Document:

ex10_18.htm

    
      

    

    
      EXHIBIT
10.18

       

       

      
        
          

        

         

         

      

      AMENDED
AND RESTATED

      SENIOR
REVOLVING CREDIT AGREEMENT

      

      dated
as of April 9, 2009

      

      among

      

      ROSETTA
RESOURCES INC.,

      as
Borrower,

      

      BNP
PARIBAS,

      as
Administrative Agent,

      

      WELLS
FARGO BANK, N.A.

      and

      UNION
BANK OF CALIFORNIA, N.A.,

      as
Co-Syndication Agents,

      

      COMPASS
BANK

      and

      BANK
OF MONTREAL,

      as
Co-Documentation Agents

      

      and

      

      THE
LENDERS PARTY HERETO

      

      

      
        
          

        

         

         

      

      BNP
PARIBAS SECURITIES CORP.

      

      Sole
Lead Arranger and Sole Bookrunner

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      TABLE
OF CONTENTS

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	 
      	 
      	 
      	
                                          Page

                                        
	 
      	 
      	 
      	 
      
	
                                          ARTICLE
      I

                                        
	
                                          DEFINITIONS
      AND ACCOUNTING MATTERS

                                        
	 
      	 
      	 
      	 
      
	
                                          Section
      1.01

                                        	 
      	
                                          Terms
      Defined Above

                                        	
                                          1

                                        
	
                                          Section
      1.02

                                        	 
      	
                                          Certain
      Defined Terms

                                        	
                                          1

                                        
	
                                          Section
      1.03

                                        	 
      	
                                          Types
      of Loans and Borrowings

                                        	
                                          22

                                        
	
                                          Section
      1.04

                                        	 
      	
                                          Terms
      Generally; Rules of Construction

                                        	
                                          22

                                        
	
                                          Section
      1.05

                                        	 
      	
                                          Accounting
      Terms and Determinations; GAAP

                                        	
                                          23

                                        
	 
      	 
      	 
      	 
      
	
                                          ARTICLE
      II

                                        
	
                                          THE
      CREDITS

                                        
	 
      	 
      	 
      	 
      
	
                                          Section
      2.01

                                        	 
      	
                                          Commitments.

                                        	
                                          23

                                        
	
                                          Section
      2.02

                                        	 
      	
                                          Loans
      and Borrowings.

                                        	
                                          24

                                        
	
                                          Section
      2.03

                                        	 
      	
                                          Requests
      for Borrowings

                                        	
                                          25

                                        
	
                                          Section
      2.04

                                        	 
      	
                                          Interest
      Elections.

                                        	
                                          26

                                        
	
                                          Section
      2.05

                                        	 
      	
                                          Funding
      of Borrowings.

                                        	
                                          28

                                        
	
                                          Section
      2.06

                                        	 
      	
                                          Termination
      and Reduction of Aggregate Maximum Credit Amounts.

                                        	
                                          29

                                        
	
                                          Section
      2.07

                                        	 
      	
                                          Borrowing
      Base.

                                        	
                                          29

                                        
	
                                          Section
      2.08

                                        	 
      	
                                          Letters
      of Credit.

                                        	
                                          32

                                        
	 
      
	
                                          ARTICLE
      III

                                        
	
                                          PAYMENTS
      OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

                                        
	 
      	 
      	 
      	 
      
	
                                          Section
      3.01

                                        	 
      	
                                          Repayment
      of Loans

                                        	
                                          37

                                        
	
                                          Section
      3.02

                                        	 
      	
                                          Interest.

                                        	
                                          37

                                        
	
                                          Section
      3.03

                                        	 
      	
                                          Alternate
      Rate of Interest

                                        	
                                          38

                                        
	
                                          Section
      3.04

                                        	 
      	
                                          Prepayments.

                                        	
                                          38

                                        
	
                                          Section
      3.05

                                        	 
      	
                                          Fees.

                                        	
                                          40

                                        
	 
      
	
                                          ARTICLE
      IV

                                        
	
                                          PAYMENTS;
      PRO RATA TREATMENT; SHARING OF SET-OFFS

                                        
	 
      	 
      	 
      	 
      
	
                                          Section
      4.01

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

                                        	
                                          41

                                        
	
                                          Section
      4.02

                                        	 
      	
                                          Presumption
      of Payment by the Borrower

                                        	
                                          42

                                        
	
                                          Section
      4.03

                                        	 
      	
                                          Payments
      and Deductions; Defaulting Lenders.

                                        	
                                          42

                                        
	
                                          Section
      4.04

                                        	 
      	
                                          Disposition
      of Proceeds

                                        	
                                          45

                                        
	 
      
	
                                          ARTICLE
      V

                                        
	
                                          INCREASED
      COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

                                        
	 
      	 
      	 
      	 
      
	
                                          Section
      5.01

                                        	 
      	
                                          Increased
      Costs.

                                        	
                                          45

                                        
	
                                          Section
      5.02

                                        	 
      	
                                          Break
      Funding Payments

                                        	
                                          46

                                        
	
                                          Section
      5.03

                                        	 
      	
                                          Taxes.

                                        	
                                          46

                                        
	
                                          Section
      5.04

                                        	 
      	
                                          Mitigation
      Obligations; Replacement of Lenders.

                                        	
                                          47

                                        
	
                                          Section
      5.05

                                        	 
      	
                                          Illegality

                                        	
                                          48

                                        

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          i

          
            

          

        

        
           

        

      

       

      
        
          
            
              
                
                  
                    	
                            ARTICLE
      VI

                          
	
                            CONDITIONS
      PRECEDENT

                          
	 
      	 
      	 
      	 
      
	
                            Section
      6.01

                          	 
      	
                            Effective
      Date

                          	
                            48

                          
	
                            Section
      6.02

                          	 
      	
                            Each
      Credit Event

                          	
                            51

                          
	 
      
	
                            ARTICLE
      VII

                          
	
                            REPRESENTATIONS
      AND WARRANTIES

                          
	 
      	 
      	 
      	 
      
	
                            Section
      7.01

                          	 
      	
                            Organization;
      Powers

                          	
                            52

                          
	
                            Section
      7.02

                          	 
      	
                            Authority;
      Enforceability

                          	
                            52

                          
	
                            Section
      7.03

                          	 
      	
                            Approvals;
      No Conflicts

                          	
                            52

                          
	
                            Section
      7.04

                          	 
      	
                            Financial
      Condition; No Material Adverse Change.

                          	
                            53

                          
	
                            Section
      7.05

                          	 
      	
                            Litigation.

                          	
                            54

                          
	
                            Section
      7.06

                          	 
      	
                            Environmental
      Matters

                          	
                            55

                          
	
                            Section
      7.07

                          	 
      	
                            Compliance
      with the Laws and Agreements; No Defaults.

                          	
                            55

                          
	
                            Section
      7.08

                          	 
      	
                            Investment
      Company Act

                          	
                            55

                          
	
                            Section
      7.09

                          	 
      	
                            Taxes

                          	
                            55

                          
	
                            Section
      7.10

                          	 
      	
                            ERISA.

                          	
                            55

                          
	
                            Section
      7.11

                          	 
      	
                            Disclosure;
      No Material Misstatements

                          	
                            56

                          
	
                            Section
      7.12

                          	 
      	
                            Insurance

                          	
                            57

                          
	
                            Section
      7.13

                          	 
      	
                            Restriction
      on Liens

                          	
                            57

                          
	
                            Section
      7.14

                          	 
      	
                            Subsidiaries

                          	
                            57

                          
	
                            Section
      7.15

                          	 
      	
                            Location
      of Business and Offices

                          	
                            57

                          
	
                            Section
      7.16

                          	 
      	
                            Properties;
      Titles, Etc.

                          	
                            57

                          
	
                            Section
      7.17

                          	 
      	
                            Maintenance
      of Properties

                          	
                            58

                          
	
                            Section
      7.18

                          	 
      	
                            Gas
      Imbalances, Prepayments

                          	
                            59

                          
	
                            Section
      7.19

                          	 
      	
                            Marketing
      of Production

                          	
                            59

                          
	
                            Section
      7.20

                          	 
      	
                            Swap
      Agreements

                          	
                            59

                          
	
                            Section
      7.21

                          	 
      	
                            Use
      of Loans and Letters of Credit

                          	
                            59

                          
	
                            Section
      7.22

                          	 
      	
                            Solvency

                          	
                            60

                          
	 
      
	
                            ARTICLE
      VIII

                          
	
                            AFFIRMATIVE
      COVENANTS

                          
	 
      	 
      	 
      	 
      
	
                            Section
      8.01

                          	 
      	
                            Financial
      Statements; Ratings Change; Other Information

                          	
                            60

                          
	
                            Section
      8.02

                          	 
      	
                            Notices
      of Material Events

                          	
                            63

                          
	
                            Section
      8.03

                          	 
      	
                            Existence;
      Conduct of Business

                          	
                            64

                          
	
                            Section
      8.04

                          	 
      	
                            Payment
      of Obligations

                          	
                            64

                          
	
                            Section
      8.05

                          	 
      	
                            Performance
      of Obligations under Loan Documents

                          	
                            64

                          
	
                            Section
      8.06

                          	 
      	
                            Operation
      and Maintenance of Properties

                          	
                            64

                          
	
                            Section
      8.07

                          	 
      	
                            Insurance

                          	
                            65

                          
	
                            Section
      8.08

                          	 
      	
                            Books
      and Records; Inspection Rights

                          	
                            65

                          
	
                            Section
      8.09

                          	 
      	
                            Compliance
      with Laws

                          	
                            65

                          
	
                            Section
      8.10

                          	 
      	
                            Environmental
      Matters.

                          	
                            66

                          
	
                            Section
      8.11

                          	 
      	
                            Further
      Assurances.

                          	
                            67

                          
	
                            Section
      8.12

                          	 
      	
                            Reserve
      Reports.

                          	
                            67

                          
	
                            Section
      8.13

                          	 
      	
                            Title
      Information.

                          	
                            68

                          
	
                            Section
      8.14

                          	 
      	
                            Additional
      Collateral; Additional Guarantors.

                          	
                            69

                          

                  

                

              

            

          

        

      

      
        
           

        

        
          ii

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        	
                                Section
      8.15

                              	 
      	
                                ERISA
      Compliance

                              	
                                71

                              
	
                                Section
      8.16

                              	 
      	
                                Unrestricted
      Subsidiaries

                              	
                                71

                              
	
                                Section
      8.17

                              	 
      	
                                Marketing
      Activities

                              	
                                71

                              
	
                                Section
      8.18

                              	 
      	
                                Swap
      Agreement Termination

                              	
                                71

                              
	 
      
	
                                ARTICLE
      IX

                              
	
                                NEGATIVE
      COVENANTS

                              
	 
      	 
      	 
      	 
      
	
                                Section
      9.01

                              	 
      	
                                Financial
      Covenants.

                              	
                                72

                              
	
                                Section
      9.02

                              	 
      	
                                Debt

                              	
                                72

                              
	
                                Section
      9.03

                              	 
      	
                                Liens

                              	
                                73

                              
	
                                Section
      9.04

                              	 
      	
                                Dividends,
      Distributions and Redemptions.

