivered to the Lenders pursuant to
Section 8.01(a); provided that, unless the Borrower and the Majority Lenders shall
otherwise agree in writing, no such change shall modify or affect the manner in which compliance
with the covenants contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.



ARTICLE II

The Credits




     Section 2.01 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make revolving loans
to the Borrower 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 total
Credit Exposures exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Loans.



     Section 2.02 Loans and Borrowings.



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




29









 








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




          (c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each
Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that
is an integral multiple of $1,000,000 and not less than $1,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by Section
2.09(e). Borrowings of more than one Type may be outstanding at the same time,
provided that there shall not at any time be more than a total of ten (10) Eurodollar
Borrowings outstanding. Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the Maturity Date.




          (d) Notes. The Loans made by each Lender, if requested by such Lender, shall be
evidenced by a single promissory note of the Borrower in substantially the form of Exhibit
A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of
the date of this Agreement, (ii) any Lender that becomes a party hereto pursuant to an Assignment
and Assumption, as of the effective date of the Assignment and Assumption, or (iii) any Lender that
becomes a party hereto in connection with an increase in the total Commitments pursuant to
Section 2.07(d), as of the effective date of such increase, in each case, payable to the
order of such Lender in a principal amount equal to its Commitment as in effect on such date, and
otherwise duly completed. In the event that any Lender’s Commitment increases or decreases for any
reason (whether pursuant to Section 2.07, Section 12.04(b) or otherwise), if
requested by such Lender, the Borrower shall deliver or cause to be delivered on the effective date
of such increase or decrease, a new Note payable to the order of such Lender in a principal amount
equal to its Commitment after giving effect to such increase or decrease, and otherwise duly
completed. The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan
made by each Lender, and all payments made on account of the principal thereof, shall be recorded
by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such
Lender on a schedule attached to such Note or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a schedule
shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans
or affect the validity of such transfer by any Lender of its Note.




     Section 2.03 Requests for Borrowings To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Eastern time, three
(3) Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR
Borrowing, not later than 12:00 noon, Eastern time, on the date of the proposed Borrowing;
provided that no such notice shall be required for any deemed request of an ABR Borrowing
to finance the reimbursement of an LC



30









 







Disbursement as provided in Section 2.09(e). Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery, facsimile or e-mail to the Administrative Agent of a written Borrowing Request in
substantially the form of Exhibit B and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance with Section
2.02:



               (i) the aggregate amount of the requested Borrowing;



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



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



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



               (v) the current total Credit Exposures (without regard to the requested Borrowing) and the pro
forma total Credit Exposures (giving effect to the requested Borrowing).


If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar
Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one (1) month’s
duration. Each Borrowing Request shall constitute a representation that the amount of the
requested Borrowing shall not cause the total Credit Exposures to exceed the total Commitments.



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




     Section 2.04 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 $25,000,000 or (ii) the
sum of the total Credit Exposures exceeding the total Commitments; 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 hand delivery, facsimile or e-mail), not later than 2:00 p.m.,
Eastern time, 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




31









 







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 2.09(e), by remittance to the applicable Issuing Bank)
by 4:00 p.m., Eastern time, 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., Eastern time, 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 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 2.06 with respect to Loans made
by such Lender (and Section 2.06 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 2.05 Interest Elections.



          (a) Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower
may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this
Section 2.05. 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




32









 







among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings,
which may not be converted or continued.




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




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




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



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



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



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


If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one (1)
month’s duration.




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




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




33









 







Borrowing shall be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable thereto.




     Section 2.06 Funding of Borrowings.



          (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., Eastern
time, 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 2.04. The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to the account of the Borrower
designated by the Borrower in the Notice of Account Designation delivered to the Administrative
Agent on or prior to the Effective Date or to such other account designated by the Borrower in
writing to the Administrative Agent, or applicable Borrowing Request; provided that ABR
Loans made to finance the reimbursement of an LC Disbursement as provided in Section
2.09(e) shall be remitted by the Administrative Agent to the relevant Issuing Bank. Nothing
herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular
place or manner or to constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.




          (b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed time of any Borrowing (or prior to the proposed
time of any same day ABR Borrowing) that such Lender will not make available to the Administrative
Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender
has made such share available on such date in accordance with Section 2.06(a) and may, in
reliance upon such assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender agrees 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 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. If such Lender does not pay such corresponding
amount to the Administrative Agent within three (3) Business Days after demand, the Borrower
agrees 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 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 2.07 Termination, Reduction and Increase of Commitments.



          (a) Mandatory Termination and Reduction of Commitments.




               (i) Unless previously terminated, all Commitments shall terminate on the earlier to occur of
(A) the Maturity Date and (B) any date specified pursuant to Section 10.02.



34









 





               (ii) The total Commitments shall automatically reduce by the amount of any mandatory
prepayments required pursuant to Sections 3.04(c)(ii) and (iii) on the date of each
such mandatory prepayment.



          (b) Optional Termination and Reduction of Commitments.




               (i) The Borrower may at any time terminate, or from time to time reduce, the total
Commitments; provided that (A) each reduction of the total Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (B) the
Borrower shall not terminate or reduce the total Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Credit
Exposures would exceed the total Commitments.



               (ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the total Commitments under Section 2.07(b)(i) at least three (3) Business Days prior to
the effective date of such termination or reduction, specifying such election and the effective
date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this
Section 2.07(b)(ii) shall be irrevocable; provided that a notice of termination of
the Commitments 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.



          (c) Terminations and Reductions of Commitments. Any termination or reduction of the
Commitments shall be permanent and may not be reinstated except pursuant to Section
2.07(d). Each reduction of the Commitments shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.




          (d) Optional Increase in Commitments.





          (i) Subject to the conditions set forth in Section 2.07(d)(ii), the Borrower
may increase the total Commitments then in effect with the prior written consent of the
Administrative Agent by increasing the Commitment of a Lender or by causing a Person that at
such time is not a Lender to become a Lender (an “Additional Lender”).




          (ii) Any increase in the Commitments shall be subject to the following additional
conditions:




          (A) such increase shall not be less than $50,000,000 unless the Administrative
Agent otherwise consents; provided, that all such increases pursuant to this
Section 2.07(d) shall not exceed $200,000,000 in the aggregate;




          (B)
such increase shall occur prior to December 13, 2011;




          (C) no Default shall have occurred and be continuing at the effective date of
such increase;



35









 






          (D) the Borrower shall have paid all compensation required by Section
5.02 (if any);




          (E) no Lender’s Commitment may be increased without the consent of such Lender;




          (F) if the Borrower elects to increase the total Commitments by increasing the
Commitment of a Lender, the Borrower and such Lender shall execute and deliver to
the Administrative Agent a certificate substantially in the form of Exhibit
G-1 (a “Commitment Increase Certificate”), and if requested by such
Lender, the Borrower shall deliver a new Note payable to the order of such Lender in
a principal amount equal to its Commitment after giving effect to such increase, and
otherwise duly completed;




          (G) if the Borrower elects to increase the total Commitments by causing an
Additional Lender to become a party to this Agreement, then the Borrower and such
Additional Lender shall execute and deliver to the Administrative Agent a
certificate substantially in the form of Exhibit G-2 (an “Additional
Lender Certificate”), together with an Administrative Questionnaire, and if
requested by such Additional Lender, the Borrower shall deliver a Note payable to
the order of such Additional Lender in a principal amount equal to its Commitment,
and otherwise duly completed; and




          (H) the Borrower and its Restricted Subsidiaries shall have delivered to the
Administrative Agent such legal opinions, resolutions, amendment to Security
Instruments and other documents as the Administrative Agent may reasonably request.




          (iii) Subject to acceptance and recording thereof pursuant to Section
2.07(d)(iv), from and after the effective date specified in the Commitment Increase
Certificate or the Additional Lender Certificate: (A) the amount of the total
Commitments shall be increased as set forth therein, and (B) in the case of an Additional
Lender Certificate, any Additional Lender party thereto shall be a party to this Agreement
and the other Loan Documents and have the rights and obligations of a Lender under this
Agreement and the other Loan Documents. In addition, the Lender or the Additional Lender,
as applicable, shall purchase a pro rata portion of the outstanding Loans (and participation
interests in Letters of Credit) of each of the other Lenders (and such Lenders hereby agree
to sell and to take all such further action to effectuate such sale) such that each Lender
(including any Additional Lender, if applicable) shall hold its Applicable Percentage of the
outstanding Loans (and participation interests) after giving effect to the increase in the
total Commitments.




          (iv) Upon its receipt of a duly completed Commitment Increase Certificate or an
Additional Lender Certificate, executed by the Borrower and the Lender or the Borrower and
the Additional Lender party thereto, as applicable, the Administrative Questionnaire
referred to in Section 2.07(d)(ii), if applicable, the written consent of the
Administrative Agent to such increase required by Section 2.07(d)(i), and



36









 







all other
documents and payments required by this Section 2.07(d), the Administrative Agent
shall accept such Commitment Increase Certificate or Additional Lender Certificate and
record the information contained therein in the Register required to be maintained by the
Administrative Agent pursuant to Section 12.04(b)(iv).



     Section 2.08 Borrowing Base.



          (a) Initial Borrowing Base. For the period from and including the Effective Date to
but excluding the first Redetermination Date, the amount of the Borrowing Base shall be
$140,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further
adjustments from time to time pursuant to Section 8.13(c), Section 9.11(a) or
Section 9.12.




          (b) Borrowing Base Redeterminations. The Borrowing Base shall be redetermined
semi-annually in accordance with this Section 2.08 (a “Scheduled Redetermination”),
and subject to Section 2.08(d), such redetermined Borrowing Base shall become effective and
applicable to the Borrower, the Agents, any Issuing Bank and the Lenders on April 1st and October
1st of each year, commencing April 1, 2008. In addition, (a) the Borrowing Base shall be
redetermined as required by Section 9.02(h) and Section 9.02(m) and (b) the
Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at
the direction of the Required Lenders, by notifying the Borrower thereof, elect to cause the
Borrowing Base to be redetermined one time each between Scheduled Redeterminations, in the case of
clauses (a) and (b), in accordance with this Section 2.08 (each such redetermination, an
“Interim Redetermination”).




          (c) Borrowing Base Redetermination Procedure.





          (i) Each Borrowing Base Redetermination shall be effectuated as follows: Upon receipt
by the Administrative Agent of (A) the Reserve Report and the
certificate required to be delivered by the Borrower to the Administrative Agent, in
the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and
(c), and, in the case of an Interim Redetermination, pursuant to Section
8.12(b) and (c), and (B) such other reports, data and supplemental information,
including, without limitation, the information provided pursuant to Section
8.12(c), as may, from time to time, be reasonably requested by the Majority Lenders
(the Reserve Report, such certificate and such other reports, data and supplemental
information being the “Engineering Reports”), the Administrative Agent shall
evaluate the information contained in the Engineering Reports and shall, in good faith,
propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such
information and such other information (including, without limitation, the status of title
information with respect to the Borrowing Base Properties as described in the Engineering
Reports and the existence of any other Indebtedness) as the Administrative Agent deems
appropriate in its sole discretion and consistent with its normal oil and gas lending
criteria as it exists at the particular time. In no event shall the Proposed Borrowing
Base exceed the total Commitments.




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



37









 






          (A) in the case of a Scheduled Redetermination (1) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on or before the March 15th and September 15th of such year following the date
of delivery, or (2) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower and
has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.08(c)(i); and




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




          (iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved or deemed to have been approved by all of the Lenders as provided
in this Section 2.08(c)(iii); and any Proposed Borrowing Base that would decrease
or maintain the Borrowing Base then in effect must be approved or be deemed to have been
approved by the Required Lenders as provided in this Section 2.08(c)(iii). Upon
receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to
agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by
proposing an alternate Borrowing Base. If at the end of such fifteen (15) days, any Lender
has not communicated its approval or disapproval in writing to the Administrative Agent,
such silence shall be deemed to be an approval of the Proposed Borrowing Base. If, at the
end of such 15-day period, all of the Lenders, in the case of a Proposed Borrowing Base
that would increase the Borrowing Base then in effect, or the Required Lenders, in the case
of a Proposed Borrowing Base that would
decrease or maintain the Borrowing Base then in effect, have approved or deemed to
have approved, as aforesaid, then the Proposed Borrowing Base shall become the new
Borrowing Base, effective on the date specified in Section 2.08(d). If, however,
at the end of such 15-day period, all of the Lenders or the Required Lenders, as
applicable, have not approved or deemed to have approved, as aforesaid, then the
Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then
acceptable to a number of Lenders sufficient to constitute the Required Lenders for
purposes of this Section 2.08 and, so long as such amount does not increase the
Borrowing Base then in effect, such amount shall become the new Borrowing Base, effective
on the date specified in Section 2.08(d).



          (d) Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing
Base is approved or is deemed to have been approved by all of the Lenders or the Required Lenders,
as applicable, pursuant to Section 2.08(c)(iii), the Administrative Agent shall notify the
Borrower and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing
Base Notice”), and such amount shall become the new Borrowing Base, effective and applicable to
the Borrower, the Agents, any Issuing Bank and the Lenders:




38









 









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




          (ii) in the case of an Interim Redetermination or an adjustment to the Borrowing Base
under Section 8.13(c), Section 9.11(a) or Section 9.12, on the
Business Day next succeeding delivery of such notice.


Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date, the
next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section
8.13(c), Section 9.11(a) or Section 9.12, whichever occurs first.
Notwithstanding the foregoing, no Borrowing Base Redetermination shall become effective until the
New Borrowing Base Notice related thereto is received by the Borrower.




     Section 2.09 Letters of Credit.



          (a) General. The Borrower, the Administrative Agent, the Issuing Bank, and Lenders
hereby agree that all Existing Letters of Credit shall be deemed to be issued under this Agreement
as of the Effective Date and shall constitute Letters of Credit hereunder for all purposes (except
that no Issuing Bank’s standard issuance fee shall be payable on such deemed issuance). Subject to
the terms and conditions set forth herein, the Borrower may request the issuance of dollar
denominated Letters of Credit for its own account or for the account of any of its Restricted
Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the
applicable 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 Letter of Credit Agreement, 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 facsimile (or transmit by electronic communication,
if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable
Issuing Bank and the Administrative Agent (not less than three (3) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:




               (i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be
amended, renewed or extended;



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



39









 





               (iii) specifying the date on which such Letter of Credit is to expire (which shall comply with
Section 2.09(c));



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



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



               (vi) specifying the current total Credit Exposures (without regard to the requested Letter of
Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the
pro forma total Credit Exposures (giving effect to the requested Letter of Credit or the requested
amendment, renewal or extension of an outstanding Letter of Credit).


Each notice shall constitute a representation that after giving effect to the requested issuance,
amendment, renewal or extension, as applicable, (i) the LC Exposure shall not exceed the LC
Commitment, and (ii) the total Credit Exposures shall not exceed the total Commitments.