                              	
                                73

                              
	
                                Section
      9.05

                              	 
      	
                                Investments,
      Loans and Advances

                              	
                                74

                              
	
                                Section
      9.06

                              	 
      	
                                Designation
      and Conversion of Restricted and Unrestricted Subsidiaries; Debt of
      Unrestricted Subsidiaries.

                              	
                                76

                              
	
                                Section
      9.07

                              	 
      	
                                Nature
      of Business; International Operations

                              	
                                76

                              
	
                                Section
      9.08

                              	 
      	
                                Limitation
      on Leases

                              	
                                77

                              
	
                                Section
      9.09

                              	 
      	
                                Proceeds
      of Notes

                              	
                                77

                              
	
                                Section
      9.10

                              	 
      	
                                ERISA
      Compliance

                              	
                                77

                              
	
                                Section
      9.11

                              	 
      	
                                Sale
      or Discount of Receivables

                              	
                                78

                              
	
                                Section
      9.12

                              	 
      	
                                Mergers,
      Etc

                              	
                                78

                              
	
                                Section
      9.13

                              	 
      	
                                Sale
      of Properties

                              	
                                78

                              
	
                                Section
      9.14

                              	 
      	
                                Environmental
      Matters

                              	
                                79

                              
	
                                Section
      9.15

                              	 
      	
                                Transactions
      with Affiliates

                              	
                                79

                              
	
                                Section
      9.16

                              	 
      	
                                Subsidiaries

                              	
                                79

                              
	
                                Section
      9.17

                              	 
      	
                                Negative
      Pledge Agreements; Dividend Restrictions

                              	
                                79

                              
	
                                Section
      9.18

                              	 
      	
                                Gas
      Imbalances, Take-or-Pay or Other Prepayments

                              	
                                80

                              
	
                                Section
      9.19

                              	 
      	
                                Swap
      Agreements

                              	
                                80

                              
	
                                Section
      9.20

                              	 
      	
                                Gas
      Sales Contracts

                              	
                                81

                              
	 
      
	
                                ARTICLE
      X

                              
	
                                EVENTS
      OF DEFAULT; REMEDIES

                              
	 
      	 
      	 
      	 
      
	
                                Section
      10.01

                              	 
      	
                                Events
      of Default

                              	
                                82

                              
	
                                Section
      10.02

                              	 
      	
                                Remedies
      of Lenders.

                              	
                                84

                              
	 
      
	
                                ARTICLE
      XI

                              
	
                                THE
      AGENTS

                              
	 
      	 
      	 
      	 
      
	
                                Section
      11.01

                              	 
      	
                                Appointment;
      Powers

                              	
                                85

                              
	
                                Section
      11.02

                              	 
      	
                                Duties
      and Obligations of Administrative Agent

                              	
                                85

                              
	
                                Section
      11.03

                              	 
      	
                                Action
      by Administrative Agent

                              	
                                86

                              
	
                                Section
      11.04

                              	 
      	
                                Reliance
      by Administrative Agent

                              	
                                87

                              
	
                                Section
      11.05

                              	 
      	
                                Subagents

                              	
                                87

                              
	
                                Section
      11.06

                              	 
      	
                                Resignation
      or Removal of Administrative Agent

                              	
                                87

                              
	
                                Section
      11.07

                              	 
      	
                                Agents
      as Lenders

                              	
                                88

                              
	
                                Section
      11.08

                              	 
      	
                                No
      Reliance.

                              	
                                88

                              
	
                                Section
      11.09

                              	 
      	
                                Administrative
      Agent May File Proofs of Claim

                              	
                                89

                              
	
                                Section
      11.10

                              	 
      	
                                Authority
      of Administrative Agent to Release Collateral and Liens

                              	
                                89

                              
	
                                Section
      11.11

                              	 
      	
                                The
      Arranger and other Agents

                              	
                                89

                              

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          iii

          
            

          

        

        
           

        

      

      

      
        
          
            	
                    ARTICLE
      XII

                  
	
                    MISCELLANEOUS

                  
	 
      	 
      	 
      	 
      
	
                    Section
      12.01

                  	 
      	
                    Notices.

                  	
                    90

                  
	
                    Section
      12.02

                  	 
      	
                    Waivers;
      Amendments.

                  	
                    90

                  
	
                    Section
      12.03

                  	 
      	
                    Expenses,
      Indemnity; Damage Waiver.

                  	
                    92

                  
	
                    Section
      12.04

                  	 
      	
                    Successors
      and Assigns.

                  	
                    94

                  
	
                    Section
      12.05

                  	 
      	
                    Survival;
      Revival; Reinstatement.

                  	
                    97

                  
	
                    Section
      12.06

                  	 
      	
                    Counterparts;
      Integration; Effectiveness.

                  	
                    98

                  
	
                    Section
      12.07

                  	 
      	
                    Severability

                  	
                    98

                  
	
                    Section
      12.08

                  	 
      	
                    Right
      of Setoff

                  	
                    98

                  
	
                    Section
      12.09

                  	 
      	
                    GOVERNING
      LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

                  	
                    99

                  
	
                    Section
      12.10

                  	 
      	
                    Headings

                  	
                    100

                  
	
                    Section
      12.11

                  	 
      	
                    Confidentiality

                  	
                    100

                  
	
                    Section
      12.12

                  	 
      	
                    Interest
      Rate Limitation

                  	
                    100

                  
	
                    Section
      12.13

                  	 
      	
                    EXCULPATION
      PROVISIONS

                  	
                    101

                  
	
                    Section
      12.14

                  	 
      	
                    Collateral
      Matters; Swap Agreements

                  	
                    102

                  
	
                    Section
      12.15

                  	 
      	
                    Reaffirmation
      and Grant of Security Interest

                  	
                    102

                  
	
                    Section
      12.16

                  	 
      	
                    No
      Third Party Beneficiaries

                  	
                    102

                  
	
                    Section
      12.17

                  	 
      	
                    USA
      Patriot Act Notice

                  	
                    102

                  

          

        

      

      
        
           

        

        
          iv

          
            

          

        

        
           

        

      

      ANNEXES,
EXHIBITS AND SCHEDULES

      

      
        
          
            	
                    Annex
      I

                  	 
      	
                    List
      of Maximum Credit Amounts

                  
	 
      	 
      	 
      
	
                    Exhibit
      A

                  	 
      	
                    Form
      of Note

                  
	
                    Exhibit
      B

                  	 
      	
                    Form
      of Borrowing Request

                  
	
                    Exhibit
      C

                  	 
      	
                    Form
      of Interest Election Request

                  
	
                    Exhibit
      D

                  	 
      	
                    Form
      of Compliance Certificate

                  
	
                    Exhibit
      E

                  	 
      	
                    Security
      Instruments

                  
	
                    Exhibit
      F

                  	 
      	
                    Form
      of Assignment and Assumption

                  
	
                    Exhibit
      G

                  	 
      	
                    Form
      of Reserve Report Certificate

                  
	 
      	 
      	 
      
	
                    Schedule
      1.02

                  	 
      	
                    Designated
      Gulf Coast Properties

                  
	
                    Schedule
      7.05

                  	 
      	
                    Litigation

                  
	
                    Schedule
      7.14

                  	 
      	
                    Subsidiaries
      and Partnerships; Unrestricted Subsidiaries

                  
	
                    Schedule
      7.18

                  	 
      	
                    Gas
      Imbalances

                  
	
                    Schedule
      7.19

                  	 
      	
                    Marketing
      Contracts

                  
	
                    Schedule
      7.20

                  	 
      	
                    Swap
      Agreements

                  
	
                    Schedule
      9.05

                  	 
      	
                    Investments

                  

          

        

      

      
        
           

        

        
          v

          
            

          

        

        
           

        

      

      THIS AMENDED AND RESTATED SENIOR
REVOLVING CREDIT AGREEMENT dated as of April 9, 2009, is among:
Rosetta Resources
Inc., a corporation 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 BNP Paribas (in
its individual capacity, “BNP
Paribas”), as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative
Agent”); Wells Fargo Bank, N.A. and Union Bank of California, N.A. as
co-syndication agents (each, in such capacity, together with its successors in
such capacity, a “Syndication Agent”);
and Compass Bank and Bank of Montreal as co-documentation agents (each, in such
capacity, together with its successors in such capacity, a “Documentation
Agent”).

      

      R E C I T A L
S

      

      A.          The
Borrower, the Administrative Agent and the other financial institutions named
and defined therein as lenders and agents are parties to that certain Credit
Agreement dated July 7, 2005 (as amended from time to time, the “Existing Credit
Agreement”).

      

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

      

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

      

      ARTICLE
I

      Definitions
and Accounting Matters

      

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

      

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

      

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

      

      “Acceptable
Collateral” means (a) letters of credit having terms satisfactory to the
Administrative Agent issued by a 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, (b)  cash prepayment for gas purchases and
(c)  such other forms of collateral as may be approved by the Required
Lenders.

      

      “Adequate Assurance of
Performance” means sufficient security in the form, amount and for the
term reasonably acceptable to the Borrower, including but not limited to, a
standby irrevocable letter of credit, a prepayment, a security interest in an
asset or a performance bond or guaranty.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      “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 the LIBO Rate for such Interest Period multiplied by the Statutory
Reserve Rate.

      

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

      

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

      

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

      

      “Agents” means,
collectively, the Administrative Agent, and any syndication agent, documentation
agent or similar agent that hereafter becomes a party hereto, and “Agent” shall
mean either the Administrative Agent or such other agent, as the context
requires.

      

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

      

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

      

      “Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Federal Funds Effective Rate in effect on such
day plus 1⁄2 of 1%, (c) the Adjusted LIBO Rate for a one month Interest Period on
such day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1.5% and (d) the Reference Bank Cost of Funds
Rate.  Any change in the Alternate Base Rate due to a change in the
Prime Rate, the Federal Funds Effective Rate, the Adjusted LIBO Rate or the
Reference Bank Cost of Funds Rate shall be effective from and including the
effective date of such change in the Prime Rate, the Federal Funds Effective
Rate, the Adjusted LIBO Rate or the Reference Bank Cost of Funds Rate,
respectively.

      

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

      

      
        
          
            	
                    Borrowing
      Base Utilization Grid

                  	 
	
                    Borrowing
      Base Utilization Percentage

                  	 	
                    <25%

                  	 	 	
                    325% but
      

                    <50% 
        

                  	 	 	
                    350% but
      

                    <75% 
        

                  	 	 	 	375	%
	
                    Eurodollar
      Loans

                  	 	 	2.250	%	 	 	2.500	%	 	 	2.750	%	 	 	3.000	%
	
                    ABR
      Loans

                  	 	 	0.750	%	 	 	1.000	%	 	 	1.250	%	 	 	1.500	%

          

        

      

      

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

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      “Applicable
Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I; provided that if the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect.

      

      “Approved
Counterparty” means (a) any Lender or any Affiliate of a Lender, (b) any
other Person whose long term senior unsecured debt rating is A/A2 by S&P or
Moody’s (or their equivalent) or higher or (c) any other Person from time to
time approved by the Required Lenders.

      

      “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. and (c) any other independent
petroleum engineers reasonably acceptable to the Administrative Agent and the
Borrower.

      

      “Approved Purchaser”
means a Person whose long-term senior unsecured debt rating from S&P is at
least “BBB” or whose obligations are unconditionally guaranteed pursuant to a
guaranty of payment by a Person (the “Approved Purchaser
Guarantor”) whose long-term senior unsecured debt rating from S&P is
at least “BBB”, in either case at the time such Gas Sales Contract is entered
into, provided that if such Person’s (or Approved Purchaser Guarantor’s, if
applicable) long-term senior unsecured debt rating from S&P subsequently is
downgraded below “BBB”, the Person will cease to be an Approved Purchaser until
such time as such Person’s (or such Approved Purchaser Guarantor’s, if
applicable) long-term senior unsecured debt rating is upgraded to “BBB” or
above.

      

      “Arranger” means BNP Paribas Securities
Corp., in its capacity as the sole lead arranger and sole bookrunner
hereunder.

      

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

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

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

      

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

      

      “Borrowing Base” means
at any time an amount equal to the amount determined in accordance with Section
2.07, as the same may be adjusted from time to time pursuant to Section 2.07(e),
Section 8.13(c), Section 8.18 or Section 9.13(e).

      

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

      

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

      

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

      

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

      

      “Calpine” means
Calpine Corporation, a Delaware corporation.

      

      “Calpine Gas
Contracts” means all Gas Sales Contracts between the Borrower or any of
its Subsidiaries and Calpine or any of its Subsidiaries.

      

      “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 having a fair
market value in excess of $2,500,000.

      

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

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

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

      

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

      

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

      

      “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, (d) non cash gains or
losses under FAS 133 resulting from the net change in Borrower’s and the
Consolidated Restricted Subsidiaries’ mark to market portfolio of commodity
price risk management activities during that period, (e) non cash gains or
losses under FAS 143 resulting from the net change in the fair value of asset
retirement obligations (including plugging and abandonment liabilities) during
that period, (f) non cash gains or losses under FAS 123(R) resulting from the
stock based compensation adjustments and (g) any gains or losses attributable to
writeups or writedowns of assets, including ceiling test writedowns; and
provided further that for purposes of calculating the financial ratios in
Section 9.01, if the Borrower or any Consolidated Restricted Subsidiary shall
acquire or dispose of any material Property or a Subsidiary shall be
redesignated as either an Unrestricted Subsidiary or a Restricted Subsidiary, in
any case, during the period of four fiscal quarters ending on the last day of
the fiscal quarter immediately preceding the date of determination for which
financial statements are available and up to and including the date of the
consummation of such acquisition, disposition or redesignation, then
Consolidated Net Income shall be calculated after giving pro forma effect to such
acquisition (including the revenues of the Properties acquired), merger,
disposition or redesignation, as if such acquisition, merger, disposition or
redesignation had occurred on the first day of such period.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

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

      

      “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 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.

      

      “Cost of Funds” means
with respect to any Lender, the rate per annum quoted by such Lender to the
Administrative Agent as contemplated in the Reference Bank Cost of Funds Rate as
its cost of funds with respect to a Borrowing Request, as determined solely by
such Lender in its reasonable discretion based upon such factors as such Lender
shall deem appropriate from time to time, including market, regulatory and
liquidity conditions; provided that such rate is not necessarily the cost to
such Lender of funding the specific Borrowing Request.

      

      “Debt” means, for any
Person, the sum of the following (without duplication): (a) all obligations of
such Person for borrowed money or evidenced by bonds, bankers’ acceptances,
debentures, notes or other similar instruments; (b) all obligations of such
Person (whether contingent or otherwise) in respect of letters of credit, surety
or other bonds and similar instruments; (c) all accounts payable and all accrued
expenses, liabilities or other obligations of such Person to pay the deferred
purchase price of Property or services that are more than ninety (90) days past
the date of invoice other than those which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (d) all obligations under Capital Leases; (e) all
obligations under Synthetic Leases; (f) all Debt (as defined in the other
clauses of this definition) of others secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others to
insure a creditor against a loss; (i) obligations to deliver commodities, goods
or services, including, without limitation, Hydrocarbons, in consideration of
one or more advance payments made more than one month in advance of the month in
which the commodities, goods or services are to be delivered, other than gas
balancing arrangements in the ordinary course of business; (j) obligations to
pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Debt of a partnership for which
such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l)
Disqualified Capital Stock; and (m) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment.  The Debt of any Person shall include
all obligations of such Person of the character described above to the extent
such Person remains legally liable in respect thereof notwithstanding that any
such obligation is not included as a liability of such Person under
GAAP.  For purposes of determining compliance with the financial
covenants contained in this Agreement, any election by the Borrower to measure
an item of Debt using fair value (as permitted by Statement of Financial
Accounting Standards No. 159 or any similar accounting standard) shall be
disregarded and such determination shall be made as if such election had not
been made.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

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

      

      “Defaulting Lender”
means any Lender, as determined by the Administrative Agent, that has (a) failed
to fund any portion of its Loans or participations in Letters of Credit within
three Business Days of the date required to be funded by it hereunder, (b)
notified the Borrower, the Administrative Agent, the Issuing Bank or any Lender
in writing that it does not intend to comply with any of its funding obligations
under this Agreement or has made a public statement to the effect that it does
not intend to comply with its funding obligations under this Agreement or under
other agreements in which it commits to extend credit, (c) failed, within three
Business Days after request by the Administrative Agent or the Borrower, to
confirm that it will comply with the terms of this Agreement relating to its
obligations to fund prospective Loans and participations in then outstanding
Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent
or any other Lender any other amount required to be paid by it hereunder within
three Business Days of the date when due, unless the subject of a good faith
dispute, or (e) (i) become or is insolvent or has a parent company that has
become or is insolvent or (ii) become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment or has a
parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or
appointment.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      “Designated Gulf Coast
Dispositions” means, collectively, the sale, transfer, conveyance or
other disposition, whether in one or more transactions, by the Borrower or its
Restricted Subsidiaries of any of the Designated Gulf Coast
Properties.

      

      “Designated Gulf Coast
Properties” means, collectively, the Designated Gulf of Mexico Properties
and the Designated Sabine Lake Properties.

      

      “Designated Gulf of Mexico
Properties” means those certain Oil and Gas Properties of the Borrower or
its Restricted Subsidiaries described in Part 1 of  Schedule
1.02.

      

      “Designated Sabine Lake
Properties” means those certain Oil and Gas Properties of the Borrower or
its Restricted Subsidiaries described in Part 2 of Schedule 1.02.

      

      “Determination Date”
has the meaning assigned such term in Section 2.04(f).

      

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

      

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

      

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

      

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

      

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

      

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

      

      “Environmental Laws”
means any and all Governmental Requirements pertaining in any way to health,
safety, the environment or the preservation or reclamation of natural resources,
in effect in any and all jurisdictions in which the Borrower or any 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 Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 (“RCRA”),
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as amended, and
other environmental conservation or protection Governmental
Requirements.  The term “oil” shall have the
meaning specified in OPA, the terms “hazardous substance”
and “release”
(or “threatened
release”) have the meanings specified in CERCLA and the terms “solid waste” and
“disposal” (or
“disposed”)
have the meanings specified in RCRA; provided, however, that (a) in the event
either OPA, CERCLA or RCRA 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”
or “disposal” which is broader than that specified in either OPA, CERCLA or
RCRA, such broader meaning shall apply.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

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

      

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

      

      “ERISA Affiliate”
means each trade or business (whether or not incorporated) which together with
the Borrower or 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.

      

      “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 other than pursuant to clause (c) of the
definition of Alternate Base Rate.

      

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

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      “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, 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 real property leases, operating
agreements, joint venture agreements, oil and gas partnership agreements, oil
and gas leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits
agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are usual and customary in the oil and gas business
and are for claims which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP, provided that any such Lien referred to in this clause
does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Restricted
Subsidiary or materially impair the value of such Property subject thereto; (e)
Liens 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
that do not secure any Debt 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, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature
incurred in the ordinary course of business; (h) Liens arising under Uniform
Commercial Code financing filings regarding operating leases which are not
Synthetic Leases entered into by Borrower and Restricted Subsidiaries in the
ordinary course of business covering only the Property under such lease; 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, the 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 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).

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      “Exposure” means, for
any day, the volume of physical gas flow delivered during the previous day
multiplied by the contract price therefor.

      

      “FAS 123R” means
Statement of Financial Accounting Standard 123R (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

      

      “FAS 133” means
Statement of Financial Accounting Standard 133 (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

      

      “FAS 143” means
Statement of Financial Accounting Standard 143 (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

      

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

      

      “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 Borrower.

      

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

      

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

      

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

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

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

      

      “Gas Sales Contract”
means any contract for the purchase and sale of gas.

      

      “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, the
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,
collectively:

      

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Operating LP;

              

      

      

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Offshore, LLC;

              

      

      

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Operating GP, LLC;

              

      

      

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Holdings, LLC;

              

      

      

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Gathering LP;

              

      

      

      
        	
                 
      

              	
                ·

              	
                each
      Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b);
      and

              

      

      

      
        	
                 
      

              	
                ·

              	
                any
      other Person that must guarantee the Indebtedness in order for the
      Borrower to comply with Section
9.04(b)(ii)(D).

              

      

      

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

      

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

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      “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.  Unless otherwise indicated herein, each reference to the term
“Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower and the
Restricted Subsidiaries.

      

      “Hydrocarbons” means
oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
or separated therefrom.  Unless otherwise indicated herein, each
reference to the term “Hydrocarbons” shall mean Hydrocarbons of the Borrower and
the Restricted Subsidiaries.

      

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

      

      “Indemnified Taxes”
means Taxes other than Excluded Taxes.

      

      “Initial Borrowing
Base” has the meaning assigned such term in Section 2.07(a).

      

      “Initial Reserve
Report” means the report of Netherland, Sewell & Associates, Inc.
dated as of January 20, 2009, with respect to certain Oil and Gas Properties of
the Borrower and its Subsidiaries as of December 31, 2008.

      

      “Intercreditor
Agreement” means that certain Intercreditor Agreement dated as of even
date herewith, by and among the Administrative Agent, the administrative agent
under the Second Lien Term Loan Documents and the Borrower, as amended, modified
or replaced from time to time.

      

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

      

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

      

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

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      “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.

      

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

      

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

      

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

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      “LC Commitment” at any
time means Five
Million Dollars ($5,000,000).

      

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

      

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

      

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

      

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

      

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

      

      “LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page
of such service, or any successor to or substitute for such service, providing
rate quotations comparable to those currently provided on such page of such
service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest
Period.  In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with
respect to such Eurodollar Borrowing for such Interest Period shall be the rate
(rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar
deposits of an amount comparable to such Eurodollar Borrowing and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

      

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

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

      

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

      

      “Material Adverse
Effect” means a material adverse change in, or material adverse effect on
(a) the business, operations, Property or condition (financial or otherwise) of
the Borrower and the Restricted Subsidiaries taken as a whole, (b) the ability
of the Borrower 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, the Issuing Bank or any Lender under any
Loan Document.

      

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

      

      “Maturity Date” means
July 1,
2012.

      

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

      

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

      

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

      

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

      

      “Non-Defaulting
Lender” means, at any time, each Lender that is not a Defaulting Lender
at such time.