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




          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one (1) year after the date of the issuance of such Letter
of Credit, provided that such Letter of Credit may provide for automatic extensions of such
expiration date (such Letter of Credit, an “Auto-Extension Letter of Credit”) for
additional periods of 365 days thereafter, and (ii) the date that is five (5) Business Days prior
to the Maturity Date. The Borrower shall be required to make a specific request to the applicable
Issuing Bank for any extension of an Auto-Extension Letter of Credit. Once an Auto-Extension
Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not
require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any
time to an expiry date not later than five (5) Business Days prior to the Maturity Date;
provided, however, that such Issuing Bank shall not permit any such extension if
(A) such Issuing Bank has determined that it would not be permitted at such time to issue such
Letter of Credit in its revised form (as extended) under the terms hereof, or (B) it has received
notice (which may be by telephone or in writing) from the Administrative Agent, on or before the
day that is five (5) Business Days before the last day in which notice of non-extension for such
Letter of Credit may be given, that one or more of the applicable conditions specified in
Section 6.02 is not then satisfied, and directing such Issuing Bank not to permit such
extension.




          (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 any
Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender, and each
Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to
such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter
of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of the applicable
Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement




40









 







made by such Issuing Bank
and not reimbursed by the Borrower on the date due as provided in Section 2.09(e), or of
any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this Section
2.09(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected
by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency
or reduction or termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.




          (e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, 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, Eastern time, 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., Eastern time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than 12:00 noon, Eastern
time, on (i) the Business Day that the Borrower receives such notice, if such notice is received
prior to 10:00 a.m., Eastern time, on the day of receipt, or (ii) the Business 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 shall, subject to the
conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby
request under such circumstances, that such payment be financed with an ABR Borrowing (or, if such
LC Disbursement is less than $1,000,000, a 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 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 2.05(a) with
respect to Loans made by such Lender (and Section 2.05(a) shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to such 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 Section
2.09(e), the Administrative Agent shall distribute such payment to such Issuing Bank or, to the
extent that Lenders have made payments pursuant to this Section 2.09(e) to reimburse such
Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any
payment made by a Lender pursuant to this Section 2.09(e) to reimburse such Issuing Bank
for any LC Disbursement (other than the funding of ABR Loans or a Swingline Loan 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 Section 2.09(e) shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit,
any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft
or other document presented under a Letter of Credit proving to be forged,




41









 







fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by
any Issuing Bank under a Letter of Credit against presentation of a draft or other document that
does not substantially comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.09(f), constitute a legal
or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder, absent such Issuing Bank’s gross negligence or willful misconduct. Neither the
Administrative Agent, the Lenders nor any 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 any Issuing Bank; provided that the foregoing shall not be construed to excuse
such Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the Borrower to the extent
permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the
absence of gross negligence or willful misconduct on the part of any Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have
exercised all requisite care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to documents
presented which appear on their face to be in substantial compliance with the terms of a Letter of
Credit, such 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 applicable Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for payment under a
Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the
Borrower by telephone (confirmed by facsimile) of such demand for payment and whether such Issuing
Bank has made or will make an LC Disbursement thereunder; provided that any failure to give
or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such
Issuing Bank and the Lenders with respect to any such LC Disbursement.




          (h) Interim Interest. If any Issuing Bank shall make any LC Disbursement, then, until
the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own
funds or a Borrowing under Section 2.09(e)), the unpaid amount thereof shall bear interest,
for each day from and including the date such LC Disbursement is made to but excluding the date
that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR
Loans. Interest accrued pursuant to this Section 2.09(h) shall be for the account of the
applicable Issuing Bank, except that interest accrued on and after the date




42









 







of payment by any
Lender pursuant to Section 2.09(e) to reimburse such Issuing Bank shall be for the account
of such Lender to the extent of such payment.




          (i) Replacement of an Issuing Bank. Any Issuing Bank may be replaced 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 replaced 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 3.05(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references
herein to the term “Issuing Bank” shall be deemed to refer to such successor and any other existing
Issuing Banks or to any previous Issuing Bank, or to such successor and all other existing Issuing
Banks and previous Issuing Banks, as the context shall require. After the 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 (i) any Event of Default shall occur and be continuing
and the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding
the deposit of cash collateral pursuant to this Section 2.09(j), or (ii) the Borrower is
required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent and for the benefit
of the Lenders, an amount in cash equal to, in the case of an Event of Default, the LC Exposure,
and in the case of a payment required by Section 3.04(c), the amount of such excess as
provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the
Borrower or any Restricted Subsidiary described in Section 10.01(i) or Section
10.01(j). The Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Banks and the Lenders, an exclusive first priority and continuing perfected security
interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if
any, from time to time deposited or held in such account, all deposits or wire transfers made
thereto, any and all investments purchased with funds deposited in such account, all interest,
dividends, cash, instruments, financial assets and other Property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and
all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any
substitutions and replacements therefor. The Borrower’s obligation to deposit amounts pursuant to
this Section 2.09(j) shall be absolute and unconditional, without regard to whether any
beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law,
shall not be subject to any defense or be affected by a right of set-off, counterclaim or
recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such
beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any other Person for any
reason whatsoever.




43









 







Such deposit shall be held as collateral securing the payment and performance
of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan
Documents. The Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned on the investment
of such deposits, 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 Banks for LC
Disbursements for which they have 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, and if such moneys shall exceed the LC Exposure at any time, such excess shall be
reimbursed to the Borrower. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise
required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not
applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all
Events of Default have been cured or waived.




ARTICLE III

Payments of Principal and Interest; Prepayments; Fees




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



     Section 3.02 Interest.



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




          (b) Eurodollar Loans. 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 Margin, but in no event to exceed the Highest Lawful Rate.




          (c) Swingline Loans. Each Swingline Loan shall bear interest at the LIBOR Reference
Rate plus the Applicable Margin for a Eurodollar Borrowing, but in no event to exceed the Highest
Lawful Rate.




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




44









 







shall bear interest, after as well as before judgment, at the rate then applicable to such Loans,
plus the Applicable Margin, if any, plus an additional two percent (2%), but in no event to exceed
the Highest Lawful Rate.




          (e) Interest Payment Dates. Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and on the Termination Date; provided that (i)
interest accrued pursuant to Section 3.02(d) shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior
to the Termination Date), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment, and (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.




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




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



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




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



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




     Section 3.04 Prepayments.



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




45









 








          (b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by
telephone (confirmed by facsimile or other electronic transmission) of any prepayment hereunder not
later than 12:00 noon, Eastern time, 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 of the Commitments as contemplated by
Section 2.07(b), then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.07(b). Promptly following receipt of
any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided in Section
2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by
Section 3.02.




          (c) Mandatory Prepayments.




               (i) If, after giving effect to any termination or reduction of the total Commitments pursuant
to Section 2.07(b), the total Credit Exposures exceeds the total Commitments, then the
Borrower shall make a prepayment in accordance with Section 3.04(c)(vi) on the date of such
termination or reduction in an aggregate principal amount equal to such excess.



               (ii) On each date on or after the Effective Date upon which the Borrower or any Restricted
Subsidiary receives any cash proceeds from any Asset Sale made pursuant to Section 9.12(k),
an amount equal to 100% of the Net Sale Proceeds therefrom shall be applied on such date as a
mandatory repayment and/or commitment reduction in accordance with Section 3.04(c)(vi);
provided, however, that such Net Sale Proceeds shall not be required to be so
applied on such date so long as no Event of Default then exists and such Net Sale Proceeds shall be
used to purchase Property (other than inventory and working capital) used or to be used in the
businesses permitted pursuant to Section 9.07 within 270 days following the date of such
Asset Sale, and provided further, that if all or any portion of such Net Sale
Proceeds not required to be so applied as provided above in this Section 3.04(c)(ii) are
not so reinvested within such 270 day period (or such earlier date, if any, as the Borrower or
relevant Restricted Subsidiary determines not to reinvest the Net Sale Proceeds from such Asset
Sale as set forth above), such remaining portion shall be applied on the last day of such period
(or such earlier date, as the case may be) as provided above in this Section 3.04(c)(ii)
without regard to the preceding proviso.



               (iii) On each date on or after the Effective Date upon which the Borrower or any Restricted
Subsidiary receives any cash proceeds from any Recovery Event (other than Recovery Events where the
Net Cash Proceeds therefrom do not exceed five percent (5%) of Consolidated Net Tangible Assets),
an amount equal to 100% of the Net Cash Proceeds from such Recovery Event shall be applied on such
date as a mandatory repayment in accordance with the requirements of Section 3.04(c)(vi);
provided, however, that so long as no Event of Default then exists, such Net Cash
Proceeds shall not be required to be so applied on such date to the extent that such Net Cash
Proceeds shall be used to replace or restore any



46









 




Property in respect of which such Net Cash
Proceeds were paid within 270 days following the date of the receipt of such Net Cash Proceeds, and
provided further, that if all or any portion of such Net Cash Proceeds are not so
used within 270 days after the date of the receipt of such Net Cash Proceeds (or such earlier date,
if any, as the Borrower or relevant Restricted Subsidiary determines not to reinvest the Net Cash
Proceeds relating to such Recovery Event as set forth above), such remaining portion shall be
applied on the last day of such period (or such earlier date, as the case may be) as provided above
in this Section 3.04(c)(iii) without regard to the proviso or the immediately preceding
proviso.




               (iv) On each date on or after the Effective Date upon which (A) the Borrower or any Restricted
Subsidiary receives any cash proceeds from a sale or other disposition of any interest in any
Borrowing Base Properties or a Restricted Subsidiary owning any Borrowing Base Properties pursuant
to Section 9.12(f), and (B) a Borrowing Base Deficiency exists or results therefrom, an
amount equal to 100% of the Net Sale Proceeds therefrom (up to the amount of the Borrowing Base
Deficiency) shall be applied on such date as a mandatory repayment in accordance with the
requirements of Section 3.04(c)(vi); provided, that if a Borrowing Base Deficiency
continues to exist after such mandatory repayment, (1) the Borrower shall, subject to the
conditions in Section 6.02, be deemed to have requested, and the Borrower does hereby
request under such circumstances, that an amount equal to such remaining Deficiency Amount (or such
lesser amount equal to the amount of the Commitments then available for Non-Borrowing Base
Indebtedness) be transferred from Borrowing Base Indebtedness to Non-Borrowing Base Indebtedness
and that the Deficiency Amount be reduced by an amount equal to the amount of Borrowing Base
Indebtedness transferred to Non-
Borrowing Base Indebtedness, and (2) the Borrower shall make a mandatory prepayment in an
amount equal to the balance of such Deficiency Amount in accordance with Section
3.04(c)(vi).



               (v) If a Borrowing Base Deficiency results from or exists immediately after any adjustment to
the Borrowing Base pursuant to Section 2.08, Section 8.13(c) or Section
9.11(a) (but not in connection with an adjustment as a result of Section 9.12(f)), the
Borrower shall, subject to the conditions in Section 6.02, be deemed to have requested, and
the Borrower does hereby request under such circumstances, that an amount equal to such Deficiency
Amount (or such lesser amount equal to the amount of the Commitments then available for
Non-Borrowing Base Indebtedness) be transferred from Borrowing Base Indebtedness to Non-Borrowing
Base Indebtedness and that the Deficiency Amount be reduced by an amount equal to the amount of
Borrowing Base Indebtedness transferred to Non-Borrowing Base Indebtedness. The Borrower shall (A)
make mandatory prepayments within six (6) months of such Borrowing Base adjustment (in six (6)
equal monthly installments) in an aggregate amount equal to the balance of such Deficiency Amount
in accordance with Section 3.04(c)(vi), or (B) grant Liens to the Administrative Agent in
accordance with Section 8.14(a) on additional Oil and Gas Properties of the Loan Parties
that are not Royalty Properties that (1) are not Borrowing Base Properties, and (2) are
satisfactory to the Administrative Agent and are deemed by the Administrative Agent to have a value
equal to or in excess of such balance of the Deficiency Amount.



               (vi) Each payment made pursuant to this Section 3.04(c) shall be used to prepay the
Borrowings, and if any excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, such excess shall be paid to the Administrative Agent on behalf of the



47









 




Lenders to be held
as cash collateral as provided in Section 2.09(j). Each prepayment of Borrowings pursuant
to this Section 3.04(c) shall be applied, first, to any Swingline Loans then outstanding,
second, ratably to any ABR Borrowings then outstanding, and, third, to any Eurodollar Borrowings
then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such
Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least
number of days remaining in the Interest Period applicable thereto and ending with the Eurodollar
Borrowing with the most number of days remaining in the Interest Period applicable thereto.




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



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




     Section 3.05 Fees.



          (a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee, which shall accrue at the applicable
Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such
Lender during the period from and including the date of this Agreement to but excluding the
Termination Date; provided that for purposes of calculating commitment fees pursuant to
this Section 3.05(a), Swingline Loans shall not be deemed to be a utilization of
Commitments. Accrued commitment fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the Termination Date, commencing on the first such date
to occur after the date hereof. All commitment fees shall be computed on the basis of a year of
360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).




          (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Margin used to determine the interest rate
applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the
applicable Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum 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 date of this Agreement to but excluding
the later of the date of termination of the Commitments and the date on which there ceases to be
any LC Exposure, provided that in no event shall such fee be less than $500 during any
quarter, and (iii) to the applicable Issuing Bank, for its own account, its standard fees with
respect to the amendment, renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation




48









 







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 (3rd)
Business Day following such last day, commencing on the first such date to occur after the date of
this Agreement; provided that all such fees shall be payable on the Termination Date and
any such fees accruing after the Termination Date shall be payable on demand. Any other fees
payable to any Issuing Bank pursuant to this Section 3.05(b) shall be payable within ten
(10) days after demand. All participation fees and fronting fees shall be computed on the basis of
a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case
interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and
shall be payable for the actual number of days elapsed (including the first day but excluding the
last day).




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




ARTICLE IV

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




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



          (a) Payments by the Borrower. The Borrower shall make each payment required to be
made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 5.01, Section 5.02, Section 5.03 or
otherwise) prior to 12:00 noon, Eastern time, on the date when due, in immediately available funds,
without defense, deduction, recoupment, set-off or counterclaim. Fees, once paid, shall be fully
earned and shall not be refundable under any circumstances. Any amounts received after such time
on any date may, in the discretion of the Administrative Agent, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices specified in Section 12.01, except
payments to be made directly to any Issuing Bank as expressly provided herein and except that
payments pursuant to Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 shall be made directly to the Persons entitled thereto. The Administrative
Agent shall distribute any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on
a day that is not a Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments hereunder shall be made in dollars.




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





49









 








          (c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of
set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on
any of its Loans or participations in LC Disbursements 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 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 Section 4.01(c)
shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance
with the express terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or participations in LC
Disbursements and Swingline Loans to any assignee or participant, other than to the Borrower or any
Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall
apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were a direct creditor
of the Borrower in the amount of such participation.




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



     Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section
2.06(b), Section 2.09(d), Section 2.09(e) or Section 4.02 then the
Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of such Lender to
satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are
fully paid.



     Section 4.04 Disposition of Proceeds. The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in
favor of the Administrative Agent for the



50









 




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




ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality




     Section 5.01 Increased Costs.



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




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



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


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
reduce the amount of any sum received or receivable by such Lender (whether of principal, interest
or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered; provided
that the Borrower shall have no obligation to pay any such costs incurred or suffered more than six
(6) months prior to the demand therefor; provided further that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the six-month period
referred to above shall be extended to include the period of retroactive effect thereof.




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




51









 







the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered; provided that the Borrower shall
have no obligation to pay any such costs incurred or suffered more than six (6) months prior to the
demand therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the six-month period referred to above shall be
extended to include the period of retroactive effect thereof.




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




          (d) Effect of Failure or Delay in Requesting Compensation. Except as provided above,
failure or delay on the part of any Lender or any Issuing Bank to demand
compensation pursuant to this Section 5.01 shall not constitute a waiver of such
Lender’s or such Issuing Bank’s right to demand such compensation.




     Section 5.02 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar
Loan on the date specified in any notice delivered pursuant hereto, or (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 5.04(b), 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 5.02 shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.




     Section 5.03 Taxes.



          (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the Borrower or any Guarantor under any Loan Document shall be made free and




52









 







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




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




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




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




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




          (f) Tax Refunds. 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 has paid additional amounts
pursuant to this Section 5.03, 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 5.03 with respect to the Taxes or Other Taxes giving rise to such refund), net of
all out-of-pocket




53









 







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 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 5.03 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 5.04 Mitigation Obligations; Replacement of Lenders.



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




          (b) Replacement of Lenders. If (i) any Lender requests compensation under Section
5.01, (ii) the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 5.03, (iii) any
Lender defaults in its obligation to fund Loans hereunder, (iv) any Lender declines to make a
Eurodollar Loan under Section 5.05 or (v) any Lender declines to enter into any amendment
hereto executed and delivered by the Required Lenders, 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 12.04(b)), 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, which consent shall not unreasonably be withheld, and
(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).




     Section 5.05 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for
any Lender or its applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then (a) such Lender shall
promptly notify the Borrower and the Administrative Agent thereof and such Lender’s obligation to
make such Eurodollar Loans shall be suspended (the “Affected Loans”) until such time as
such Lender may again make and



54









 




maintain such Eurodollar Loans and (b) all Affected Loans which
would otherwise be made by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected Loans of such Lender
then outstanding shall be automatically converted into ABR Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into)
ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected
Loans shall be applied instead to its ABR Loans.




ARTICLE VI

Conditions Precedent




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



          (a) The Administrative Agent, the Arrangers and the Lenders shall have received all
commitment, facility and agency fees and all other fees and amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder (including,
without limitation, the costs and expenses for recordation of certain Security Instruments and the
fees and expenses of legal counsel pursuant to Section 12.03(a)).




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




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




          (d) The Administrative Agent shall have received a compliance certificate substantially in the
form of Exhibit D-1, duly and properly executed by a Financial Officer and dated as of the
Effective Date.




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






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          (f) The Administrative Agent shall have received duly executed Notes payable to the order of
each Lender that has requested a Note in a principal amount equal to its Commitment dated as of the
date hereof.




          (g) The Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of
the Security Instruments. In connection with the execution and delivery of the Security
Instruments, the Administrative Agent shall:





               (i) be reasonably satisfied that the Security Instruments create first priority, perfected
Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of the definition
thereof, but subject to the provisos at the end of such definition) on (A) at least 80% of the
total value of the Borrowing Base Properties as reflected in the Initial Reserve Report, and (B)
all of the other material tangible and intangible Property of the Loan Parties (other than the
Royalty Interests or any such other Property for which the Administrative Agent determines, in its
sole discretion, that the cost of obtaining a Lien on such Property is excessive in relation to the
value afforded thereby);



               (ii) to the extent certificated, have received certificates, together with undated, blank
stock powers for each such certificate, representing any Equity Interests of any of the Guarantors.



          (h) The Administrative Agent shall have received an opinion of (i) Thompson & Knight LLP,
special counsel to the Borrower and the other Loan Parties, and (ii) local counsel in Alabama,
Mississippi and any other jurisdictions requested by the Administrative Agent, in each case, in
form and substance satisfactory to the Administrative Agent.




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




          (j) The Administrative Agent shall have received title information as the Administrative Agent
may reasonably require satisfactory to the Administrative Agent setting forth the status of title
to at least 80% of the total value of the Borrowing Base Properties.




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




          (l) The Administrative Agent shall have received the Financial Statements referred to in
Section 7.04(a) and the Initial Reserve Report accompanied by a certificate covering the
matters described in Section 8.12(c).




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




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          (n) The Administrative Agent shall have received a solvency certificate from a Financial
Officer, in form and substance satisfactory to the Administrative Agent and the Lenders, certifying
that after giving effect to the Transactions on the Effective Date, each of (i) the Loan Parties on
an individual basis, and (ii) the Loan Parties taken as a whole, is Solvent.




          (o) Each document (including any Uniform Commercial Code financing statement) required by this
Agreement or under law or reasonably requested by the Administrative Agent to be filed, registered
or recorded in order to create in favor of the Administrative Agent, for the benefit of the
Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any
other Person (other than Excepted Liens), shall be in proper form for filing, registration or
recordation.




          (p) Concurrently with the initial Loans hereunder, all commitments under the Existing Credit
Agreement shall have been terminated in full, all amounts outstanding under the Existing Credit
Agreement shall have been paid in full, and all Liens granted in connection therewith shall have
been released or assigned to the Administrative Agent.




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




     The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and
such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section
12.02) at or prior to 5:00 p.m., Eastern time, on December 31, 2007 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at such time).



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



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




          (b) At the time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no event, development or
circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected
to have, a Material Adverse Effect.




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




57









 







Credit, as applicable, such
representations and warranties shall continue to be true and correct in all material respects as of
such specified earlier date.




          (d) The receipt by the Administrative Agent of a Borrowing Request in accordance with
Section 2.03 or a request for a Letter of Credit and related Letter of Credit Agreement in
accordance with Section 2.09(b), as applicable.




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



ARTICLE VII

Representations and Warranties




     The Borrower (on behalf of itself and its Subsidiaries), and each Guarantor by its execution
of a Guaranty and Collateral Agreement, represents and warrants to the Administrative Agent, the
Issuing Banks and the Lenders that:



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



     Section 7.02 Authority; Enforceability. The Transactions are within each Loan Party’s corporate powers and have been duly authorized by
all necessary corporate and, if required, stockholder action (including, without limitation, any
action required to be taken by any class of directors of the Borrower or any other Person, whether
interested or disinterested, in order to ensure the due authorization of the Transactions). Each
Loan Document to which a Loan Party is a party has been duly executed and delivered by such Loan
Party and constitutes a legal, valid and binding obligation of such Loan 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 7.03 Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority or any other third Person (including shareholders
or any class of directors, whether interested or disinterested, of the Borrower or any other
Person), nor is any such consent, approval, registration, filing or other action necessary for the
validity or enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full force and effect
other than (i) the recording and filing of the Security Instruments as required by this Agreement
and (ii) those third party approvals or consents which, if not made or obtained, would not cause a
Default hereunder, could not



58









 







reasonably be expected to have a Material Adverse Effect or do not
have an adverse effect on the enforceability of the Loan Documents, (b) will not violate any
applicable law or regulation or any Organization Document 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 binding upon the Borrower or any Restricted
Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made
by the Borrower or such Restricted Subsidiary and (d) will not result in the creation or imposition
of any Lien on any Property of the Borrower or any Restricted Subsidiary (other than the Liens
created by the Loan Documents).



     Section 7.04 Financial Condition; No Material Adverse Change.



          (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows (i) contained in its Form 10-K as of and
for the fiscal year ended 2006 filed with the SEC, with a report by Deloitte & Touche LLP,
independent public accountants, and (ii) as contained in its Form 10-Q as of and for each fiscal
quarter and the portion of such fiscal year ended March 31, 2007, June 30, 2007 and September 30,
2007 filed with the SEC. Such Financial Statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and its Consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited quarterly Financial
Statements.




          (b) Since December 31, 2006, (i) there has been no event, development or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the
Borrower and its Restricted Subsidiaries has been conducted only in the ordinary course consistent
with past business practices.




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




          (d) The projections regarding the financial performance of the Borrower and its Consolidated
Subsidiaries furnished to the Lenders have been prepared in good faith by the Borrower and based
upon assumptions believed by the Borrower to be reasonable at the time such projections were
provided (and on the Effective Date in the case of forecasts provided prior to the Effective Date)
(it being recognized by the Lenders, however, that projections as to future events are not to be
viewed as facts and that actual results during the period(s) covered by such projections may differ
from the projected results and that such differences may be material and that the Loan Parties make
no representation that such projections will be realized).




     Section 7.05 Litigation.



          (a) Except as set forth on Schedule 7.05, there are no actions, suits, investigations
or proceedings by or before any arbitrator or Governmental Authority pending





59











 




against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or
any Restricted Subsidiary or any of their Properties (i) as to which there is a reasonable
possibility of an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse Effect, or (ii) that
involve any Loan Document or the Transactions.




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




     Section 7.06 Environmental Matters.
Except for such matters as set forth on Schedule 7.06 or that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:



          (a) the Borrower and the Restricted Subsidiaries and each of their respective Properties and
operations thereon are, and within all applicable statute of limitation periods have been, in
compliance with all applicable Environmental Laws;




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




          (c) there are no claims, demands, suits, orders, inquiries, investigations, requests for
information or proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under, any applicable Environmental Law that is pending or, to the
Borrower’s knowledge, threatened against the Borrower or any Restricted Subsidiary or any of their
respective Properties or as a result of any operations at such Properties;




          (d) none of the Properties of the Borrower or any Restricted Subsidiary contain or have
contained any: (i) underground storage tanks; (ii) asbestos-containing materials; (iii) landfills
or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or any comparable state
law; or (v) sites on or nominated for the National Priority List promulgated pursuant to CERCLA or
any state remedial priority list promulgated or published pursuant to any comparable state law;




          (e) there has been no Release or, to the Borrower’s knowledge, threatened Release, of
Hazardous Materials at, on, under or from the Borrower’s or any Restricted Subsidiary’s Properties,
there are no investigations, remediations, abatements, removals, or monitorings of Hazardous
Materials required under applicable Environmental Laws at such Properties and, to the knowledge of
the Borrower, none of such Properties are adversely affected by any Release or threatened Release
of a Hazardous Material originating or emanating from any other real property;




60









 








          (f) neither the Borrower nor any Restricted Subsidiary has received any written notice
asserting an alleged liability or obligation under any applicable Environmental Laws with respect
to the investigation, remediation, abatement, removal, or monitoring of any Hazardous Materials at,
under, or Released or threatened to be Released from any real properties offsite the Borrower’s or
any Restricted Subsidiary’s Properties and, to the Borrower’s knowledge, there are no conditions or
circumstances that would reasonably be expected to result in the receipt of such written notice;




          (g) there has been no exposure of any Person or property to any Hazardous Materials as a
result of or in connection with the operations and businesses of any of the Borrower’s or the
Restricted Subsidiaries’ Properties that would reasonably be expected to form the basis for a claim
for damages or compensation and, to the Borrower’s knowledge, there are no conditions or
circumstances that would reasonably be expected to result in the receipt of notice regarding such
exposure;




          (h) the Borrower and the Restricted Subsidiaries have provided to the Lenders complete and
correct copies of all environmental site assessment reports, investigations, studies, analyses, and
correspondence on environmental matters (including matters relating to any alleged non-compliance
with or liability under Environmental Laws) that are in any of the Borrower’s or the Restricted
Subsidiaries’ possession or control and relating to their respective Properties or operations
thereon.




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



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




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




          (c) No Default has occurred and is continuing.




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



     Section 7.09 Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns
and reports required to have been filed and has paid or caused to be paid all Taxes required to
have been paid by it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as



61









 




applicable, has set aside on its
books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Effect. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower, adequate.




     Section 7.10 ERISA.



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




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




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




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




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




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




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




62









 








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




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




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



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



     Section 7.13 Restriction on Liens. Neither the Borrower nor any of the Restricted Subsidiaries is a party to any material agreement
or arrangement (other than (a) Capital Leases



63









 




creating Liens and Purchase Money Indebtedness
permitted by Section 9.03(c), but then only on the Property subject of such Capital Lease
or Purchase Money Indebtedness, (b) customary provisions restricting subletting or assignment of
leases or rights thereunder, (c) restrictions with respect to Property securing Indebtedness
permitted under Section 9.02 pursuant to Liens permitted under Section 9.03, and
(d) temporary restrictions with respect to an Asset Sale otherwise permitted hereunder pending the
consummation of such sale), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to the Administrative Agent and the
Lenders on or in respect of their Properties to secure the Secured Obligations and the Loan
Documents.




     Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative
Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to
Schedule 7.14, the Borrower has no Subsidiaries and the Borrower has no Foreign
Subsidiaries. Schedule 7.14 identifies each Subsidiary as either Restricted or
Unrestricted, and each Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.



     Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Eagle Rock Energy Partners L.P., and the
organizational identification number of the Borrower in its jurisdiction of organization is 4164963
(or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to
Section 8.01(n) in accordance with Section 12.01). The Borrower’s principal place
of business and chief executive offices are located at the address specified in Section
12.01 (or as set forth in a notice delivered pursuant to Section 8.01(n) and
Section 12.01(c)). Each Restricted Subsidiary’s jurisdiction of organization, name as
listed in the public records of its jurisdiction of organization, organizational identification
number in its jurisdiction of organization, and the location of its principal place of business and
chief executive office is stated on Schedule 7.15 (or as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(n) in accordance with Section
12.01).



     Section 7.16 Properties; Titles, Etc.



          (a) Each of the Borrower and the Restricted Subsidiaries has (i) good and defensible title to,
valid leasehold interests in, or valid easements or other property interests in all of its Oil and
Gas Properties and other real Property and (ii) good and valid title to all of its personal
Property, in the case of each of (i) and (ii), free and clear of all Liens except Liens permitted
by Section 9.03.




          (b) After giving full effect to the Excepted Liens, the Borrower or the Restricted Subsidiary
specified as the owner of the Borrowing Base Properties owns the net interests in Hydrocarbon
production attributable to the Borrowing Base Properties as reflected in the most recently
delivered Reserve Report, and the ownership of such Borrowing Base Properties shall not in any
material respect obligate the Borrower or such Restricted Subsidiary to bear the costs and expenses
relating to the maintenance, development and operations of each such Borrowing Base Property in an
amount in excess of the working interest of each Borrowing Base Property set forth in the most
recently delivered Reserve Report that is not offset by a




64









 







corresponding proportionate increase in
the Borrower’s or such Restricted Subsidiary’s net revenue interest in such Borrowing Base
Property.




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




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




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




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




     Section 7.17 Maintenance of Properties.