      

      “Non-Recourse Debt”
means any Debt of any Unrestricted Subsidiary, in each case in respect of which:
(a) the holder or holders thereof (i) shall have recourse only to, and shall
have the right to require the obligations of such Unrestricted Subsidiary to be
performed, satisfied, and paid only out of, the Property of such Unrestricted
Subsidiary and/or one or more of its Subsidiaries (but only to the extent that
such Subsidiaries are Unrestricted Subsidiaries) and/or any other Person (other
than Borrower and/or any Restricted Subsidiary) and (ii) shall have no direct or
indirect recourse (including by way of guaranty, support or indemnity) to the
Borrower or any Restricted Subsidiary or to any of the Property of Borrower or
any Restricted Subsidiary, whether for principal, interest, fees, expenses or
otherwise; and (b) the terms and conditions relating to the non-recourse nature
of such Debt are in form and substance reasonably acceptable to the
Administrative Agent.

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

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

      

      “Oil and Gas
Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereafter 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.  Unless otherwise
indicated herein, each reference to the term “Oil and Gas Properties” shall mean
Oil and Gas Properties of the Borrower and the Restricted
Subsidiaries.

      

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

      

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

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

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

      

      “Purchaser” has the
meaning assigned such term in Section 9.20.

      

      “Proved Oil and Gas
Properties” means Oil and Gas Properties containing Proved
Reserves.

      

      “Proved Reserves”
means “Proved Reserves” which shall include “Proved Developed Producing
Reserves”, “Proved Developed Nonproducing Reserves” and “Proved Undeveloped
Reserves” each as defined in the Definitions for Oil and Gas Reserves
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

      

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

      

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

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      “Reference Bank Cost of Funds
Rate” means the rate determined pursuant to Section 2.04(f).

      

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

      

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

      

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

      

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

      

      “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 Aggregate Maximum
Credit Amounts; and at any time while any Loans or LC Exposure is outstanding,
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding aggregate principal amount of the Loans or participation interests
in such Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)) (the “Outstanding
Amounts”); provided that, if any one
Lender has at least sixty-six and two-thirds percent (66-2/3%) of the
Outstanding Amounts, then “Required Lenders” shall mean, at any time while any
Loans or LC Exposure is outstanding, at least two Lenders having at least the
greater of (i) seventy-five percent (75%) of the Outstanding Amounts and (ii)
10% plus the percentage of the Outstanding Amounts held by the Lender holding
the greater amount of the Outstanding Amounts.

      

      “Reserve Report” means
a report, in form and substance reasonably satisfactory to the Administrative
Agent and otherwise prepared in accordance with Section 8.12, 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, based
upon the pricing assumptions consistent with SEC reporting requirements at the
time.

      

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

      

      “Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
Property) with respect to any Equity Interests in the Borrower or any of its
Restricted 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 Restricted Subsidiaries
or any option, warrant or other right to acquire any such Equity Interests in
the Borrower or any of its Restricted Subsidiaries.

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

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

      

      “Second Lien Notes”
means Second Lien Term Notes in an amount of up to $100,000,000 issued pursuant
to the Second Lien Term Loan Agreement, together with all amendments,
modifications, replacements, extensions and rearrangements thereof permitted by
Section 9.04(b).

      

      “Second Lien Term Loan
Agreement” means that certain Amended and Restated Second Lien Term Loan
Credit Agreement dated as of the date hereof among the Borrower, BNP Paribas, as
the Second Lien Administrative Agent, and the lenders party thereto, together
with all amendments, modifications and supplements thereto permitted by Section
9.04(b).

      

      “Second Lien Term Loan
Documents” means the Second Lien Term Loan Agreement, the Second Lien
Notes and any “Loan Documents” (as defined therein), in each case, together with
all amendments, modifications and supplements thereto permitted by Section
9.04(b).

      

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

      

      “Seller” has the
meaning assigned such term in Section 9.20.

      

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

      

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

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      
        
           

        

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

      

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

      

      “Total Debt” means, at
any date, all Debt of the Borrower and the Consolidated Restricted Subsidiaries
on a consolidated basis, excluding non-cash obligations under FAS 133 and FAS
143.

      

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

      

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

      

      “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 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.

      

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

      

      Section
1.04          Terms Generally; Rules of
Construction.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” as used in this Credit Agreement shall be
deemed to be followed by the phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires otherwise (a) any definition of
or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person’s successors and assigns (subject to
the restrictions contained in the Loan Documents), (d) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word
“from” means “from and including” and the word “to” means “to and including” and
(f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Annexes, Exhibits
and Schedules to, this Agreement.  No provision of this Agreement or
any other Loan Document shall be interpreted or construed against any Person
solely because such Person or its legal representative drafted such
provision.

      
        
           

        

        
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      Section
1.05           Accounting Terms and
Determinations; GAAP.  Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be
furnished to the Administrative Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements except for changes in which the Borrower’s independent
certified public accountants concur and which are disclosed to the
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 Required 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.

      

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

      

      (b)         
 On the Effective Date (or as soon as practicable with respect to
(ii)):

      

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

      

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

      
        
           

        

        
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      It is the
intent of the parties hereto that this Agreement amends and restates in its
entirety the Existing Credit Agreement and re-evidences the obligations of the
Borrower outstanding thereunder.  The commitments of the lenders under
the Existing Credit Agreement are reallocated among the Lenders under this
Agreement as set forth on Annex I.  This Agreement does not constitute
a novation of the obligations and liabilities under the Existing Credit
Agreement or evidence repayment of any such obligations and
liabilities.  All loans, letters of credit and other indebtedness,
obligations and liabilities outstanding under the Existing Credit Agreement on
such date shall continue to constitute Loans, Letters of Credit and other
Indebtedness, obligations and liabilities under this Agreement.

      

      Section
2.02           Loans and
Borrowings.

      

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

      

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

      

      (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 $100,000 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 $100,000 and not
less than $1,000,000; provided
that an ABR Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section
2.08(e).  Borrowings of more than one Type may be outstanding at the
same time, provided that there shall not at any time be more than a total of
8 Eurodollar
Borrowings outstanding.  Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.

      

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

      
        
           

        

        
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      Section
2.03           Requests for
Borrowings.  To request a Borrowing, the Borrower shall notify
the Administrative Agent of such request by telephone, fax (or transmit by
electronic communication, if arrangements for doing so have been approved by the
Administrative Agent) (a) in the case of a Eurodollar Borrowing, not later than
12:00 noon, New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00
noon, New York City time, on the Business Day of the proposed Borrowing;
provided that no such notice shall be required for any deemed request of an ABR
Borrowing to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e).  Each such telephonic (or electronic communication)
Borrowing Request shall be irrevocable and all Borrowings shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in substantially the form of Exhibit B and signed by the
Borrower.  Each such telephonic, electronic communication and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:

      

      (i)          the
aggregate amount of the requested Borrowing;

      

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

      

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

      

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

      

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

      

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

      

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

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      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, the
amount of such Lender’s Loan to be made as part of the requested Borrowing and
if the Borrowing Request is for an ABR Borrowing, then the Administrative Agent
shall request that each Lender provide its Cost of Funds rate consistent with
the procedures set forth in Section 2.04(f).

      

      Section
2.04            Interest
Elections.

      

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

      

      (b)           Interest Election
Requests.  To make an election pursuant to this Section 2.04,
the Borrower shall notify the Administrative Agent of such election by
telephone, fax (or transmit by electronic communication, if arrangements for
doing so have been approved by the Issuing Bank) 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 (or electronic
communication) Interest Election Request shall be irrevocable, and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in substantially the form of Exhibit C and
signed by the Borrower.

      

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

      

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

      

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

      

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

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

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

      

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

      

      (d)           Notice to Lenders by the
Administrative Agent.  Promptly following receipt of an
Interest Election Request, the Administrative Agent shall advise each Lender of
the details thereof, such Lender’s portion of each resulting Borrowing and if
there are ABR Loans outstanding or if the Interest Election Request is for an
ABR Borrowing, then the Administrative Agent shall request that each Lender
provide its Cost of Funds rate consistent with the procedures set forth in the
Section 2.04(f).

      

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

      

      (f)            
Reference Bank Cost of
Funds.

      

      (i)          For
each Business Day (A) that the Administrative Agent receives a Borrowing Request
or an Interest Election Request for an ABR Loan (including any request for a
Eurodollar Borrowing converted to an ABR Borrowing pursuant to Section 3.03)
(each individually, an “ABR Request”), on or
prior to 12:00 noon, New York City time on such Business Day and (B) that an ABR
Loan is outstanding under this Agreement and the Alternate Base Rate
communicated by the Administrative Agent on the previous Business Day has
changed, on or prior to 10:00 a.m., New York City time, on each such Business
Day, the Administrative Agent shall communicate the Alternate Base Rate on such
Business Day (without reference to the Reference Bank Cost of Funds Rate (as
defined below)) to each Lender.  Each Lender shall notify the
Administrative Agent no later than 1:00 p.m., New York City time, on such
Business Day an ABR Request is received by the Administrative Agent, and 11:00
a.m., New York City time, on each Business Day that an ABR Loan is outstanding
(in each instance, a “Determination Date”),
whether such Lender’s Cost of Funds exceeds the Alternate Base Rate for such
Business Day (without reference to the Reference Bank Cost of Funds Rate (as
defined below)).   Any Lender that does not provide notice to the
Administrative Agent with respect to its Cost of Funds prior to 1:00 p.m. or
11:00 a.m., New York City time, on such Business Day, as applicable, shall be
deemed to have confirmed to the Administrative Agent that such Lender’s Cost of
Funds does not exceed the Alternate Base Rate without reference to the Reference
Bank Cost of Funds Rate.

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

      (ii)          If
sixty percent (60%) or more of the Lenders with a Commitment as of the
applicable Determination Date (the “Cost of Funds Calculation
Threshold”) notify the Administrative Agent that their Cost of Funds
exceeds the Alternate Base Rate communicated by the Administrative Agent, then
the Administrative Agent shall calculate the “Reference Bank Cost of Funds Rate”
which shall be calculated as the simple average of the Cost of Funds of the
Lenders; provided that, any Lender which does not submit a Cost of Funds Rate
shall be deemed to have confirmed to the Administrative Agent that such Lender’s
Cost of Funds does not exceed the Alternate Base Rate without reference to the
Reference Bank Cost of Funds Rate.  The Alternate Base Rate
communicated by the Administrative Agent as of such Determination Date (without
reference to the Reference Bank Cost of Funds) shall be used for each such
Lender which does not submit a Cost of Funds Rate to calculate the Reference
Bank Cost of Funds Rate.  If the Cost of Funds Calculation Threshold
is not met, then the Reference Bank Cost of Funds Rate shall not be calculated
and shall be disregarded for the purposes of calculating the Alternate Base Rate
as of such Determination Date. For purposes of determining the Reference Bank
Cost of Funds Rate, each Lender and the Administrative Agent may provide notice
by electronic communications pursuant to procedures approved by the
Administrative Agent.

      

      (iii)        On
any Determination Date that a Reference Bank Cost of Funds Rate is calculated,
the Administrative Agent shall calculate the Reference Bank Cost of Funds Rate
in accordance with the procedures set forth in subsection (ii) above and shall
provide such rate to the Borrower and each Lender no later than 2:00 p.m., New
York City time for any ABR Request, and 12:00 noon, New York City time on each
Business Day that an ABR Loan is outstanding, without identifying the underlying
rates submitted by the Lenders.