          (a) Except for such acts or failures to act as could not be reasonably expected to have a
Material Adverse Effect, the Oil and Gas Properties (and Properties unitized therewith) of the
Borrower and its Restricted Subsidiaries have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Governmental Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of the Oil and Gas Properties of the
Borrower and its Restricted Subsidiaries. Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas
Property (other than Royalty Interests) of the Borrower or any Restricted Subsidiary is subject to
having allowable production reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same was permissible at
the time) and (ii) none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) (other than Royalty Interests) of




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the Borrower or any Restricted Subsidiary is
deviated from the vertical more than the maximum permitted by Governmental Requirements, and such
wells are, in fact, bottomed under and are producing from, and the well bores are wholly within,
the Oil and Gas Properties (or in the case of wells located on Properties unitized therewith, such
unitized Properties) (other than Royalty Interests) of the Borrower or such Restricted Subsidiary.




          (b) Except for such acts or failures to act as could not be reasonably expected to have a
Material Adverse Effect, the offices, plants, wells, gas processing plants, platforms,
improvements, fixtures, equipment, and other Property (other than Oil and Gas Properties) owned,
leased or used by the Borrower and its Restricted Subsidiaries in the conduct of their businesses
are (i) structurally sound with no known defects, (ii) in good operating condition and repair,
subject to ordinary wear and tear, (iii) not in need of maintenance or repair except for ordinary,
routine maintenance and repair the cost of which is immaterial, (iv) sufficient for the operation
of the businesses of the Borrower and its Restricted Subsidiaries as currently conducted, and (v)
in conformity with all Governmental Requirements relating thereto.




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



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



     Section 7.20 Security Instruments.



          (a) Guaranty and Collateral Agreement. The provisions of the Guaranty and Collateral
Agreement are effective to create, in favor of the Administrative Agent for the benefit of the
Secured Parties, a legal, valid and enforceable Lien on, and security interest in, all of the
Collateral, and (i) when financing statements and other filings in appropriate form are filed in
the offices specified in the Guaranty and Collateral Agreement and (ii) upon the taking of
possession or control by the Administrative Agent of the Collateral with respect to which a
security interest may be perfected only by possession or control (which possession or control shall
be given to the Administrative Agent to the extent possession or control by the Administrative
Agent is required




66









 







by the Guaranty and Collateral Agreement), the Liens created by the Guaranty and
Collateral Agreement shall constitute fully perfected first priority Liens on, and security
interests in, all right, title and interest of the Loan Parties in the Collateral covered thereby
(other than such Collateral in which a security interest cannot be perfected under the Uniform
Commercial Code as in effect at the relevant time in the relevant jurisdiction), in each case free
of all Liens other than Excepted Liens, and prior and superior to all other Liens other than
Excepted Liens.




          (b) Mortgages. Each Mortgage is effective to create, in favor of the Administrative
Agent (or such other trustee as may be required or desired under local law) for the benefit of the
Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the
Mortgaged Property thereunder and the proceeds thereof, subject only to Excepted Liens, and when
the Mortgages are filed in the offices specified on Schedule 7.20 (or, in the case of any
Mortgage executed and delivered after the date thereof in accordance with the provisions of
Section 8.11 and Section 8.14, when such Mortgage is filed in the appropriate
offices), the Mortgages shall constitute fully perfected first priority Liens on, and security
interests in, all right, title and interest of the Loan Parties in the Mortgaged Property and the
proceeds thereof, in each case prior and superior in right to any other person, other than Liens
permitted by such Mortgage.




          (c) Valid Liens. Each Security Instrument delivered pursuant to Section 8.11
or Section 8.14, upon execution and delivery thereof, is effective to create in favor of
the Administrative Agent, for the benefit of the Secured Parties, legal, valid and enforceable
Liens on, and security interests in, all of the Collateral thereunder, and when all appropriate
filings or recordings are made in the appropriate offices as may be required under applicable
Governmental Requirements, such Security Instrument will constitute fully perfected first priority
Liens on, and security interests in, all right, title and interest of the Loan Parties in such
Collateral, in each case with no other Liens except for applicable Excepted Liens.




     Section 7.21 Hedging Agreements. Schedule 7.21, as of the date hereof, and after the date hereof, each report required to
be delivered by the Borrower pursuant to Section 8.01(e), sets forth, a true and complete
list of all Hedging Agreements of the Borrower and each Restricted Subsidiary (specifying the
category of each Hedging Agreement, which categories include Borrowing Base Hedges, Royalty
Interest Hedges, Midstream Hedges and Interest Rate Hedges), the material terms thereof (including
the type, term, effective date, termination date and notional amounts or volumes), the net mark to
market value thereof, all credit support agreements relating thereto (including any margin required
or supplied) and the counterparty to each such agreement.



     Section 7.22 Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used to provide working capital (a)
to refinance the Existing Credit Agreement and pay fees and expenses incurred therewith, (b) for
Capital Expenditures and Permitted Acquisitions, and (c) for general corporate purposes, including
distributions permitted under Section 9.04(d). The Borrower and its Subsidiaries are not
engaged principally, or as one of its or their important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of any
Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations
T, U or X of the Board.



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     Section 7.23 Solvency. Each Loan Party is Solvent. No Loan Party is planning to take any action described in
Section 10.01(i) or Section 10.01(j).



     Section 7.24 Anti-Terrorism Laws.



          (a) The Borrower is not, and to the knowledge of the Borrower, none of the Borrower’s
Affiliates, officers or directors is in violation of any Governmental Requirement relating to
terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56, and the Trading with the Enemy Act, 50 U.S.C. App. 1 et
seq., in each case, as amended from time to time.




          (b) The Borrower is not, and to the knowledge of the Borrower, no Affiliate, officer,
director, broker or other agent of the Borrower acting or benefiting in any capacity in connection
with the Loans is any of the following:




               (i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order;



               (ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive Order;



               (iii) a Person with which any Lender is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law;



               (iv) a Person that commits, threatens or conspires to commit or supports “terrorism” as
defined in the Executive Order; or



               (v) a Person that is named as a “specially designated national and blocked Person” on the most
current list published by the U.S. Treasury Department Office of Foreign Assets Control
(“OFAC”) at its official website or any replacement website or other replacement official
publication of such list.



          (c) No Loan Party and, to the knowledge of the Borrower, no broker or other agent of any Loan
Party acting in any capacity in connection with the Loans (i) conducts any business or engages in
making or receiving any contribution of funds, goods or services to or for the benefit of any
Person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction
relating to, any Property or interests in Property blocked pursuant to the Executive Order, or
(iii) engages in or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.




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ARTICLE VIII

Affirmative Covenants




     Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents
shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower (on behalf of itself and its Subsidiaries)
and each Guarantor by its execution of the Guaranty and Collateral Agreement, covenants and agrees
with the Lenders, the Agents and the Issuing Banks that:



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



          (a) Annual Financial Statements. As soon as available, but in any event in accordance
with then applicable law and not later than ninety (90) days after the end of each fiscal year of
the Borrower, its audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all reported on by Deloitte & Touche
LLP or other independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements present fairly in
all material respects the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied; provided, that the timely filing with the SEC of the Borrower’s annual report
on Form 10-K will satisfy the reporting requirements of this Section 8.01(a).




          (b) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than forty-five (45) days after the end of each
of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders’ equity and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each
case in comparative form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by one of its
Financial Officers as presenting fairly in all material respects the financial condition and
results of operations of the 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; provided, that the timely filing with the SEC of the Borrower’s
quarterly reports on Form 10-Q will satisfy the reporting requirements of this Section
8.01(b).




          (c) Certificate of Financial Officer — Compliance. Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer in substantially the form of Exhibit D-2 hereto (i) certifying as to
whether a Default has occurred and, if a Default has occurred, specifying the details thereof and
any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 9.01 and (iii) stating whether
any change in GAAP or in the application thereof has occurred since the date of the audited
financial




69









 







statements referred to in Section 7.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying such certificate.




          (d) Certificate of Financial Officer — Consolidating Information. If, at any time,
all of the Consolidated Subsidiaries of the Borrower are not Consolidated Restricted Subsidiaries,
then concurrently with any delivery of financial statements under Section 8.01(a) or
Section 8.01(b), a certificate of a Financial Officer setting forth consolidating
spreadsheets that show all Consolidated Unrestricted Subsidiaries and the eliminating entries, in
such form as would be presentable to the auditors of the Borrower.




          (e) Certificate of Financial Officer — Hedging Agreements. Concurrently with the
delivery of each Reserve Report hereunder, a certificate of a Financial Officer, in form and
substance satisfactory to the Administrative Agent, setting forth as of a recent date, a true and
complete list of all Hedging Agreements of the Borrower and each Restricted Subsidiary (specifying
the category of each Hedging Agreement, which categories include Borrowing Base Hedges, Royalty
Interest Hedges, Midstream Hedges and Interest Rate Hedges), the material terms thereof (including
the type, term, effective date, termination date and notional amounts or volumes), the net
mark-to-market value therefor, any new credit support agreements relating thereto not listed on
Schedule 7.21, any margin required or supplied under any credit support document, and the
counterparty to each such agreement.




          (f) Financial Plan. As soon as practicable and in any event no later than thirty (30)
days prior to the beginning of each fiscal year, a consolidated plan and financial forecast for
such fiscal year, including (i) forecasted consolidated statements of income and cash flows of the
Borrower and its Consolidated Subsidiaries for each quarter of such fiscal year and (ii)
forecasts demonstrating projected compliance with the requirements of Section 9.01 for each
quarter of such fiscal year.




          (g) Management Letters. Promptly upon receipt thereof, a copy of each “management
letter” submitted to the Borrower or any of its Subsidiaries by independent accountants in
connection with any annual, interim or special audit made by them of the books of the Borrower or
any such Subsidiary, and a copy of any response by the Borrower or any such Subsidiary, or the
board of directors of the Borrower or any such Subsidiary, to such letter.




          (h) SEC and Other Filings; Reports to Shareholders. Promptly after the same become
publicly available, copies of all material reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the SEC, or with any national or foreign securities exchange,
or distributed by the Borrower to its shareholders generally, as the case may be; provided,
that the Borrower and any Subsidiary shall be deemed to have furnished the Administrative Agent and
each Lender the information filed with the SEC on the date that the Borrower or such Subsidiary
provides notice to the Administrative Agent that such information has been posted on the EDGAR
system.




          (i) Notices Under Material Instruments. Promptly after the furnishing thereof, copies
of any financial statement, report or notice furnished to or by any Person pursuant to the terms of
any indenture, loan or credit or other similar agreement, other than this




70









 







Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other provision of this
Section 8.01.




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




          (k) Notice of Sales of Borrowing Base Properties. In the event the Borrower or any
Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of any Borrowing Base
Properties or any Equity Interests in any Subsidiary owning Borrowing Base Properties in accordance
with Section 9.12 with a fair market value in excess of five percent (5%) of the Borrowing
Base, prior written notice of such disposition.




          (l) Notice of Casualty Events. Prompt written notice, and in any event within three
(3) Business Days, of the occurrence of any Casualty Event or the commencement of any action or
proceeding that could reasonably be expected to result in a Casualty Event, in each case, having a
fair market value in excess of $25,000,000.




          (m) Permitted Refinancing Indebtedness. In the event the Borrower intends to
refinance any Indebtedness with the proceeds of Permitted Refinancing Indebtedness as contemplated
by Section 9.02(b), prior written notice of such intended offering therefor, the amount
thereof and the anticipated date of closing, and a copy of the preliminary offering memorandum (if
any) and the final offering memorandum (if any).




          (n) Information Regarding Loan Parties. Prompt written notice (and in any event at
least ten (10) days prior thereto) of any change (i) in any Loan Party’s corporate name, (ii) in
the location of any Loan Party’s chief executive office, (iii) in any Loan Party’s identity or
corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in
any Loan Party’s jurisdiction of organization or such Person’s organizational identification number
in such jurisdiction of organization, and (v) in any Loan Party’s federal taxpayer identification
number.




          (o) Notices of Certain Changes. Promptly, but in any event within five (5) Business
Days, after the execution thereof, copies of any material amendment, modification or supplement to
the certificate or articles of incorporation, by-laws, any preferred stock designation or any other
Organization Document of the Borrower or any Restricted Subsidiary.




          (p) Borrowing Base Indebtedness Designations. Concurrently with the delivery of each
compliance certificate pursuant to Section 8.01(c) and promptly, but in any event within
five (5) Business Days, after the receipt by the Borrower of a New Borrowing Base Notice, a
certificate of a Responsible Officer of the Borrower designating the amount of the Borrowing Base
Indebtedness as of such date (whether or not there is a change in the amount of the Borrowing Base
Indebtedness since the immediately preceding certificate delivered pursuant to this Section
8.01(p)).




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          (q) Notices of Hedging Agreement Terminations. Promptly, but in any event within five
(5) Business Days, after the early termination of any Borrowing Base Hedge, written notice of such
termination, identifying the terminated Borrowing Base Hedge.




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




     Section 8.02 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice (and
in any event within five (5) Business Days) of the following:



          (a) the occurrence of any Default;




          (b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding,
investigation or arbitration by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof not previously disclosed in writing to the Lenders
or any material adverse development in any action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lenders) that, in either case, 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 its
Subsidiaries in an aggregate amount exceeding $20,000,000; and




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



Each notice delivered under this Section 8.02 shall be accompanied by a statement of a
Responsible Officer 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 8.03 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, consents, privileges and franchises material to the conduct of its
business and maintain, if necessary, its qualification to do business in each other jurisdiction in
which its Properties are located or the ownership of its Properties requires such qualification,
except where the failure to so qualify could not reasonably be expected to have a Material Adverse
Effect; provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 9.11.



     Section 8.04 Payment of Obligations. The Borrower will, and will cause each Restricted Subsidiary to, pay its obligations, including
Tax liabilities of the Borrower and all of its Subsidiaries before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) the



72









 




Borrower or such Restricted Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material Adverse Effect or
result in the seizure or levy of any Property of the Borrower or any Subsidiary.




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



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



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




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




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




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




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




     Section 8.07 Insurance.



          (a) The Borrower will, and will cause each Restricted Subsidiary to, maintain, with
financially sound and reputable insurance companies, insurance in such amounts and against such
risks as are customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations (including hazard insurance). The loss




73









 







payable clauses
or provisions in said insurance policy or policies insuring any of the Collateral for the Loans
shall be endorsed in favor of and made payable to the Administrative Agent as its interests may
appear and such policies shall name the Administrative Agent as an “additional insured” and provide
that the insurer will endeavor to give at least thirty (30) days’ prior notice of any cancellation
to the Administrative Agent.




          (b) With respect to each portion of the real property (other than pipelines) of the Borrower
or any Restricted Subsidiary on which improvements are located, the Borrower will, and will cause
each Restricted Subsidiary to, obtain flood insurance in such total amount as the Administrative
Agent or the Majority Lenders may from time to time require, if at any time the area in which any
improvements located on any such real property is designated a “flood hazard area” in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency),
and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster
Protection Act of 1973, as amended from time to time.




     Section 8.08 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 independent accountants, all at such reasonable times and as often as reasonably requested.



     Section 8.09 Compliance with Laws. The Borrower will, and will cause each 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 8.10 Environmental Matters.



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




74









 







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




          (b) The Borrower will promptly, but in no event later than five (5) days of the occurrence of
a triggering event, notify the Administrative Agent and the Lenders in writing of any threatened
action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit
by any landowner or other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has knowledge in connection with any Environmental Laws (excluding routine
testing and corrective action) if the Borrower reasonably anticipates that such action will result
in liability (whether individually or in the aggregate) in excess of $10,000,000, not fully covered
by insurance, subject to normal deductibles.




          (c) The Borrower will, and will cause each Subsidiary to, provide environmental audits and
tests in accordance with American Society of Testing Materials standards upon request by the
Administrative Agent and the Lenders and no more than once per year in the absence of any Event of
Default (or as otherwise required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any future acquisitions of Oil and Gas Properties
(other than Royalty Interests).




     Section 8.11 Further Assurances.



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




          (b) The Borrower hereby authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of the Collateral
without the signature of the Borrower or any other Guarantor where permitted by




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law. A carbon,
photographic or other reproduction of the Security Instruments or any financing statement covering
such Collateral or any part thereof shall be sufficient as a financing statement where permitted by
law.




     Section 8.12 Reserve Reports.



          (a) On or before March 1st and September 1st of each year, commencing March 1, 2008, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the
Borrowing Base Properties of the Borrower and its Subsidiaries as of the immediately preceding
January 1st and July 1st. The Reserve Report as of January 1 of each year shall be prepared by one
or more Approved Petroleum Engineers, and the July 1 Reserve Report of each year shall be prepared
by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve
Report to be true and accurate (provided, that projections concerning volumes attributable
to the Borrowing Base Properties and related production and cost estimates contained in such
Reserve Report are necessarily based upon professional opinions, estimates and projections and such
opinions, estimates and projections may not ultimately prove accurate) and to have been prepared in
accordance with the procedures used in the immediately preceding January 1 Reserve Report.




          (b) In the event of an Interim Redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate
(provided, that projections concerning volumes attributable to the Borrowing Base
Properties and related production and cost estimates contained in such Reserve Report are
necessarily based upon professional opinions, estimates and projections and such opinions,
estimates and projections may not ultimately prove accurate) and to have been prepared in
accordance with the procedures used in the immediately preceding January 1 Reserve Report. For any
Interim Redetermination requested by the Administrative Agent or the Borrower pursuant to
Section 2.08(b), the Borrower shall provide such Reserve Report with an “as of” date as
required by the Administrative Agent as soon as possible, but in any event no later than thirty
(30) days following the receipt of such request.




          (c) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative
Agent and the Lenders a certificate from a Responsible Officer certifying that in all material
respects: (i) the information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct (provided, that projections concerning volumes
attributable to the Borrowing Base Properties and related production and cost estimates contained
in such Reserve Report are necessarily based upon professional opinions, estimates and projections
and such opinions, estimates and projections may not ultimately prove accurate), (ii) the Borrower
or its Restricted Subsidiaries own good and defensible title to the Borrowing Base Properties and
such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii)
except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances,
take or pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Borrowing Base Properties which would require the Borrower or any Restricted
Subsidiary to deliver Hydrocarbons either generally or produced from such Borrowing Base Properties
at some future time without then or thereafter receiving full payment therefor, (iv) none of their
Borrowing Base Properties have been sold since the date




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of the last Borrowing Base determination
except as set forth on an exhibit to the certificate, which certificate shall list all of its
Borrowing Base Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the certificate is a list of
all marketing agreements entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report which the Borrower could reasonably be expected to have been
obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof and
(vi) attached thereto is a schedule of the Borrowing Base Properties that are Mortgaged Properties
and demonstrating the percentage of the total value of the Borrowing Base Properties that the value
of such Mortgaged Properties represent in compliance with Section 8.14(a).




          (d) Concurrently with the delivery of the Reserve Reports in connection with Sections
8.12(a) and (b), the Borrower shall furnish to the Administrative Agent and the Lenders
a report setting forth, for the period since the last delivery of such information, the volume of
production and sales attributable to production (and the prices at which such sales were made and
the revenues derived from such sales ) during such period from the Oil and Gas Properties, and
setting forth the related ad valorem, severance and production taxes and lease operating expenses
attributable thereto and incurred during such period.




     Section 8.13 Title Information.



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




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




          (c) If the Borrower is unable to cure any title defect requested by the Administrative Agent
or the Lenders to be cured within the 60-day period or the Borrower does not comply with the
requirements to provide acceptable title information covering 80% of the value of the Borrowing
Base Properties as set forth in the most recent Reserve Report, such default shall not be a
Default, but instead the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time,




77









 







and any failure to so exercise this remedy at any time shall not be a waiver as to future
exercise of the remedy by the Administrative Agent or the Lenders. To the extent that the
Administrative Agent or the Majority Lenders are not satisfied with title to any Mortgaged Property
after the 60-day period has elapsed, such unacceptable Mortgaged Property shall not count towards
the 80% requirement, and the Administrative Agent may send a notice to the Borrower and the Lenders
that the then outstanding Borrowing Base shall be reduced by an amount as determined by the
Required Lenders to cause the Borrower to be in compliance with the requirement to provide
acceptable title information on 80% of the value of the Borrowing Base Properties as set forth in
the most recent Reserve Report. This new Borrowing Base shall become effective immediately after
receipt of such notice.




     Section 8.14 Additional Collateral; Additional Guarantors.



          (a) In connection with each Borrowing Base Redetermination, the Borrower shall review the
Reserve Report and the list of current Mortgaged Properties (as described in Section
8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 80% of the total
value of the Borrowing Base Properties as set forth in such Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and production. In the event
that the Mortgaged Properties do not represent at least 80% of such total value, then the Borrower
shall, and shall cause its Restricted Subsidiaries to, grant, within thirty (30) days of delivery
of the certificate required under Section 8.12(c), to the Administrative Agent as security
for the Secured Obligations a first-priority Lien interest (provided that Excepted Liens of
the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject
to the provisos at the end of such definition) on additional Borrowing Base Properties not already
subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value. All such Liens will be created and
perfected by and in accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance reasonably
satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes. In order to comply with the
foregoing, if any Restricted Subsidiary places a Lien on its Oil and Gas Properties and such
Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with
Section 8.14(b).




          (b) In the event that (i) the Borrower or any Restricted Subsidiary acquires any Material
Domestic Subsidiary, (ii) the Borrower determines that any Restricted Subsidiary is a Material
Domestic Subsidiary or (iii) any Domestic Subsidiary incurs or guarantees any Indebtedness, the
Borrower shall promptly (and in any event within thirty (30) days of such acquisition,
determination, incurrence or guaranty) cause such Restricted Subsidiary to guarantee the Secured
Obligations pursuant to the Guaranty and Collateral Agreement. In connection with any guaranty,
the Borrower shall, or shall cause such Domestic Subsidiary to, (i) execute and deliver a
supplement to the Guaranty and Collateral Agreement executed by such Domestic Subsidiary, (ii)
cause the owner of the Equity Interests in such Domestic Subsidiary to pledge such Equity Interests
(including, without limitation, to the extent certificated, delivery of original stock certificates
evidencing the Equity Interests of such Domestic Subsidiary, together with an
appropriate undated stock powers for each certificate duly executed in blank by the registered




78









 







owner thereof) and (iii) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative Agent.




          (c) In the event that the Borrower or any Domestic Subsidiary becomes the owner of a Foreign
Subsidiary, then the Borrower shall promptly, or shall cause such Domestic Subsidiary to promptly
(and in any event within thirty (30) days after such acquisition or formation) (i) execute and
deliver a supplement to the Guaranty and Collateral Agreement, (ii) pledge 66% of all the Equity
Interests of such Foreign Subsidiary (including, without limitation, to the extent certificated,
delivery of original stock certificates evidencing such Equity Interests of such Foreign
Subsidiary, together with appropriate stock powers for each certificate duly executed in blank by
the registered owner thereof), so long as such pledge does not result in adverse tax consequences
to the Borrower or such Domestic Subsidiary, and (iii) execute and deliver such other additional
closing documents, certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.




          (d) The Borrower will at all times cause the other material tangible and intangible Property
of the Borrower and each Restricted Subsidiary not covered by clauses (a) through (c) above (other
than the Royalty Interests) to be subject to a Lien pursuant to the Security Instruments;
provided, that in the case of a Permitted Acquisition, the Borrower and the applicable
Restricted Subsidiaries shall have thirty (30) days (subject to extension in the sole discretion of
the Administrative Agent) in which to satisfy this Section 8.14(d); provided
further, that if the Administrative Agent determines, in its sole discretion, that the cost
of obtaining a Lien on any such other material tangible or intangible Property is excessive in
relation to the value afforded thereby, the Administrative Agent may waive the requirements of this
Section 8.14(d) with respect to such Property.




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



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     Section 8.16 Unrestricted Subsidiaries. The Borrower:



          (a) will cause the management, business and affairs of each of the Borrower and its Restricted
Subsidiaries to be conducted in such a manner (including, without limitation, by keeping separate
books of account, furnishing separate financial statements of Unrestricted Subsidiaries to
creditors and potential creditors thereof and by not permitting Properties of the Borrower and its
Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary that is a
corporation will be treated as a corporate entity separate and distinct from Borrower and the
Restricted Subsidiaries;




          (b) will not, and will not permit any of the Restricted Subsidiaries to, incur, assume,
guarantee or be or become liable for any Indebtedness of any of the Unrestricted Subsidiaries; and




          (c) will not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any
Indebtedness of, the Borrower or any Restricted Subsidiary.




ARTICLE IX

Negative Covenants




     Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have
been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower (on behalf of itself and its Subsidiaries) and each
Guarantor by its execution of the Guaranty and Collateral Agreement covenants and agrees with the
Lenders, the Administrative Agent and the Issuing Banks that:



     Section 9.01 Financial Covenants.



          (a) Interest Coverage Ratio. The Borrower will not, as of the last day of any fiscal
quarter, permit the ratio of Consolidated EBITDA for the period of four (4) fiscal quarters then
ending to Consolidated Interest Expense for such period to be less than 2.50 to 1.00.




          (b) Total Leverage Ratio.




               (i) If the Borrower has no Indebtedness of the type described in Section 9.02(h), the
Borrower will not, at any time, permit the Total Leverage Ratio to be greater
than 5.00 to 1.00; provided that during a Specified Acquisition Period, the Total
Leverage Ratio shall not exceed 5.25 to 1.00.



               (ii) If the Borrower has Indebtedness of the type described in Section 9.02(h), the
Borrower will not, at any time, permit the Total Leverage Ratio to be greater than 5.25 to 1.00;
provided that during a Specified Acquisition Period, the Total Leverage Ratio shall not
exceed 5.75 to 1.00.



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          (c) Senior Secured Leverage Ratio. If the Borrower has Indebtedness of the type
described in Section 9.02(h), then the Borrower will not permit the Senior Secured Leverage
Ratio to exceed 4.25 to 1.00; provided that during a Specified Acquisition Period, the
Senior Secured Leverage Ratio shall not exceed 4.75 to 1.00.




          (d) Certain Calculations. With respect to any period during which a Permitted
Acquisition has occurred (a “Subject Transaction”), for purposes of determining compliance
with the financial covenants set forth in this Section 9.01, Adjusted Consolidated EBITDA
shall be calculated with respect to such period on a pro forma basis (including pro forma
adjustments arising out of events which are directly attributable to a specific transaction, are
factually supportable and are expected to have a continuing impact, in each case, determined on a
basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act of 1933 and
as interpreted by the staff of the SEC, which would include cost savings resulting from head count
reduction, closure of facilities and similar restructuring charges, which pro forma adjustments
shall be certified by the chief financial officer of the General Partner) using the historical
audited financial statements of any business so acquired or to be acquired and the consolidated
financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such
Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been
consummated or incurred or repaid at the beginning of such period (and assuming that such
Indebtedness bears interest during any portion of the applicable measurement period prior to the
relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans
incurred during such period).




          (e) Material Projects.




               (i) With respect to any Material Project, the following adjustments (the “Material Project
EBITDA Adjustments”) may be made, at the Borrower’s discretion, to Adjusted Consolidated
EBITDA:




          (A) prior to the Commercial Operation Date of such Material Project (but
including the fiscal quarter in which such Commercial Operation Date occurs), a
percentage (based on the then-current completion percentage of such Material Project
as of the date of determination) of an amount to be approved by the Administrative
Agent as the projected Adjusted Consolidated EBITDA attributable to such Material
Project for the first 12-month period following the scheduled Commercial Operation
Date of such Material Project (such amount to be determined based upon projected
revenues from customer contracts, projected revenues that are determined by the
Administrative Agent, in its discretion, to otherwise be highly probable, the
creditworthiness and applicable
projected production of the prospective customers, capital and other costs,
operating and administrative expenses, scheduled Commercial Operation Date,
commodity price assumptions and other factors deemed appropriate by the
Administrative Agent), may be added, at the Borrower’s option, to actual Adjusted
Consolidated EBITDA for the fiscal quarter in which construction or expansion of
such Material Project commences and for each fiscal quarter thereafter until the
Commercial Operation Date of such Material Project (including the fiscal quarter in
which such Commercial Operation Date occurs,



81









 







but net of any actual Adjusted
Consolidated EBITDA attributable to such Material Project following such Commercial
Operation Date); provided that if the actual Commercial Operation Date does
not occur by the scheduled Commercial Operation Date, then the foregoing amount
shall be reduced for quarters ending after the scheduled Commercial Operation Date
to (but excluding) the first full quarter after the actual Commercial Operation
Date, by the following percentage amounts depending on the period of delay (based on
the period of actual delay or then-estimated delay, whichever is longer): (i) 90
days or less, 0%, (ii) longer than 90 days, but not more than 180 days, 50%, and
(iii) longer than 180 days, 100%; and




          (B) beginning with the first full fiscal quarter following the Commercial
Operation Date of such Material Project and for the two (2) immediately succeeding
fiscal quarters, an amount equal to the projected Adjusted Consolidated EBITDA
attributable to such Material Project for the balance of the four (4) full fiscal
quarter period following such Commercial Operation Date, may be added, at the
Borrower’s option, to actual Adjusted Consolidated EBITDA for such fiscal quarters.




     (ii) Notwithstanding anything else contained in this Section 9.01(e),:




          (A) no Material Project EBITDA Adjustment shall be allowed with respect to any
Material Project unless at least thirty (30) days prior to the last day of the
fiscal quarter for which the Borrower desires to commence inclusion of such Material
Project EBITDA Adjustment in Adjusted Consolidated EBITDA with respect to a Material
Project (the “Initial Quarter”), the Borrower shall have delivered to the
Administrative Agent written pro forma projections of Adjusted Consolidated EBITDA
attributable to such Material Project and such other documentation as the
Administrative Agent may reasonably request, all in form and substance satisfactory
to the Administrative Agent,




          (B) no Material Project EBITDA Adjustment shall be allowed with respect to any
Material Project unless prior to the last day of the Initial Quarter, the
Administrative Agent shall have approved (such approval not to be unreasonably
withheld) such projections and shall have received such other information and
documentation as the Administrative Agent may reasonably request, all in form and
substance satisfactory to the Administrative Agent,




          (C) the aggregate amount of all Material Project EBITDA Adjustments with
respect to a particular Material Project shall not exceed twenty percent (20%) of
the capital cost of such Material Project, and




          (D) the aggregate amount of all Material Project EBITDA Adjustments during any
period shall be limited to fifteen percent (15%) of the total actual Adjusted
Consolidated EBITDA for such period (which total actual Adjusted Consolidated EBITDA
shall be determined without including any Material Project EBITDA Adjustments).