      

      Section
2.05           Funding of
Borrowings.

       

      (a)           
Funding by
Lenders.  Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 2:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the
Lenders.  The Administrative Agent will make such Loans available to
the Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with the Administrative Agent in New York,
New York and designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the Issuing Bank.  Nothing herein shall be deemed to obligate any
Lender to obtain the funds for its Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

      

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

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

      Section
2.06            Termination and Reduction of
Aggregate Maximum Credit Amounts.

      

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

      

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

      

      (i)           The
Borrower may at any time terminate, or from time to time reduce, the Aggregate
Maximum Credit Amounts; provided that (a) each reduction of the Aggregate
Maximum Credit Amounts shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (b) the Borrower shall not terminate
or reduce the Aggregate Maximum Credit Amounts if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 3.04(c), the total
Revolving Credit Exposures would exceed the total Commitments.

      

      (ii)          The
Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each notice
delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be
irrevocable; provided that a notice of termination of the Aggregate Maximum
Credit Amounts delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied.  Any termination or reduction of the Aggregate Maximum
Credit Amounts shall be permanent and may not be reinstated.  Each
reduction of the Aggregate Maximum Credit Amounts shall be made ratably among
the Lenders in accordance with each Lender’s Applicable Percentage.

      

      Section
2.07           Borrowing
Base.

      

      (a)          
 Initial
Borrowing Base.  For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be $375,000,000.  Notwithstanding
the foregoing, the Borrowing Base may be subject to further adjustments from
time to time pursuant to Section 2.07(e), Section 8.13(c), Section 8.18 or
Section 9.13.

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

      (b)         
  Scheduled
and Interim Redeterminations.  The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined
Borrowing Base shall become effective and applicable to the Borrower, the
Agents, the Issuing Bank and the Lenders on April 1st and October 1st of each
year, commencing October 1, 2009.  In
addition, 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, one time during any 12-month period,
each elect to cause the Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim
Redetermination”) in accordance with this Section 2.07.

      

      (c)         
  Scheduled
and Interim  Redetermination Procedure.

      

      (i)           Each
Scheduled Redetermination and each Interim Redetermination shall be effectuated
as follows:  Upon receipt by the Administrative Agent of (c) the
Reserve Report and the Reserve Report Certificate, and (d) 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 Required 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 its sole discretion, propose
a new Borrowing Base (the “Proposed Borrowing
Base”) based upon such information and such other information (including,
without limitation, the status of title information with respect to the Oil and
Gas Properties as described in the Engineering Reports and the existence of any
other Debt) as the Administrative Agent deems appropriate in its sole discretion
and consistent with its normal and customary oil and gas lending criteria as it
exists at the particular time.  In no event shall the Proposed
Borrowing Base exceed the Aggregate Maximum Credit Amounts.

      

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

      

      (A)           in
the case of a Scheduled Redetermination (i) 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 (ii) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and

      

      (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.

      
        
           

        

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

      

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

      

      (i)          in
the case of a Scheduled Redetermination, (2) 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 (3) 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, 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 2.07(e), Section 8.13(c), Section
8.18 or Section 9.13, whichever occurs first.  Notwithstanding the
foregoing, no Scheduled Redetermination or Interim Redetermination shall become
effective until the New Borrowing Base Notice related thereto is received by the
Borrower.

      
        
           

        

        
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      (e)        
   Reduction of the Borrowing
Base Upon Consummation of Designated Gulf Coast
Dispositions.  Upon the consummation of a Designated Gulf Coast
Disposition at any time during the period from the Effective Date to but
excluding the next Scheduled Redetermination Date, the amount of the Borrowing
Base shall automatically and immediately reduce upon the closing of such sale
and the release of Liens on such Oil and Gas Properties securing this Agreement
by (i) $15,000,000 on the date that the first sale, transfer or disposition of
any of the Designated Sabine Lake Properties is consummated and (ii) $10,000,000
on the date that the first sale, transfer or disposition of any of the
Designated Gulf of Mexico Properties is consummated.

      

      (f)           
 Reduction of
Borrowing Base Upon Termination of Hedge Positions.  If the
Borrower or any Restricted Subsidiary changes the material terms of any
commodity-price Swap Agreement, terminates any such Swap Agreement or creates
any off-setting positions in respect of any hedge positions under any such Swap
Agreement (whether evidenced by a floor, put or Swap Agreement) and, as a result
thereof, the Borrower is required to give the Lenders notice in accordance with
Section 8.18, then the Borrowing Base shall be simultaneously reduced by an
amount determined by the Required Lenders not exceeding the economic
consequences of such change, termination or creation of off-setting
positions.

      

      Section
2.08            Letters of
Credit.

      

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

      

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

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

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

      

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

      

      If
requested by the Issuing Bank, the Borrower also shall submit a letter of credit
application on the Issuing Bank’s standard form in connection with any request
for a Letter of Credit; provided, in the event of any conflict between such
standard form and the terms of the Loan Documents, the terms of the Loan
Documents shall control.

      

      (c)          
 Expiration
Date.  Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (4) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, which may be provided for in such Letter of Credit, one year after such
renewal or extension) and (5) the date that is five Business Days prior to the
Maturity Date.

      

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

      
        
           

        

        
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      (e)         
  Reimbursement.  If
the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon, New York City 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., New York City 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, New York City time, on the Business Day immediately following the
day that the Borrower receives such notice; provided that if such LC
Disbursement is equal to or greater than $1,000,000, the Borrower shall, subject
to the conditions to Borrowing set forth herein, be deemed to have requested,
and the Borrower does hereby request under such circumstances, that such LC
Disbursement be financed with an ABR Borrowing 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.  If the
Borrower fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender’s Applicable Percentage
thereof.  Promptly following receipt of such notice, each Lender shall
pay to the Administrative Agent its Applicable Percentage of the payment then
due from the Borrower, in the same manner as provided in Section 2.05 with
respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the
Lenders.  Promptly following receipt by the Administrative Agent of
any payment from the Borrower pursuant to this Section 2.08(e), the
Administrative Agent shall distribute such payment to the Issuing Bank or, to
the extent that Lenders have made payments pursuant to this Section 2.08(e) to
reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their
interests may appear.  Any payment made by a Lender pursuant to this
Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other
than the funding of ABR Loans as contemplated above) shall not constitute a Loan
and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.

      

      (f)      
     Obligations
Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(6) 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, (7) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (8) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit or any Letter of Credit Agreement, or
(9) any other event or circumstance whatsoever, whether or not similar to any of
the foregoing, that might, but for the provisions of this Section 2.08(f),
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower’s obligations hereunder.  Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the part
of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised 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 compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of
Credit.

      
        
           

        

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

      

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

      

      (i)           
Replacement of the
Issuing Bank.  The Issuing Bank may be replaced at any time by
written agreement among the Borrower, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank.  One or more Lenders may
become issuers of Letters of Credit hereunder (each, an “Additional Issuing
Bank”) at any time by written agreement among the Borrower and the Issuing Banks
hereunder at such time.  The Administrative Agent shall notify the
Lenders of any such replacement or Additional 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 or addition, (1) the successor or Additional Issuing Bank shall have
all the rights and obligations of the Issuing Bank under this Agreement with
respect to Letters of Credit to be issued thereafter and (2) references herein
to the term “Issuing Bank” shall be deemed to refer to such Additional Issuing
Bank, such successor or to any previous Issuing Bank, or to such Additional
Issuing Bank, such successor and all previous Issuing Banks, as the context
shall require.  After the replacement of the Issuing Bank hereunder,
the replaced Issuing Bank shall remain a party hereto and shall continue to have
all the rights and obligations of the 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.

      
        
           

        

        
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      (j)           
 Cash
Collateralization.  If (10) any Event of Default shall occur
and be continuing and the Borrower receives notice from the Administrative Agent
or the Required Lenders demanding the deposit of cash collateral pursuant to
this Section 2.08(j), or (11) 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(h), Section 10.01(i) or Section
10.01(j).  The Borrower hereby grants to the Administrative Agent, for
the benefit of the Issuing Bank and the Lenders, an exclusive first priority and
continuing perfected security interest in and Lien on such account and all cash,
checks, drafts, certificates and instruments, if any, from time to time
deposited or held in such account, all deposits or wire transfers made thereto,
any and all investments purchased with funds deposited in such account, all
interest, dividends, cash, instruments, financial assets and other Property from
time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor.  The Borrower’s obligation to deposit
amounts pursuant to this Section 2.08(j) shall be absolute and unconditional,
without regard to whether any beneficiary of any such Letter of Credit has
attempted to draw down all or a portion of such amount under the terms of a
Letter of Credit, and, to the fullest extent permitted by applicable law, shall
not be subject to any defense or be affected by a right of set-off, counterclaim
or recoupment which the Borrower or any of its Subsidiaries may now or hereafter
have against any such beneficiary, the Issuing Bank, the Administrative Agent,
the Lenders or any other Person for any reason whatsoever.  Such
deposit shall be held as collateral securing the payment and performance of the
Borrower’s and 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 direction of the Borrower in
Investments of the type described in Section 9.05(c), 9.05(d), 9.05(e) or
9.05(f) at the Borrower’s risk and expense, such deposits shall not bear
interest.  Interest or profits, if any, on such investments shall
accumulate in such account.  Moneys in such account shall be applied
by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure at such time or, if the maturity of the Loans has been
accelerated, be applied to satisfy other obligations of the Borrower and the
Guarantors under this Agreement or the other Loan Documents.  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 Business Days after all Events of Default have been
cured or waived.

      
        
           

        

        
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      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)           
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, and including any payments in respect of a
Borrowing Base Deficiency under Section 3.04(b), then all Loans outstanding and
the aggregate LC Exposure, 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.

      

      (d)         
  Interest
Payment Dates.  Accrued interest on each Loan shall be payable
in arrears on each Interest Payment Date for such Loan and on the Termination
Date; provided that ii) interest accrued pursuant to Section 3.02(c) shall be
payable on demand, iii) 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 iv) 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.

      
        
           

        

        
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      (e)        
   Interest Rate
Computations.  All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate 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 Required Lenders that the Adjusted LIBO
Rate or LIBO Rate, as applicable, for such Interest Period will not adequately
and fairly reflect the cost to such Lenders of making or maintaining their Loans
included in such Borrowing for such Interest Period;

      

      then the
Administrative Agent shall give notice thereof to the Borrower and the Lenders
by telephone or telecopy as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (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.  Subject to any break funding costs payable
pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b),
the Borrower shall have the right to, at any time and from time to time, prepay
any Borrowing, in whole or in part.

      

      (b)           Notice and Terms of Optional
Prepayment.  The Borrower shall notify the Administrative Agent
by telephone (confirmed by telecopy) or telecopy of any prepayment hereunder (i)
in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon,
New York City time, three Business Days before the date of prepayment, or (ii)
in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New
York City time, the Business Day 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 except in connection
with a revocable commitment reduction pursuant to Section
2.06(b)(ii).  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.

      
        
           

        

        
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      (c)         
  Mandatory
Prepayments.

      

      (i)           If,
after giving effect to any termination or reduction of the Aggregate Maximum
Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures
exceeds the total Commitments, then the Borrower shall (a) prepay the Borrowings
on the date of such termination or reduction in an aggregate principal amount
equal to such excess, and (b) if any excess remains after prepaying all of the
Borrowings as a result of an LC Exposure, pay to the Administrative Agent on
behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j).

      

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

      

      (iii)        Upon
any adjustments to the Borrowing Base pursuant to Section 2.07(e), Section 8.18
or Section 9.13, if the total Revolving Credit Exposures exceeds the Borrowing
Base as adjusted, then the Borrower shall (e) prepay the Borrowings in an
aggregate principal amount equal to such excess, and (f) if any excess remains
after prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).  The
Borrower shall be obligated to make such prepayment and/or deposit of cash
collateral on the date it or any Restricted Subsidiary consummates such
disposition; provided that all payments required to be made pursuant to this
Section 3.04(c)(iii) must be made on or prior to the Termination
Date.

      

      (iv)        If,
at any time the Borrower or any Restricted Subsidiary receives net cash proceeds
from the sale, transfer or other disposition of Property or termination or
unwinding of any Swap Agreements or other hedge positions, and an Event of
Default has occurred and is continuing or a Borrowing Base Deficiency then
exists, then the Borrower shall promptly use all of such net cash proceeds (A)
in the case of an Event of Default, to prepay the Borrowings and if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such
excess to be held as cash collateral as provided in Section 2.08(j), and (B) in
the case of a Borrowing Base Deficiency, to repay the excess of the total
Revolving Credit Exposures over the Borrowing Base then in
effect.

      
        
           

        

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

      

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

      

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

      

      Section
3.05           Fees.

      

      (a)           
Commitment
Fees.  The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a commitment fee, which shall accrue at a rate
equal to 0.500% on the average daily amount of the unused amount of the
Commitment of such Lender during the period from and including the date of this
Agreement to but excluding the Termination Date.  Accrued commitment
fees shall be payable in arrears on the last day of March, 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 v) 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, vi) to the Issuing Bank a fronting fee, which
shall accrue at the rate of 0.500% 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 $125 during any quarter, and vii) to the Issuing
Bank, for its own account, its standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder.  Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the 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 the Issuing Bank pursuant to this
Section 3.05(b) shall be payable within 10 days after demand.  All
participation fees and fronting fees shall be computed on the basis of a year of
360 days, unless such computation would exceed the Highest Lawful Rate, in which
case 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).

      
        
           

        

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

      

      (d)           Borrowing Base Increase
Fees.  The Borrower agrees to pay to the Administrative Agent,
for the account of each Lender then party to this Agreement, ratably in
accordance with its Applicable Percentage, a Borrowing Base increase fee to be
agreed by the Lenders and the Borrower on the amount of any increase of the
Borrowing Base over the highest Borrowing Base previously in effect, payable on
the effective date of any such increase to the Borrowing Base.

      

      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.  Except as provided for in Section 4.03, 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, New York City time, on the date when due, in immediately available
funds, without defense, deduction, recoupment, set-off or
counterclaim.  Fees, once paid, shall be fully earned and shall not be
refundable under any circumstances.  Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  Except as provided for in Section 4.03,
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 the 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 of the Loans and unreimbursed LC Disbursements then due
hereunder, ratably (but subject to Section 4.03(b)) among the parties entitled
thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

      
        
           

        

        
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      (c)          
 Sharing of
Payments by Lenders.  If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that viii) 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 ix) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply).  The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such
participation.

      

      Section
4.02           Presumption of Payment by
the Borrower.  Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Administrative Agent for the account of the Lenders or the 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 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 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 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           Payments and Deductions;
Defaulting Lenders.

      
        
           

        

        
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      (a)           The
Borrower and the Guarantors shall each have the right, to the extent permitted
by applicable law, to setoff any Debt owed to it by any Defaulting Lender in
respect of deposit liabilities of such Defaulting Lender against amounts owed by
the Borrower to such Defaulting Lender under this Agreement, provided that the
amount of such set-off shall not exceed the amount of such Defaulting Lender’s
Revolving Credit Exposures and interest.  Further, if any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.05(b),
Section 2.08(d), Section 2.08(e) or Section 4.02, then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid in cash.

      

      (b)           If
a Defaulting Lender (or a Lender who would be a Defaulting Lender but for the
expiration of the relevant grace period) as a result of the exercise of a
set-off shall have received a payment in respect of its Revolving Credit
Exposure which results in its Revolving Credit Exposure being less than its
Applicable Percentage of the aggregate Revolving Credit Exposures, then payments
(including principal, interest and fees) to such Defaulting Lender will be
suspended until such time as all amounts due and owing to the Lenders has been
equalized in accordance with each of the Lenders respective pro rata share of
the Indebtedness.  Further, if at any time prior to the acceleration
or maturity of the Loans, the Administrative Agent shall receive any payment in
respect of principal of a Loan or a reimbursement of an LC Disbursement while
one or more Defaulting Lenders shall be party to this Agreement, the
Administrative Agent shall apply such payment first to the Borrowing(s) for
which such Defaulting Lender(s) shall have failed to fund its pro rata share
until such time as such Borrowing(s) are paid in full or each Lender (including
each Defaulting Lender) is owed its Applicable Percentage of all Loans then
outstanding.  After acceleration or maturity of the Loans, subject to
the first sentence of this Section 4.03(b), all principal will be paid ratably
as provided in Section 10.02(c).

      

      (c)           Notwithstanding
any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such
Lender is a Defaulting Lender:

      

      (i)          fees
shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 3.05.

      

      (ii)         the
Commitment of such Defaulting Lender shall not be included in determining
whether all Lenders or the Required Lenders have consented to any increases,
reaffirmations or decreases in the Borrowing Base or the Aggregate Maximum
Credit Amount; provided that no such agreement shall increase the Commitment of
any Defaulting Lender without the written consent of such Defaulting
Lender.

      

      (iii)        if
any LC Exposure exists at the time a Lender becomes a Defaulting Lender
then:

      

      (A)           all
or any part of such the Defaulting Lender’s LC Exposure shall be reallocated
among the Non-Defaulting Lenders in accordance with their respective Applicable
Percentages (calculated without regard to such Defaulting Lender’s Maximum
Credit Amount) but only to the extent (x) the sum of all Non-Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all non-Defaulting Lenders’ Commitments and (y) the
conditions set forth in Section 6.02 are satisfied at such
time;

      
        
           

        

        
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      (B)           if
the reallocation described in clause (i) above cannot, or can only partially, be
effected, then the Borrower shall within one Business Day following notice by
the Administrative Agent cash collateralize such Defaulting Lender’s LC Exposure
(after giving effect to any partial reallocation pursuant to clause (i) above)
in accordance with the procedures set forth in Section 10.02 for so long as such
LC Exposure is outstanding;

      

      (C)           if
the Borrower cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to this Section 4.03 then the Borrower shall not be required
to pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with
respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

      

      (D)           if
the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to Section
4.03(c)(iii)(A), then the fees payable to the Lenders pursuant to Section
3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
Non-Defaulting Lenders’ Applicable Percentages (calculated without regard to
such Defaulting Lender’s Maximum Credit Amount); or

      

      (E)           if
any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to Section 4.03(c)(iii), then, without prejudice to any
rights or remedies of the Issuing Bank or any Lender hereunder, all commitment
fees that otherwise would have been payable to such Defaulting Lender (solely
with respect to the portion of such Defaulting Lender’s Commitment that was
utilized by such LC Exposure) and letter of credit fees payable under Section
3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to
the Issuing Bank until such LC Exposure is cash collateralized and/or
reallocated.

      

      (d)           So
long as any Lender is a Defaulting Lender, the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure will be 100% covered by the Commitments of
the Non-Defaulting Lenders and/or cash collateral will be provided by the
Borrower in accordance with Section 4.03(c), and participating interests in any
such newly issued or increased Letter of Credit shall be allocated among
Non-Defaulting Lenders in a manner consistent with Section 2.08(d) (and
Defaulting Lenders shall not participate therein).

      

      (e)           In
the event that the Administrative Agent, the Borrower and the Issuing Bank each
agrees that a Defaulting Lender has adequately remedied all matters that caused
such Lender to be a Defaulting Lender, then the LC Exposure of the Lenders shall
be readjusted to reflect the inclusion of such Lender’s Commitment and on such
date such Lender shall purchase at par such of the Loans of the other
Lenders  as the Administrative shall determine may be necessary in
order for such Lender to hold such Loans in accordance with its Applicable
Percentage.

      
        
           

        

        
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      Section
4.04           Disposition of
Proceeds.  The Security Instruments contain an assignment by
the Borrower and/or the Guarantors unto and in favor of the Administrative Agent
for the benefit of the Lenders of all of the Borrower’s or each Guarantor’s
interest in and to production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged Property.  The Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (i) 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 (ii) 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.

      

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

      
        
           

        

        
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      (c)           Certificates.  A
certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the 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 the Issuing Bank, as the case may be, the
amount shown as due on any such certificate within 10 days after receipt
thereof.

      

      (d)           Effect of Failure or Delay
in Requesting Compensation.  Failure or delay on the part of
any Lender or the Issuing Bank to demand compensation pursuant to this Section
5.01 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right
to demand such compensation; provided that the Borrower shall not be required to
compensate a Lender or the Issuing Bank pursuant to this Section 5.01 for any
increased costs or reductions incurred more than 180 days prior to the date that
such Lender or the Issuing Bank, as the case may be, notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the Issuing Bank’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

      

      Section
5.02           Break Funding
Payments.  In the event of (a) the payment of any principal of
any Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of
any Eurodollar Loan into an ABR Loan other than on the last day of the Interest
Period applicable thereto, or (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto, 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 10
days after receipt thereof.

      

      Section
5.03           Taxes.

      

      (a)           Payments Free of
Taxes.  Any and all payments by or on account of any obligation
of the Borrower or any Guarantor under any Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower or any Guarantor shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
5.03(a)), the Administrative Agent, 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.

      
        
           

        

        
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      (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 the Issuing Bank, within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent, such Lender or the Issuing Bank, as the case may be,
on or with respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 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 the 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.

      

      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.

      
        
           

        

        
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      (b)           Replacement of
Lenders.  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, or if any Lender becomes a Defaulting Lender, then the Borrower may to the
extent not prohibited by applicable law, 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, (ii) such Lender shall have received payment of
an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 5.01 or payments required to be made
pursuant to Section 5.03, such assignment will result in a reduction in such
compensation or payments.  A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such  assignment and delegation cease to apply.

      

      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 x) such Lender shall promptly notify the Borrower and the
Administrative Agent thereof and such Lender’s obligation to make such
Eurodollar Loans shall be suspended (the “Affected Loans”)
until such time as such Lender may again make and maintain such Eurodollar Loans
and xi) 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 the
Issuing Bank to issue Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 12.02):

      
        
           

        

        
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      (a)           The
Administrative Agent, the Arranger 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 two
(2) Business Days prior to the Effective Date, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder (including, without limitation, the fees and expenses of Vinson &
Elkins L.L.P., counsel to the Administrative Agent).