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



          (a) the Secured Obligations arising under the Loan Documents or any guaranty of or suretyship
arrangement for the Secured Obligations arising under the Loan Documents;




          (b) Indebtedness of the Borrower and its Restricted Subsidiaries existing on the date hereof
that is set forth on Schedule 9.02, and any Permitted Refinancing Indebtedness in respect
thereof;




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




          (d) Indebtedness (i) under Capital Leases and (ii) that constitutes Purchase Money
Indebtedness; provided that the aggregate amount of all Indebtedness described in this
Section 9.02(d) at any one time outstanding shall not exceed an amount equal to two and
half percent (2.5%) of Consolidated Tangible Net Worth;




          (e) Indebtedness associated with bonds or surety obligations required by Governmental
Requirements in connection with the operation of the Oil and Gas Properties;




          (f) unsecured intercompany Indebtedness between the Borrower and any Restricted Subsidiary or
between Restricted Subsidiaries to the extent permitted by Section 9.05(g);
provided that such Indebtedness is not held, assigned, transferred, negotiated or pledged
to any Person other than the Borrower or one of its Wholly-Owned Subsidiaries, and,
provided further, that any such Indebtedness owed by a Loan Party shall be
subordinated to the Secured Obligations on terms set forth in the Guaranty and Collateral
Agreement;




          (g) endorsements of negotiable instruments for collection in the ordinary course of business;




          (h) unsecured Indebtedness in respect of a private placement or public sale of unsecured
senior or subordinated notes by the Borrower and unsecured guarantees of such notes by one or more
of the Guarantors; provided that (i) no Event of Default has occurred and is continuing or
would occur after giving effect to such incurrence, (ii) after giving effect to the incurrence of
such Indebtedness on a pro forma basis, the Borrower shall be in compliance with all covenants set
forth in Section 9.01, (iii) the latest maturity date of such Indebtedness shall not be
prior to the ninety-first (91st) day after the Maturity Date and shall not have a
weighted average life to maturity that is shorter than that of the existing Loans, and (iv) such
Indebtedness does not have the benefit of, directly or indirectly, any covenants or definitions
that are more restrictive than those set forth herein; provided further that upon
the incurrence of such Indebtedness, the Borrowing Base will be redetermined using the procedures
for an Interim Redetermination in accordance with Section 2.08




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          (i) Indebtedness arising from agreements providing for indemnification or from guaranties or
letters of credit, surety bonds or performance bonds securing the performance of (but not the
payment of the purchase price by) the Borrower or any Restricted Subsidiary pursuant to such
agreements, in connection with Permitted Acquisitions or Asset Sales by the Borrower or any of its
Restricted Subsidiaries;




          (j) Indebtedness which may be deemed to exist pursuant to any guaranty, performance, surety,
statutory, appeal or similar obligations (but not obligations for borrowed money) incurred in the
ordinary course of business;




          (k) Indebtedness under Treasury Management Agreements not to exceed $5,000,000 in the
aggregate at any time outstanding for all Treasury Management Agreements;




          (l) guaranties by any Loan Party of Indebtedness of any other Loan Party with respect to
Indebtedness otherwise permitted to be incurred pursuant to this Section 9.02; and




          (m) other Indebtedness not to exceed five percent (5%) of Consolidated Tangible Net Worth in
the aggregate at any one time outstanding; provided that if such Indebtedness exceeds ten
percent (10%) of the Borrowing Base, upon the incurrence of such Indebtedness, the Borrowing Base
will be redetermined using the procedures for an Interim Redetermination in accordance with
Section 2.08.




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



          (a) Liens securing the payment of any Secured Obligations pursuant to the Security
Instruments;




          (b) Excepted Liens;




          (c) Liens securing Capital Leases and Purchase Money Indebtedness permitted by Section
9.02(d) but only on the Property under lease or the Property purchased with such Purchase Money
Indebtedness, as applicable;




          (d) Liens described on Schedule 9.03;




          (e) any interest or title of a lessor or sublessor under any lease of real estate permitted
hereunder;




          (f) Liens solely on any cash earnest money deposits made by the Borrower or any Restricted
Subsidiary in connection with any letter of intent or purchase agreement permitted hereunder;




          (g) purported Liens evidenced by the filing of precautionary UCC financing statements relating
solely to operating leases of personal property entered into in the ordinary course of business;




84









 








          (h) licenses of patents, trademarks and other intellectual property rights granted by the
Borrower or any Restricted Subsidiary in the ordinary course of business and not interfering in any
respect with the ordinary conduct of the business of the Borrower or any Restricted Subsidiary;




          (i) Liens on Property acquired in a Permitted Acquisition that as of the date of such
Permitted Acquisition secure Hedging Agreements; provided that such Liens shall only be
permitted for thirty (30) days after the date of such Permitted Acquisition; and




          (j) Liens on Property not constituting Collateral or Borrowing Base Property and not otherwise
permitted by the foregoing clauses of this Section 9.03; provided that (i) the
aggregate principal or face amount of all Indebtedness secured under this Section 9.03(j)
shall not exceed $25,000,000 at any time and (ii) the aggregate value of all Property subject to
Liens under this Section 9.03(j) shall not exceed $75,000,000 at any time.




     Section 9.04 Restricted Payments. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital
to its stockholders or make any distribution of its Property to its Equity Interest holders,
except:



          (a) the Borrower may declare and pay dividends with respect to its Equity Interests payable
solely in additional shares of its Equity Interests (other than Disqualified Capital Stock);




          (b) Restricted Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests;




          (c) 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 Subsidiaries;




          (d) the Borrower may make cash distributions in an amount not to exceed “Available Cash” (as
such term is defined in the Partnership Agreement as in effect on the date hereof);
provided that immediately before and after giving effect to such distribution, no Default
or Event of Default has occurred or would be caused by such distribution; and




          (e) the Borrower and Restricted Subsidiaries may make Restricted Payments to their equity
holders (i) in an aggregate amount not to exceed $500,000 in any fiscal year, to the extent
necessary to permit such equity holders to pay general administrative costs and expenses and (ii)
as otherwise permitted pursuant to clauses (a) through (d) of Section 9.14;
provided that, in the case of clauses (i) and (ii), immediately before and after giving
effect to such distribution, no Default or Event of Default has occurred or would be caused by such
distribution.




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



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          (a) Investments which are disclosed to the Lenders in Schedule 9.05;




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




          (c) direct obligations of the United States or any agency thereof, or obligations guaranteed
by the United States or any agency thereof, in each case maturing within one (1) year from the date
of creation thereof;




          (d) commercial paper maturing within one (1) year from the date of creation thereof rated in
the highest grade by S&P or Moody’s;




          (e) deposits maturing within one (1) year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the United States of any
other bank or trust company which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the
date of such bank or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s,
respectively or, in the case of any Foreign Subsidiary, a bank organized in a jurisdiction in which
the Foreign Subsidiary conducts operations having assets in excess of $500,000,000 (or its
equivalent in another currency);




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




          (g) Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Restricted
Subsidiary in or to the Borrower or any Guarantor, and (iii) made by the Borrower or any Restricted
Subsidiary in or to all other Domestic Subsidiaries which are not Guarantors in an aggregate amount
at any one time outstanding not to exceed $10,000,000;




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




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




          (j) Investments pursuant to Hedging Agreements otherwise permitted under this Agreement;




          (k) Investments in Unrestricted Subsidiaries, provided that (i) the aggregate amount
of all such Investments at any one time shall not exceed $20,000,000 (or its equivalent in




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other
currencies as of the date of Investment) and (ii) the Borrowing Base Utilization Percentage is less
than 80% immediately before and immediately after giving effect such Investment;




          (l) Permitted Acquisitions; and




          (m) other Investments not to exceed $20,000,000 in the aggregate at any time.




     Section 9.06 Designation and Conversion of Restricted and Unrestricted Subsidiaries;
Indebtedness of Unrestricted Subsidiaries.



          (a) Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the date
hereof or thereafter, assuming compliance with Section 9.06(b), any Person that becomes a
Subsidiary of the Borrower or any of its Restricted Subsidiaries shall be classified as a
Restricted Subsidiary.




          (b) The Borrower may designate, by written notification thereof to the Administrative Agent,
any Restricted Subsidiary, including a newly formed or newly acquired Subsidiary, as an
Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, neither a
Default nor a Borrowing Base Deficiency would exist and (ii) such designation is deemed to be an
Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date
of such designation of the Borrower’s direct and indirect Equity Interests in such Subsidiary and
such Investment would be permitted to be made at the time of such designation under Section
9.05(k). Except as provided in this Section 9.06(b), no Restricted Subsidiary may be
redesignated as an Unrestricted Subsidiary.




          (c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if,
after giving effect to such designation, (i) the representations and warranties of the Borrower and
its Restricted Subsidiaries contained in each of the Loan
Documents are true and correct on and as of such date as if made on and as of the date of such
redesignation (or, if stated to have been made expressly as of an earlier date, were true and
correct as of such date), (ii) no Default would exist and (iii) the Borrower complies with the
requirements of Section 8.14, Section 8.16 and Section 9.15.




     Section 9.07 Nature of Business. The Borrower will not, and will not permit any Restricted Subsidiary to, engage (directly or
indirectly) in any business other than those businesses in which the Borrower and its Restricted
Subsidiaries are engaged on the Effective Date (or which are reasonably related thereto or are
reasonable extensions thereof).



     Section 9.08 Proceeds of Loans. The Borrower will not permit the proceeds of the Loans to be used for any purpose other than
those permitted by Section 7.22. Neither the Borrower nor any Person acting on behalf of
the Borrower has taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect
or as the same may hereinafter be in effect. If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 or such other form referred to in
Regulation U, Regulation T or Regulation X of the Board, as the case may be.



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



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




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




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




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




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




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




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




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




          (i) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan




88









 







maintained to
provide benefits to former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.




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




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



     Section 9.11 Mergers, Etc. The Borrower will not, and will not permit any Restricted Subsidiary to, merge into or with 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 (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person (whether now owned or
hereafter acquired) (any such transaction, a “consolidation”), or liquidate or dissolve;
provided that the Borrower or any Restricted Subsidiary may participate in a consolidation
with any other Person; provided that:



          (a) (i) no Default is continuing, (ii) any such consolidation would not cause a Default
hereunder, (iii) if the Borrower consolidates with any Person, the Borrower shall be the surviving
Person (or, so long as no Change in Control shall have occurred, the surviving entity is a Person
organized under the laws of the United States or any state thereof that expressly assumes in
writing (in form and substance satisfactory to the Administrative Agent) all obligations and
liabilities applicable to it under the Loan Documents), (iv) if any Restricted Subsidiary
consolidates with any Person (other than the Borrower or another Restricted Subsidiary) and such
Restricted Subsidiary is not the surviving Person, such surviving Person shall expressly assume in
writing (in form and substance satisfactory to the Administrative Agent) all obligations and
liabilities of such Restricted Subsidiary under the Loan Documents and (v) the Borrowing Base will
be redetermined using the procedures for an Interim Redetermination in accordance with Section
2.08;




          (b) any Restricted Subsidiary (including a Foreign Subsidiary) may participate in a
consolidation with the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or any other Restricted Subsidiary that is a Domestic Subsidiary
(provided that if one of such parties to the consolidation is a Foreign Subsidiary, such
Domestic Subsidiary shall be the continuing or surviving Person) and if one of such Restricted
Subsidiaries is a Wholly-Owned Subsidiary, then the surviving Person shall be a Wholly-Owned
Subsidiary; and




          (c) any Foreign Subsidiary of the Borrower may participate in a consolidation with any one or
more Foreign Subsidiaries; provided that if one of such Foreign Subsidiaries is a
Wholly-Owned Subsidiary, the survivor shall be a Wholly-Owned Subsidiary.




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     Section 9.12 Sale of Properties. The Borrower will not, and will not permit any Restricted Subsidiary to, sell, assign, farm-out,
convey or otherwise transfer any Property except for:



          (a) the sale of Hydrocarbons in the ordinary course of business;




          (b) farmouts of undeveloped acreage and assignments in connection with such farmouts;




          (c) the sale or transfer of equipment that is no longer necessary for the business of the
Borrower or such Restricted Subsidiary or is replaced by equipment of at least comparable value and
use;




          (d) the transfer of Property to another Loan Party;




          (e) the sale, transfer or other disposition of Equity Interests in Unrestricted Subsidiaries;




          (f) the sale or other disposition of any Borrowing Base Property or any interest therein or
any Restricted Subsidiary owning Borrowing Base Properties; provided that (i) 75% of the
consideration received in respect of such sale or other disposition shall be cash, (ii) the
consideration received in respect of such sale or other disposition shall be equal to or greater
than the fair market value of the Borrowing Base Property, interest therein or Restricted
Subsidiary subject of such sale or other disposition (as reasonably determined by the board of
directors of the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver
a certificate of a Responsible Officer of the Borrower certifying to that effect), (iii) if such
sale or other disposition of such Borrowing Base Property or Restricted Subsidiary owning Borrowing
Base Properties during any period between two (2) successive Scheduled Redetermination Dates has a
fair market value in excess of ten percent (10%) of the Borrowing Base, individually or in the
aggregate when combined with all other sales for such period, the Borrowing Base shall be reduced,
effective immediately upon such sale or disposition, by an amount equal to the value designated by
the Required Lenders and (iv) if any such sale or other disposition is of a Restricted Subsidiary
owning Borrowing Base Properties, such sale or other disposition shall include all the Equity
Interests of such Restricted Subsidiary;




          (g) the sale or transfer of non-core assets acquired in a Permitted Acquisition;




          (h) the sale of Investments described in Sections 9.05(c), (d), (e)
and (f) for fair market value;




          (i) an exchange or “swap” of pipeline or other fixed, tangible, non-Borrowing Base Property
assets of any Loan Party for the assets of a Person other than another Loan Party in the ordinary
course of business; provided that such Loan Party receives reasonable equivalent value for such
assets, such value to be demonstrated to the reasonable satisfaction of the Administrative Agent;
provided, further, that the fair market value of all such assets of the Loan Parties exchanged or
“swapped”, other than exchanges or swaps of the assets described in Schedule 9.12(i), does
not exceed $50,000,000 for the term of this Agreement;





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          (j) Asset
Sales having, in the aggregate for all Asset Sales by the Borrower or any
Restricted Subsidiary, a fair market value not to exceed $25,000,000 during any fiscal year
of the Borrower; and




          (k) other Asset Sales, subject to Section 3.04(c)(ii).