      

      (b)           The
Administrative Agent shall have received a certificate of the Secretary or an
Assistant Secretary of the Borrower and each Guarantor setting forth (1)
resolutions of its board of directors with respect to the authorization of the
Borrower or such Guarantor to execute and deliver the Loan Documents to which it
is a party and to enter into the transactions contemplated in those documents,
(2) the officers of the Borrower or such Guarantor (y) who are authorized to
sign the Loan Documents to which the Borrower or such Guarantor is a party and
(z) who will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this Agreement
and the transactions contemplated hereby, (3) specimen signatures of such
authorized officers, and (4) the articles or certificate of incorporation and
bylaws (or other applicable organizational documents) of the Borrower and such
Guarantor, certified as being true and complete.  The Administrative
Agent and the Lenders may conclusively rely on such certificate until the
Administrative Agent receives notice in writing from the Borrower to the
contrary.

      

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

      

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

      

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

      

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

      

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

      

      (i)           be
reasonably satisfied that the Security Instruments create (or upon the
recordation thereof after the Effective Date will create) first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d)
and (f) of the definition thereof, but subject to the provisos at the end of
such definition) on at least 80% of the total value of the Proved Oil and Gas
Properties evaluated in the Initial Reserve Report;

      
        
           

        

        
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      (ii)         have
received certificates, together with undated, blank stock or equity powers for
each such certificate, to the extent any issued and outstanding Equity Interests
of any Guarantor is certificated; and

      

      (iii)        be
reasonably satisfied that all Property constituting security for the Second Lien
Term Loan Agreement is subject to a first priority, perfected Lien in favor of
the Administrative Agent under the Security Instruments.

      

      (h)           The
Administrative Agent shall have received an opinion of (5) Mayer Brown LLP,
special counsel to the Borrower, in form and substance reasonably acceptable to
the Administrative Agent, and (6) local counsel in each of the following states:
Texas, California,
New Mexico, Wyoming, Colorado and any other jurisdictions requested by
the Administrative Agent, in form and substance reasonably acceptable to the
Administrative Agent.

      

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

      

      (j)            
The Administrative Agent shall have received 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 Proved Oil and Gas Properties evaluated in the Initial Reserve
Report.

      

      (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 a certificate of a Responsible
Officer of the Borrower certifying that the Borrower has received all consents
and approvals required by Section 7.03.

      

      (m)           The
Administrative Agent shall have received the financial statements referred to in
Section 7.04(a) and the Initial Reserve Report accompanied by the Reserve Report
Certificate.

      

      (n)           The
Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties of the Borrower and the
Restricted Subsidiaries for each of the following
jurisdictions:  Delaware, Texas, California,
Louisiana, New Mexico, Wyoming, Colorado 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.

      

      (o)           The
Administrative Agent shall have received evidence satisfactory to it, and a
certificate of a Responsible Officer of the Borrower certifying, that on a pro
forma basis after giving effect to the proceeds of the initial funding
hereunder, the Borrower has liquidity of not less than $25,000,000, consisting
of undrawn Borrowing Base availability, cash or Investments permitted by Section
9.05(c), Section 9.05(d), Section 9.05(e) or Section 9.05(f).

      
        
           

        

        
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      (p)           The
Second Lien Term Loan Agreement is in form and substance reasonably acceptable
to the Administrative Agent and the Administrative Agent shall have received
evidence that funding under the Second Lien Term Loan Agreement has occurred, or
is occurring contemporaneously with the initial funding hereunder.

      

      (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 the Issuing Bank to issue Letters of Credit
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m., New
York City time, on April 9, 2009 (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 the 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 Credit, as applicable, such representations and warranties shall
continue to be true and correct as of such specified earlier date.

      

      (d)           The
making of such Loan or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, would not conflict with, or cause any Lender or
the Issuing Bank to violate or exceed, any applicable Governmental
Requirement.

      

      (e)           No
Change in Law shall have occurred, and no litigation shall be pending or
threatened, in each case, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

      
        
           

        

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

      

      Each
request for a Borrowing and each 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 (f).

      

      ARTICLE
VII

      Representations
and Warranties

      

      The
Borrower represents and warrants to the Lenders that:

      

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

      

      Section
7.02           Authority;
Enforceability.  The Transactions are within the Borrower’s and
each Guarantor’s corporate, company or partnership powers and have been duly
authorized by all necessary corporate, company or partnership and, if required,
stockholder, member or partner action (including, without limitation, any action
required to be taken by any class of directors of the Borrower or any other
Person, whether interested or disinterested, in order to ensure the due
authorization of the Transactions).  Each Loan Document to which the
Borrower and each Guarantor is a party has been duly executed and delivered by
the Borrower and such Guarantor and constitutes a legal, valid and binding
obligation of the Borrower and such Guarantor, as applicable, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights 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 xii) 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 (1) filings and
approvals that will have been obtained prior to the Effective Date or are
customarily obtained following an acquisition of Oil and Gas Properties, (ii)
the recording and filing of the Security Instruments as required by this
Agreement and (iii) those third party approvals or consents which, if not made
or obtained, would not cause a Default hereunder, could not reasonably be
expected to have a Material Adverse Effect or do not have an adverse effect on
the enforceability of the Loan Documents, xiii) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, xiv) 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 xv) 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).

      
        
           

        

        
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      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 as of and for the
fiscal year ended December 31, 2008,
reported on by PricewaterhouseCoopers,
independent public accountants.  Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such date and for such period in accordance with GAAP.

      

      (b)           Since
December 31,
2008, (1) there has been no event, development or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect and (2)
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
Debt (including Disqualified Capital Stock) or any contingent liabilities,
off-balance sheet liabilities or partnerships, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements.

      

      Section
7.05           Litigation.

      

      (a)           Except
as set forth on Schedule 7.05, there are no actions, suits, investigations or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Restricted Subsidiary (3) not fully covered by insurance
(except for normal deductibles) and reasonable self-insurance 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, and (4) 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.

      
        
           

        

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

      

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

      

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

      

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

      

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

      

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

      

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

      
        
           

        

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

      

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

      

      (a)           Each
of the Borrower and each 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 Restricted 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 Restricted Subsidiary, as applicable, has set aside on its
books adequate reserves in accordance with GAAP or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.  The charges, accruals and reserves on the books of
the Borrower and its Restricted Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower,
adequate.  No Tax Lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such Tax or other such
governmental charge.

      

      Section
7.10           ERISA.

      

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

      

      (b)           Each
Plan is, and has been, established and maintained in substantial compliance with
its terms, 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 (5) either a civil penalty assessed pursuant to subsections (c),
(i), (l) or (m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code or (6) breach of fiduciary duty liability damages
under section 409 of ERISA.

      
        
           

        

        
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      (d)          
 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.

      

      (e)         
  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.

      

      (f)         
  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 employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

      

      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.  No 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), taken as a whole, 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 pursuant to a notice under Section
8.02 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 Oil and Gas Properties and 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.

      
        
           

        

        
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      Section
7.12          Insurance.  The
Borrower has, and has caused all of its Restricted Subsidiaries to have, xvi)
all insurance policies sufficient for the compliance by each of them with all
material Governmental Requirements and all material agreements and xvii)
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 and xviii)
identified to the Administrative Agent the amounts and matters for which the
Borrower or its Restricted Subsidiaries have self-insurance.  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
Capital Leases creating Liens permitted by Section 9.03(c), but then only on the
Property subject of such Capital Lease), or subject to any order, judgment, writ
or decree, which either restricts or purports to restrict its ability to grant
Liens to the Administrative Agent and the Lenders on or in respect of their
Properties to secure the Indebtedness and the Loan Documents.

      

      Section
7.14           Subsidiaries.  Except
as set forth on Schedule 7.14 or as disclosed in writing to the Administrative
Agent (which shall promptly furnish a copy to the Lenders), which shall be a
supplement to Schedule 7.14, the Borrower has no Subsidiaries 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 Rosetta Resources
Inc.; and the organizational identification number of the Borrower in its
jurisdiction of organization is 3980164 (or, in each case,
as set forth in a notice delivered to the Administrative Agent pursuant to
Section 8.01(m) in accordance with Section 12.01).  The
Borrower’s principal place of business and chief executive offices are located
at the address specified in Section 12.01 (or as set forth in a notice delivered
pursuant to Section 8.01(m) and Section 12.01(c)).  Each 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 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(m)).

      

      Section
7.16           Properties; Titles,
Etc.

      

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

      
        
           

        

        
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      (b)           All
material 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 agreement, which could reasonably be expected to have a
Material Adverse Effect.

      

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

      

      (d)           All
of the Properties of the Borrower and the 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,
except for such failure as to condition or maintenance as could not be
reasonably expected to have a Material Adverse Effect.

      

      (e)           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.  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, (1) no Oil and Gas Property 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 (2) none of the wells comprising a part of the Oil and Gas Properties
(or Properties unitized therewith) of 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) of the Borrower or such Restricted Subsidiary.  All
pipelines, wells, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the Borrower
or any of its Restricted Subsidiaries that are necessary to conduct normal
operations are being maintained in a state adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Borrower or any of its Restricted Subsidiaries, in a manner consistent with the
Borrower’s or its Restricted Subsidiaries’ past practices (other than those the
failure of which to maintain in accordance with this Section 7.17 could not
reasonably be expected to have a Material Adverse Effect).

      
        
           

        

        
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      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 their Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding one 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 production sold thereunder
which is computed substantially in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the subject
Property’s delivery capacity), no material agreements exist which are not
cancelable on 60 days notice or less without penalty or detriment for the sale
of production from the Borrower’s or its Restricted Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that xix)
pertain to the sale of production at a fixed price and xx) have a maturity or
expiry date of longer than six (6) months from the date hereof.

      

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

      

      Section
7.21          Use of Loans and Letters of
Credit.  The proceeds of the Loans and the Letters of Credit
shall be used to provide working capital for exploration and production
operations, the acquisition, exploration and development of additional Oil and
Gas Properties, and for general corporate purposes.  The Borrower and
its Restricted 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
7.22           Solvency.  After
giving effect to the transactions contemplated hereby, xxi) the aggregate assets
(after giving effect to amounts that could reasonably be received by reason of
indemnity, offset, insurance or any similar arrangement), at a fair valuation,
of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate
Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt
becomes absolute and matures, xxii) each of the Borrower and the Guarantors will
not have incurred or intended to incur, and will not believe that it will incur,
Debt beyond its ability to pay such Debt (after taking into account the timing
and amounts of cash to be received by each of the Borrower and the Guarantors
and the amounts to be payable on or in respect of its liabilities, and giving
effect to amounts that could reasonably be received by reason of indemnity,
offset, insurance or any similar arrangement) as such Debt becomes absolute and
matures and xxiii) each of the Borrower and the Guarantors will not have (and
will have no reason to believe that it will have thereafter) unreasonably small
capital for the conduct of its business.

      

      ARTICLE
VIII

      Affirmative
Covenants

      

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

      

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

      

      (a)           Annual Financial
Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the 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 PricewaterhouseCoopers
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.

      

      (b)           Quarterly Financial
Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, its
unaudited 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.

      
        
           

        

        
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      (c)         
  Certificate of Financial
Officer -- Compliance.  Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of
a Financial Officer in substantially the form of Exhibit D hereto (1) 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, (2) setting forth reasonably detailed calculations demonstrating
compliance with Section 9.01 and (3) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial
statements referred to in Section 7.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate.