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



     Section 9.14 Transactions with Shareholders and Affiliates. The Borrower will not, and will not permit
any Restricted Subsidiary to, enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate
(other than a Loan Party) unless such transactions are otherwise permitted under this Agreement and
are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable
arm’s length transaction with a Person not an Affiliate; provided, that the foregoing
restriction shall not apply to (a) reasonable and customary fees paid to members of the board of
directors (or similar governing body) of the Borrower and its Subsidiaries, (b) compensation
arrangements for directors, officers and other employees of the Borrower and its Subsidiaries
entered into in the ordinary course of business, (c) transactions approved by the Conflicts
Committee, and (d) transactions described in Schedule 9.14.



     Section 9.15 Subsidiaries. The Borrower will not, and will not permit any Restricted Subsidiary to,
create or acquire any additional Restricted Subsidiary or redesignate an Unrestricted Subsidiary as
a Restricted Subsidiary unless the Borrower complies with Section 8.14(b), Section
8.14(c) and Section 9.06. The Borrower shall not, and shall not permit any Restricted
Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any Restricted
Subsidiary except in compliance with Section 9.12(f). Neither the Borrower nor any
Restricted Subsidiary shall have any Foreign Subsidiaries.



     Section 9.16 Negative Pledge Agreements; Dividend Restrictions. The Borrower will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any contract,
agreement or understanding (other than (a) this Agreement and the Security Instruments, (b)
restrictions with respect to Property securing Indebtedness pursuant to Liens permitted under
Section 9.03, (c) customary provisions restricting subletting or assignment of leases or
rights thereunder, and (d) temporary restrictions with respect to an Asset Sale otherwise permitted
hereunder pending the consummation of such sale), which in any way prohibits or restricts the
granting, conveying, creation or imposition of any Lien on any of its Property in favor of the
Administrative Agent and the Lenders or restricts any Restricted Subsidiary from paying dividends
or making distributions to the Borrower or any Guarantor, or which requires the consent of or
notice to other Persons in connection therewith.



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     Section 9.17 Limitation on Issuance of Equity Interests. The Borrower shall not permit any Restricted
Subsidiary to issue any Equity Interest (including by way of sales of treasury stock) or any
options or warrants to purchase, or securities convertible into, any Equity Interest, except for
Equity Interest issued to another Loan Party. The Borrower and the Restricted Subsidiaries shall
comply with Section 8.11 and Section 8.14 with respect to any such issued Equity
Interests.



     Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not, and will not
permit any Restricted Subsidiary to, allow gas imbalances, take-or-pay or other prepayments with
respect to the Borrowing Base Properties of the Borrower or any Restricted Subsidiary that would
require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future time
without then or thereafter receiving full payment therefor to exceed one-half bcf of gas (on an mcf
equivalent basis) in the aggregate.



     Section 9.19 Hedging Agreements. The Borrower will not, and will not permit any Restricted Subsidiary
to, enter into any Hedging Agreements with any Person other than (a) Borrowing Base Hedges and
Royalty Interest Hedges (i) with an Approved Counterparty and (ii) the notional volumes for which
do not exceed, as of the date such Hedging Agreement is executed, the greater of (A) 90% of the
reasonably anticipated projected production from proved, developed, producing Borrowing Base
Properties and Royalty Interests for each month during the period during which such Hedging
Agreement is in effect for each of crude oil and natural gas, calculated separately and (B) 85% of
forecasted production from total proved Borrowing Base Properties and Royalty Interests for each
month during the period during which such Hedging Agreement is in effect for each of crude oil and
natural gas, calculated separately, (b) Midstream Hedges with an Approved Counterparty and that are
not speculative in nature, and (c) Interest Rate Hedges with an Approved Counterparty and that are
not speculative in nature. The Borrower will not, and will not permit
any Restricted Subsidiary to, after January 11, 2008, permit any
Secured Hedging Agreement to be with, or any Secured Hedging
Agreement Counterparty to be, any Person other than a Lender or an
Affiliate of a Lender.



     Section 9.20 Sale and Leaseback. The Borrower shall not, and shall not permit any Restricted Subsidiary
to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any Property, whether now owned or hereafter acquired, and thereafter rent or lease such
Property which it intends to use for substantially the same purpose or purposes as the Property
being sold or transferred.



     Section 9.21 Amendments to Organization Documents or Fiscal Year End; Prepayments of other Indebtedness.



          (a) The Borrower shall not, and shall not permit any Restricted Subsidiary to, amend or
otherwise modify (or permit to be amended or modified) its Organization Documents in a manner that
would be adverse to the Lenders in any material respect.




          (b) The Borrower shall not, and shall not permit any Restricted Subsidiary to, change the last
day of its fiscal year from December 31 of each year, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30 of each year,
respectively.




          (c) The Borrower shall not, and shall not permit any Restricted Subsidiary to, make (or give
any notice in respect of) any voluntary or optional payment or prepayment on or




92









 




redemption or
acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of
control or similar event of, any outstanding subordinated Indebtedness or other Indebtedness
permitted by Section 9.02(h), except as otherwise permitted by this Agreement.




     Section 9.22 Marketing Activities. The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, engage in marketing activities for any Hydrocarbons attributable to the Borrowing
Base Properties or enter into any contracts related thereto other than (i) contracts for
the sale of Hydrocarbons attributable to the Borrowing Base Properties scheduled or reasonably
estimated to be produced therefrom during the period of such contract, (ii) contracts for the sale
of such Hydrocarbons scheduled or reasonably estimated to be produced from proved Borrowing Base
Properties of third parties during the period of such contract associated with the Borrowing Base
Properties of the Borrower and its Restricted Subsidiaries that the Borrower or one of its
Restricted Subsidiaries has the right to market pursuant to joint operating agreements, unitization
agreements or other similar contracts that are usual and customary in the oil and gas business,
(iii) other contracts for the purchase and/or sale of such Hydrocarbons of third parties (A) which
have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and
points and volumes) such that no “position” is taken and (B) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty thereto, and (iv)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be received from third
parties for processing by the Borrower or any Restricted Subsidiary.



     Section 9.23 Anti-Terrorism Law; Anti-Money Laundering.



          (a) The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly,
(i) knowingly conduct any business or engage in making or receiving any contribution of funds,
goods or services to or for the benefit of any Person described in Section 7.24, (ii)
knowingly deal in, or otherwise engage in any transaction relating to, any Property or interests in
Property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii)
knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law (and the Borrower shall deliver to any Lender any certification or other
evidence requested from time to time by such Lender confirming the Borrower’s and the Subsidiaries’
compliance with this Section 9.23(a)).




          (b) The Borrower shall not, and shall not permit any Subsidiary to, cause or permit any of the
funds of the Borrower or any Subsidiary that are used to repay the Loans to be derived from any
unlawful activity with the result that the making of the Loans would be in violation of any
Governmental Regulation.




     Section 9.24 Embargoed Person. The Borrower shall not, and shall not permit any Subsidiary to, permit
(a) any of the funds or Properties of the Borrower or any Subsidiary that are used to repay the
Loans to constitute Property of, or be beneficially owned directly or indirectly by, any Person
subject to sanctions or trade restrictions under United States law (“Embargoed Person” or
“Embargoed Persons”) that is identified on (i) the “List of Specially Designated Nationals
and Blocked Persons” maintained by OFAC and/or on any other similar list maintained by OFAC
pursuant to any authorizing statute including, but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the



93









 







Enemy Act, 50 U.S.C. App. 1 et
seq., and any Executive Order or Governmental Regulation promulgated thereunder, with the result
that the investment in the Borrower or any Subsidiary (whether directly or indirectly) is
prohibited by a Governmental Regulation, or the Loans would be in violation of a Governmental
Regulation, or (ii) the Executive Order, any related enabling legislation or any other similar
Executive Orders or (b) any Embargoed Person to have any direct or indirect interest, of any nature
whatsoever in the Borrower or any Subsidiary, with the result that the
investment in the Borrower or any Subsidiary (whether directly or indirectly) is prohibited by a
Governmental Regulation or the Loans are in violation of a Governmental Regulation.



ARTICLE X

Events of Default; Remedies




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



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




          (b) The Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in Section 10.01(a)) payable under any Loan Document,
when and as the same shall become due and payable, and such failure shall continue unremedied for a
period of five (5) Business 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 any Loan Document or any amendment or modification
of any Loan Document or waiver under such Loan Document, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been incorrect when
made or deemed made.




          (d) The Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant,
condition or agreement contained in Section 8.02(a), Section 8.03 (solely with
respect to legal existence), Section 8.14 or ARTICLE IX.




          (e) The Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant,
condition or agreement contained in Section 8.01(a), Section 8.01(b) or Section
8.01(c), and such failure shall continue unremedied for a period of fifteen (15) days.




          (f) 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 Section
10.01(a), Section 10.01(b), Section 10.01(d) or Section 10.01(e)) or
any other Loan Document, and such failure shall continue unremedied for a period of thirty (30)
days after notice thereof from the Administrative Agent to the Borrower (which notice will be given
at the request of any Lender).




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          (g) The Borrower or any 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, and any grace or cure period related thereto shall have expired.




          (h) Any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits, subject to any applicable
grace or cure period, the holder or holders of such Material Indebtedness or any trustee or
agent on its or their behalf to cause such Material Indebtedness to become due, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled
maturity or require the Borrower or any Restricted Subsidiary to make an offer in respect thereof.




          (i) 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 thirty (30) days
or an order or decree approving or ordering any of the foregoing shall be entered.




          (j) 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 Section 10.01(i), (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; or any stockholder of the Borrower shall make any request or
take any action for the purpose of calling a meeting of the stockholders of the Borrower to
consider a resolution to dissolve and wind-up the Borrower’s affairs.




          (k) (i) One or more judgments for the payment of money in an aggregate amount in excess of
$20,000,000 (to the extent not covered by independent third party insurance provided by insurers of
the highest claims paying rating or financial strength as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, shall be rendered against the Borrower, any Restricted Subsidiary or any
combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive
days during which execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor or judgment creditors to attach or levy upon any assets of the Borrower or
any Restricted Subsidiary to enforce any such judgment.




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




          (m) An ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when
taken together with all other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$20,000,000 in the aggregate.




          (n) A Change in Control shall occur.




     Section 10.02 Remedies.



          (a) In the case of an Event of Default other than one described in Section 10.01(i) or
Section 10.01(j), at any time thereafter during the continuance of such Event of Default,
the Administrative Agent may, and at the request of the Majority Lenders, shall, by notice to the
Borrower, take either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments 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 and the Guarantors accrued
hereunder and under the Loan Documents (including, without limitation, the payment of cash
collateral to secure the LC Exposure as provided in Section 2.09(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice
of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and
each Guarantor; and in case of an Event of Default described in Section 10.01(i) or
Section 10.01(j), the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and the other
obligations of the Borrower and the Guarantors accrued hereunder and under the other Loan Documents
(including, without limitation, the payment of cash collateral to secure the LC Exposure as
provided in Section 2.09(j)), shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Borrower and each Guarantor.




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




          (c) All proceeds realized from the liquidation or other disposition of Collateral or otherwise
received after maturity of the Loans, whether by acceleration or otherwise, shall be applied:




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




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




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




                    (iv) fourth, pro rata to payment of (A) principal outstanding on the Loans, (B) Secured
Obligations referred to in clause (b) of the definition of Secured Obligations owing to a Secured
Hedging Agreement Counterparty, (C) Secured Obligations referred to in clause (c) of the definition
of Secured Obligations owing to a Treasury Management Counterparty, and (D) cash collateral to be
held by the Administrative Agent to secure the LC Exposure;




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




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



ARTICLE XI

The Agents




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




     Section 11.02 Duties and Obligations of Administrative Agent. The Administrative Agent shall have no
duties or obligations except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is continuing (the use of
the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent
is not intended to connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law; rather, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative relationship between
independent contracting parties), (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except as provided in Section
11.03, and (c) except as expressly set forth herein, the Administrative Agent shall have no
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty
to ascertain or inquire



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into (i) any statement, warranty or representation made in or in connection
with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or
other document delivered hereunder or under any other Loan Document or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants, agreements or other terms
or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in ARTICLE VI or
elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the
Administrative Agent or as to those
conditions precedent expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the financial or other
condition of the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any
failure by the Borrower or any other Person (other than itself) to perform any of its obligations
hereunder or under any other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein. For purposes of determining
compliance with the conditions specified in ARTICLE VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the
Administrative Agent shall have received written notice from such Lender prior to the proposed
closing date specifying its objection thereto.



     Section 11.03 Action by Administrative Agent. The Administrative Agent shall have no duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is
required to exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section
12.02) and in all cases the Administrative Agent shall be fully justified in failing or
refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written
instructions from the Majority Lenders or the Lenders, as applicable, (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the
Lenders against any and all liability and expenses which may be incurred by it by reason of taking
or continuing to take any such action. The instructions as aforesaid and any action taken or
failure to act pursuant thereto by the Administrative Agent shall be binding on all of the Lenders.
If a Default has occurred and is continuing, then the Administrative Agent shall take such action
with respect to such Default as shall be directed by the requisite Lenders in the written
instructions (with indemnities) described in this Section 11.03, provided that,
unless and until the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default as it shall deem advisable in the best interests of the Lenders. In
no event, however, shall the Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this Agreement, the Loan
Documents or applicable law. If a Default has occurred and is continuing, neither the Syndication
Agent nor any Co-Documentation Agent shall have any obligation to perform any act in respect
thereof. 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 Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as



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provided in Section
12.02), and otherwise the Administrative Agent shall not be liable for any action taken or not
taken by it hereunder or under any other Loan Document or under any other document or instrument
referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS
OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.



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



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



     Section 11.06 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance
of a successor Administrative Agent as provided in this Section 11.06, the Administrative
Agent may resign at any time by notifying the Lenders, the Issuing Banks and the Borrower, and the
Administrative Agent may be removed at any time with or without cause by the Majority Lenders.
Upon any such resignation or removal, the Majority Lenders shall have the right, in consultation
with the Borrower, to appoint a successor. If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within thirty (30) days after the
retiring Administrative Agent gives notice of its resignation or removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders and the
Issuing Banks, appoint a successor Administrative Agent which shall be a bank with an office in 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



99









 







otherwise agreed between the Borrower and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this ARTICLE XI and
Section 12.03 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.



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



     Section 11.08 No Reliance. Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent, any other Agent, any Issuing Bank or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also
acknowledges that it will, independently and without reliance upon the Administrative Agent, any
other Agent, any Issuing Bank or any other Lender and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any related agreement or
any document furnished hereunder or thereunder. The Agents shall not be required to keep
themselves informed as to the performance or observance by the Borrower or any of its Subsidiaries
of this Agreement, the Loan Documents or any other document referred to or provided for herein or
to inspect the Properties or books of the Borrower or its Subsidiaries. Except for notices,
reports and other documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, neither the Agents nor the Arrangers shall have any duty or
responsibility to provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower (or any of its Affiliates) which may come into the
possession of such Agent or Arranger or any of its Affiliates. In this regard, each Lender
acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the
Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or
any Loan Document. Each other party hereto will consult with its own legal counsel to the extent
that it deems necessary in connection with the Loan Documents and the matters contemplated therein.



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



          (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Secured Obligations that are owing and unpaid and to
file such other documents as may be necessary or advisable in order to have the




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claims of the
Lenders and the Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the Administrative Agent
under Section 12.03) allowed in such judicial proceeding; and




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



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



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




     Section 11.10 Authority of Administrative Agent to Release Collateral and Liens. Each Lender and each
Issuing Bank hereby authorizes the Administrative Agent to release any Collateral that is permitted
to be sold or released pursuant to the terms of the Loan Documents. Each Lender and each Issuing
Bank hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the
Borrower’s sole cost and expense, any and all releases of Liens, termination statements,
assignments or other documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is permitted by the
terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.



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



ARTICLE XII

Miscellaneous




     Section 12.01 Notices.



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





               (i) if to the Borrower, to it at the following:



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Eagle Rock Energy Partners, L.P.

16701 Greenspoint Park Drive, Suite 200

Houston, Texas 77060

Attention: Alfredo Garcia

Phone: (281) 408-1204

Fax: (281) 408-1399

Email: a.garcia@eaglerockenergy.com





               With a copy to:


Natural Gas Partners

125 East John Carpenter Freeway, Suite 600

Irving, Texas 75062

Attention: Christopher Ray

Fax: (972) 432-1441





               (ii) if to the Administrative Agent or the Issuing Bank, as follows:


Wachovia Capital Markets, LLC

301 South College Street

NC5562

Charlotte, North Carolina 28288

Attention: Leanne Phillips

Phone: (704) 374-6278

Fax: (704) 383-6647

Email: leanne.phillips@wachovia.com





               With a copy to:


Wachovia Bank, National Association

1525 W.W.T. Harris Blvd.

Charlotte, North Carolina 28262

Attention: Syndication Agency Services

Fax: (704) 590-3481





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



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




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




     Section 12.02 Waivers; Amendments.



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




          (b) Neither this Agreement nor any provision hereof nor any Security Instrument nor any
provision thereof may be waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the
Administrative Agent with the consent of the Majority Lenders; provided that no such
agreement shall (i) increase the Commitment of any Lender without the written consent of such
Lender, (ii) increase the Borrowing Base without the written consent (or deemed consent pursuant to
Section 2.08(c)(iii)) of each Lender, decrease or maintain the Borrowing Base without the
consent (or deemed consent pursuant to Section 2.08(c)(iii)) of the Required Lenders, or
modify in any manner Section 2.08 without the consent of each Lender, (iii) reduce the
principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, or reduce any other Secured Obligations hereunder or under any other
Loan Document, without the written consent of each Lender affected thereby, (iv) postpone the
scheduled date of payment or prepayment of the principal amount of any Loan or LC Disbursement, or
any interest thereon, or any fees payable hereunder, or any other Secured Obligations hereunder or
under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or
postpone or extend the Termination Date without the written consent of each Lender affected
thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter
the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi)
waive or amend Section 8.14 or change the definition of the terms “Domestic Subsidiary”,
“Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent
of each Lender, (vii) release any Guarantor (except as set forth in the Guaranty and Collateral
Agreement), release all or substantially all of the Collateral (other than as provided in
Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less than


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80%, without the written consent of each Lender, or (viii) change any of the provisions of this
Section 12.02(b) or the definitions of “Required Lenders” or “Majority Lenders” or any
other provision hereof specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any determination or grant
any consent hereunder or any other Loan Documents, without the written consent of each Lender;
provided further that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent, any Issuing Bank or the Swingline Lender hereunder or
under any other Loan Document without the prior written consent of the Administrative Agent, such
Issuing Bank or the Swingline Lender as the case may be.
Notwithstanding the foregoing, any supplement to Schedule 7.14 (Subsidiaries) shall be
effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked
as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.




     Section 12.03 Expenses, Indemnity; Damage Waiver.



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




          (b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGERS, EACH ISSUING BANK AND EACH LENDER,
AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN
“INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY
COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY




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INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER
OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF
ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER
OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY
AN 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, OR
(B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE,
NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE,
TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY,
(x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL,
GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF
OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED
OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY




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CONDITION IN CONNECTION WITH THE
LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING
RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER,
WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION,
ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF
TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT
ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED
EXPENSES (i) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE OR
BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR (ii) ARISE SOLELY BY REASON OF CLAIMS BETWEEN THE ADMINISTRATIVE AGENT AND LENDERS OR
BY THEIR SHAREHOLDERS AGAINST SUCH PERSONS.




          (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the
Agents, the Arrangers, any Issuing Bank or the Swingline Lender under Section 12.03(a) or
(b), but without affecting such payment obligations of the Borrower, each Lender severally
agrees to pay to such Agents, Arranger, Issuing Bank, Swingline Lender, as the case may be, such
Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against such Agent, Arranger, Issuing Bank or Swingline Lender in its
capacity as such.




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




          (e) All amounts due under this Section 12.03 shall be payable upon written demand
therefor.




     Section 12.04 Assignments and Participations.



          (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) the




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




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



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





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




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




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




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



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




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




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



          (c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent or any
Issuing Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations and (C) the
Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and obligations under
this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve
any amendment, modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the proviso to Section
12.02 that affects such Participant. In addition, such




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agreement must provide that the
Participant be bound by the provisions of Section 12.03. Subject to Section
12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of
Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b). To
the extent permitted by law, each Participant also shall be entitled to the benefits of Section
12.08 as though it were a Lender, provided that such Participant agrees to be subject
to Section 4.01(c) as though it were a Lender.





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



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




          (e) Notwithstanding any other provisions of this Section 12.04, no transfer or
assignment of the interests or obligations of any Lender or any grant of participations therein
shall be permitted if such transfer, assignment or grant would require the Borrower and the
Guarantors to file a registration statement with the SEC or to qualify the Loans under the “Blue
Sky” laws of any state.




     Section 12.05 Survival; Revival; Reinstatement.



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




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of the Letters of Credit and the Commitments
or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.




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




     Section 12.06 Counterparts; Integration; Effectiveness.



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




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




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




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



     Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender
and each of its Affiliates is hereby authorized at any time and from time



110









 







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



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



          (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL
LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE
ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.




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




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




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




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



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



112









 







so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own confidential
information.



     Section 12.12 Interest Rate Limitation. It is the intention of the parties hereto that each Lender shall
conform strictly to usury laws applicable to it. Accordingly, if the Transactions contemplated
hereby would be usurious as to any Lender under laws applicable to it (including the laws of the
United States of America or any other jurisdiction whose laws may be mandatorily applicable to such
Lender notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into
in connection with or as security for the Secured Obligations, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any of the Loan
Documents or agreements or otherwise in connection with the Loans shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall be canceled
automatically and if theretofore paid shall be credited by such Lender on the principal amount of
the Secured Obligations (or, to the extent that the principal amount of the Secured Obligations
shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and
(ii) in the event that the maturity of the Loans is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that constitutes interest
under law applicable to any Lender may never include more than the maximum amount allowed by such
applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of the Secured
Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been
or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or
agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall,
to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and
spread throughout the stated term of the Loans until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant
to this Section 12.12 and (ii) in respect of any subsequent interest computation period the
amount of interest otherwise payable to such Lender would be less than the amount of interest
payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total
amount of interest payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed without giving effect
to this Section 12.12.



     Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY
TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ
THIS AGREEMENT AND IS FULLY



113









 







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



     Section 12.14 Collateral Matters; Hedging Agreements; Treasury Management Agreements. Notwithstanding
anything to the contrary contained herein, the terms and provisions of this Agreement shall not
apply to any Hedging Agreements, except to the extent necessary for all Secured Hedging Agreements
and Treasury Management Agreements to be secured by the Security Instruments on a pari passu basis
with other Indebtedness and for the proceeds from the Security Instruments to be applied as set
forth in Section 10.02(c) hereof. No Lender or Affiliate of a Lender shall have any voting
rights under any Loan Document as a result of the existence of obligations owed to it under any
such Secured Hedging Agreements or Treasury Management Agreements.



     Section 12.15 No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement
of the Lenders to make Loans and the Issuing Banks to issue, amend, renew or extend Letters of
Credit hereunder are solely for the benefit of the Borrower, and no other Person (including,
without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor,
supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under
any other Loan Document against the Administrative Agent, any other Agent, any Issuing Bank or any
Lender for any reason whatsoever. There are no third party beneficiaries.



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



[SIGNATURES BEGIN NEXT PAGE]




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



	 	 	 	 	 	 	 
	BORROWER:	 	EAGLE ROCK ENERGY PARTNERS, L.P.
	 	 	By:	 	Eagle Rock Energy GP, L.P.
	 

	 	 	 	By:
	 	Eagle Rock Energy G&P, LLC
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Alfredo Garcia
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Alfredo Garcia
	 

	 	 	 	 	 	Senior Vice President, Corporate
	 

	 	 	 	 	 	Development and Chief Financial Officer






Signature Page to Credit Agreement




 









 





	 	 	 	 	 
	ADMINISTRATIVE AGENT	 	WACHOVIA BANK, NATIONAL ASSOCIATION,
	and LENDER	 	as Administrative Agent
and Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Leanne S. Phillips
	 

	 	 	 	 
	 

	 	Name:
	 	Leanne S. Phillips
	 

	 	Title:
	 	Director






Signature Page to Credit Agreement




 









 





	 	 	 	 	 
	SYNDICATION AGENT	 	BANK OF AMERICA, N.A.,
	and LENDER	 	as Syndication Agent and Lender
	 
	 	 	 	 
	 

	 	By:
	 	Jeffrey H. Rathkamp
	 

	 	 	 	 
	 

	 	Name:
	 	Jeffrey H. Rathkamp
	 

	 	Title:
	 	Managing Director






Signature Page to Credit Agreement




 









 





	 	 	 	 	 
	CO-DOCUMENTATION AGENT	 	HSH NORDBANK AG, NEW YORK BRANCH,
	and LENDER	 	as Co-Documentation Agent and Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Tony K. Muoser
	 

	 	 	 	 
	 

	 	Name:
	 	Tony K. Muoser
	 

	 	Title:
	 	Senior Vice President
	 

	 	 	 	HSH Nordbank AG, New York Branch
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Rohan Singh
	 

	 	 	 	 
	 

	 	Name:
	 	Rohan Singh
	 

	 	Title:
	 	Vice President
	 

	 	 	 	HSH Nordbank AG, New York Branch






Signature Page to Credit Agreement




 









 





	 	 	 	 	 
	CO-DOCUMENTATION AGENT	 	THE ROYAL BANK OF SCOTLAND plc,
	and LENDER	 	as Co-Documentation Agent and Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Mark Lumpkin, Jr.
	 

	 	 	 	 
	 

	 	Name:
	 	Mark Lumpkin, Jr.
	 

	 	Title:
	 	Vice President






Signature Page to Credit Agreement





 










 





	 	 	 	 	 
	CO-DOCUMENTATION AGENT	 	BNP PARIBAS,
	and LENDER	 	as Co-Documentation Agent and Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Betsy Jocher
	 

	 	 	 	 
	 

	 	Name:
	 	Betsy Jocher
	 

	 	Title:
	 	Director
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Larry Robinson
	 

	 	 	 	 
	 

	 	Name:
	 	Larry Robinson
	 

	 	Title:
	 	Director





Signature Page to Credit Agreement



 









 







	 	 	 	 	 
	LENDER:	 	Comerica Bank

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Juli Bieser
	 

	 	 	 	 
	 

	 	Name:
	 	Juli Bieser
	 

	 	Title:
	 	Senior Vice President






Signature Page to Credit Agreement



 









 







	 	 	 	 	 
	LENDER:	 	Calyon New York Branch

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Sharada Manne
	 

	 	 	 	 
	 

	 	Name:
	 	Sharada Manne
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Tom Byargeon
	 

	 	 	 	 
	 

	 	Name:
	 	Tom Byargeon
	 

	 	Title:
	 	Managing Director





Signature Page to Credit Agreement



 









 






	 	 	 	 	 
	LENDER:	 	The Bank of Nova Scotia

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Andrew Ostrov
	 

	 	 	 	 
	 

	 	Name:
	 	Andrew Ostrov
	 

	 	Title:
	 	Director






Signature Page to Credit Agreement



 









 







	 	 	 	 	 
	LENDER:	 	Union Bank of California, N.A.

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Scott Gildea
	 

	 	 	 	 
	 

	 	Name:
	 	Scott Gildea
	 

	 	Title:
	 	Vice President





Signature Page to Credit Agreement



 









 







	 	 	 	 	 
	LENDER:	 	Compass Bank

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Murray Brasseux
	 

	 	 	 	 
	 

	 	Name:
	 	Murray Brasseux
	 

	 	Title:
	 	Executive Vice President






Signature Page to Credit Agreement





 












 





	 	 	 	 	 
	LENDER:	 	    Sterling Bank
	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jeff A. Forbis
	 

	 	 	 	 
	 

	 	Name:
	 	Jeff A. Forbis
	 

	 	Title:
	 	Senior Vice President
	 

	 	 	 	Sterling Bank






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	Credit Suisse, Cayman Islands Branch

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Vanessa Gomez
	 

	 	 	 	 
	 

	 	Name:
	 	Vanessa Gomez
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Morenikeji Ajayi
	 

	 	 	 	 
	 

	 	Name:
	 	Morenikeji Ajayi
	 

	 	Title:
	 	Associate






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	LEHMAN BROTHERS COMMERICAL BANK
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Brian McNany
	 

	 	 	 	 
	 

	 	Name:
	 	Brian McNany
	 

	 	Title:
	 	Authorized Signatory






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	    UBS Loan Finance LLC
	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Mary E. Evans
	 

	 	 	 	 
	 

	 	Name:
	 	Mary E. Evans
	 

	 	Title:
	 	Associate Director
	 

	 	 	 	Banking Products
	 

	 	 	 	Services, US
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Irja R. Otsa
	 

	 	 	 	 
	 

	 	Name:
	 	Irja R. Otsa
	 

	 	Title:
	 	Associate Director
	 

	 	 	 	Banking Products
	 

	 	 	 	Services, US






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	    U.S. Bank National Association
	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Justin M. Alexander
	 

	 	 	 	 
	 

	 	Name:
	 	Justin M. Alexander
	 

	 	Title:
	 	Vice President






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	    GUARANTY BANK
	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jim R. Hamilton
	 

	 	 	 	 
	 

	 	Name:
	 	Jim R. Hamilton
	 

	 	Title:
	 	Senior Vice President






Signature Page to Credit Agreement




 









 







	 	 	 	 	 
	LENDER:	 	Wells Fargo Bank, National Association

	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Doug McDowell
	 

	 	 	 	 
	 

	 	Name:
	 	Doug McDowell
	 

	 	Title:
	 	Vice President






Signature Page to Credit Agreement