      

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

      

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

      

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

      
        
           

        

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

      

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

      

      (j)           
Lists of
Purchasers.  Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of Persons
purchasing Hydrocarbons from the Borrower and its Restricted Subsidiaries
constituting at least 80% of the total revenues from such purchases for the
six-month period ending on the date of such Reserve Report (such list to include
and specify in descending order the largest purchasers of Hydrocarbons for such
period based on the percentage of total revenues that each such purchaser
represents); and during the continuance of a Default, promptly upon the request
therefor by the Administrative Agent or any Lender, a list of all Persons
purchasing Hydrocarbons from the Borrower and its Restricted Subsidiaries for
the six-month period ending on the date of such request.

      

      (k)           Notice of Sales of Oil and
Gas Properties.  In the event the Borrower or any Restricted
Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or
Gas Properties or any Equity Interests in any Subsidiary in accordance with
Section 9.13, prior written notice of such disposition, the price thereof and
the anticipated date of closing and any other details thereof requested by the
Administrative Agent or any Lender.

      

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

      

      (m)           Information Regarding
Borrower and Guarantors.  Prompt written notice (and in any
event within ten (10) days prior thereto) of any change (4) in the Borrower or
any Guarantor’s corporate name or in any trade name used to identify such Person
in the conduct of its business or in the ownership of its Properties, (5) in the
location of the Borrower or any Guarantor’s chief executive office or principal
place of business, (6) in the Borrower or any Guarantor’s identity or corporate
structure or in the jurisdiction in which such Person is incorporated or formed,
(7) in the Borrower or any Guarantor’s jurisdiction of organization or such
Person’s organizational identification number in such jurisdiction of
organization, and (8) in the Borrower or any Guarantor’s federal taxpayer
identification number.

      

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

      
        
           

        

        
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      (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 organic document of the Borrower or any
Restricted Subsidiary.

      

      (p)           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 and any reports or other information required to be filed with respect
thereto under the Code or 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.

      

      (q)           Delivery of Information
Electronically.  Notices to the Administrative Agent and the
Lenders under this Section 8.01 may be delivered or furnished by electronic
communications pursuant to procedures approved by the Administrative Agent,
including broadcast email to the Lenders that the available information has been
made available to the Lenders on either the Borrower’s “Intralinks” page or the
Borrower’s website at www.rosettaresources.com.  Notwithstanding
the foregoing, any such information included in materials otherwise filed with
the SEC may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date on which the Borrower posts such documents, or
provides a link thereto, and notifies Administrative Agent of such posting or
link.

      

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

      

      (a)           the
occurrence of any Default;

      

      (b)           the
filing or commencement of, or the threat in writing of, any action, suit,
proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof not previously disclosed in writing to the Lenders or any material
adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in
liability in excess of $5,000,000, not fully
covered by insurance, subject to normal deductibles; and reasonable
self-insurance;

      

      (c)           Calpine
shall fail to make any payment in respect of any Calpine Gas Contract or post
any Acceptable Collateral required by the terms thereof within one Business Day
of when the same shall become due and payable, whether at the due date thereof,
upon acceleration, termination or otherwise; and

      

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

      
        
           

        

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

      

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

      

      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 Restricted Subsidiaries before the same shall become delinquent
or in default, except where xxiv) the validity or amount thereof is being
contested in good faith by appropriate proceedings, xxv) the Borrower or such
Restricted Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and xxvi) 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
Restricted Subsidiary.

      

      Section
8.05          Performance of Obligations
under Loan Documents.  The Borrower will pay the Notes
according to the reading, tenor and effect thereof, and the Borrower will, and
will cause each 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, except in each case where the failure to
comply could not reasonably be expected to have a Material Adverse
Effect:

      

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

      

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

      
        
           

        

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

      

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

      

      (e)           
operate its Oil and Gas Properties and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas Properties and
other material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental
Requirements.

      

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

      

      Section
8.07          Insurance.  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.  The loss payable clauses or provisions in said insurance
policy or policies insuring any of the collateral for the Loans shall be
endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice (or 10 days prior notice in the event of
any non-payment of premiums) of any cancellation to the Administrative
Agent.  So long as no Event of Default has occurred and is continuing,
except as otherwise required by Section 9.12, the Borrower or applicable
Restricted Subsidiary shall be entitled to use the proceeds received from any
insurance policy as a result of a Casualty Event (without regarding to the
threshold in the definition thereof) to repair or replace the Property of the
Borrower or such Restricted Subsidiary subject to such Casualty Event or to
otherwise enhance the value of the collateral for the Indebtedness.

      

      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.

      
        
           

        

        
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      Section
8.10           Environmental
Matters.

      

      (a)           The
Borrower shall at its sole expense: (i) comply, and shall cause its Properties
and operations and each Subsidiary and each Subsidiary’s Properties and
operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
dispose of or otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas waste,
hazardous substance or solid waste on, under, about or from any of the
Borrower’s or its Subsidiaries’ Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause each
Subsidiary to establish and implement, such 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 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 could reasonably
anticipate that such action will result in liability (whether individually or in
the aggregate) in excess of $500,000, not fully covered by insurance, subject to
normal deductibles.

      

      (c)           The
Borrower will, and will cause each Subsidiary to, provide environmental
assessments, audits and tests in accordance with the most current version of the
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 or other
Properties.

      
        
           

        

        
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      Section
8.11           Further
Assurances.

      

      (a)           The
Borrower at its 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
Indebtedness, or to correct any omissions in this Agreement or the Security
Instruments, or to state more fully the obligations secured therein, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the reasonable discretion of the Administrative Agent, in
connection therewith.

      

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

      

      Section
8.12           Reserve
Reports.

      

      (a)           On
or before March 1st and September 1st of each year, commencing September 1,
2009, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries as of the immediately preceding January 1st and July 1st,
respectively, located within the geographic boundaries of the United States of
America (or the Outer Continental Shelf adjacent to the United States of
America).  The Reserve Report as of January 1 of each year shall be
prepared by or under the supervision of the chief engineer of the Borrower
(provided that at least 80% of Proved Reserves, on a volumetric basis, evaluated
therein shall have been audited 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 in each case certify
(1) there are no statements or conclusions in such 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 Oil and Gas Properties
and production and cost estimates contained in any 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, and (2)
to have been prepared in accordance with the procedures used in the Initial
Reserve Report.

      
        
           

        

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

      

      (c)           With
the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer,
in substantially the form of Exhibit G hereto (the “Reserve Report
Certificate”), certifying that in all material respects: (3) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (4) the Borrower or its Restricted
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (5) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (6) none of
their Oil and Gas Properties have been sold since the date of the last Borrowing
Base determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (7) 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 (8) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
total value of the Proved Oil and Gas Properties that the value of such
Mortgaged Properties represent.

      

      Section
8.13           Title
Information.

      

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

      

      (b)           If
the Borrower has provided title information for additional Properties under
Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that material title defects or exceptions exist with
respect to such additional Properties, either (9) cure any such material title
defects or exceptions (including defects or exceptions as to priority) which are
not permitted by Section 9.03 raised by such information, (10) substitute
acceptable Mortgaged Properties with no material 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 (11) 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 Proved Oil and Gas Properties evaluated by
such Reserve Report.

      
        
           

        

        
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      (c)           If
the Borrower is unable to cure any material 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 Proved Oil and Gas Properties
evaluated in the most recent Reserve Report, such default shall not be a
Default, but instead the Administrative Agent and/or the Required Lenders shall
have the right to exercise the following remedy in their sole discretion from
time to time, and any failure to so exercise this remedy at any time shall not
be a waiver as to future exercise of the remedy by the Administrative Agent or
the Lenders.  To the extent that the Administrative Agent or the
Required 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 Proved Oil and Gas
Properties.  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 redetermination of the Borrowing Base, the Borrower shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Proved Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its 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 Indebtedness 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 Proved Oil and Gas Properties not already subject to a
Lien of the Security Instruments such that after giving effect thereto, the
Mortgaged Properties will represent at least 80% of such total
value.  All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent 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).

      
        
           

        

        
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      (b)           The
Borrower shall cause each Domestic Subsidiary to guarantee the Indebtedness
pursuant to the Guaranty Agreement.  In connection with any such
guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to,
promptly, but in any event no later than 30 days after the formation or
acquisition (or other similar event) of such Domestic Subsidiary, (a) execute
and deliver a supplement to the Guaranty Agreement, (b) pledge all of the Equity
Interests of such Domestic Subsidiary (including, without limitation, 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 owner thereof) and (c)
execute and deliver such other additional closing documents, certificates and
legal opinions as shall reasonably be requested by the Administrative
Agent.

      

      (c)           In
the event that the Borrower or any Domestic Subsidiary creates or becomes the
owner of a Foreign Subsidiary, then the Borrower shall promptly, or shall cause
such Domestic Subsidiary to promptly, but in any event no later than 30 days
after the date of becoming an owner thereof, (12) pledge 65% of all the Equity
Interests of such Foreign Subsidiary (including, without limitation, 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) and (13) execute and deliver
such other additional closing documents, certificates and legal opinions as
shall reasonably be requested by the Administrative Agent.

      

      (d)           The
Borrower shall cause any Person that must guarantee the Indebtedness in order
for the Borrower to be in compliance with Section 9.04(b)(ii)(D) to guarantee
the Indebtedness pursuant to the Guaranty Agreement.  In connection
with any such guaranty, the Borrower shall, or shall cause such Person to,
promptly, but in any event no later than 15 days after the date required
thereby, (14) execute and deliver a supplement to the Guaranty Agreement
executed by such Person and (15) execute and deliver such other additional
closing documents, certificates and legal opinions as shall reasonably be
requested by the Administrative Agent.  If at any time such Person is
not otherwise required to guarantee the Indebtedness hereunder (whether pursuant
to the other provisions of this Section 8.14 or otherwise) or under any other
Loan Document, then upon receipt by the Administrative Agent of evidence
satisfactory to it that such Person has been fully and finally released from its
guarantee obligations in respect of the Second Lien Notes, such Person shall be
released from its guarantee obligations with respect to the Indebtedness and the
Administrative Agent shall, at the sole cost and expense of the Borrower,
execute such further documents and do all such further acts so as to reasonably
evidence such release.

      

      (e)           The
Borrower agrees that it will not, and will not permit any Restricted Subsidiary
to, grant a Lien on any Property to secure the Second Lien Notes without first
(16) giving fifteen (15) days’ prior written notice to the Administrative Agent
thereof and (ii) granting to the Administrative Agent to secure the Indebtedness
a first-priority, perfected Lien (subject 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 this same Property pursuant to
Security Instruments in form and substance satisfactory to the Administrative
Agent.  In connection therewith, the Borrower shall, or shall cause
its Restricted Subsidiaries to, execute and deliver such other additional
closing documents, certificates and legal opinions as shall reasonably be
requested by the Administrative Agent.

      
        
           

        

        
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      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 (17) upon request promptly after the filing thereof with
the United States Secretary of Labor or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, and (18) immediately upon becoming aware of the occurrence 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 or the Department of Labor
with respect thereto.

      

      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 respective
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 Debt of any of the Unrestricted
Subsidiaries.

      

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

      

      Section
8.17           Marketing
Activities.  The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (19)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (20) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its 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 and (21) other contracts for the purchase
and/or sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no material “position” is taken and (B) for which appropriate
credit support has been taken to alleviate the material credit risks of the
counterparty thereto.

      

      Section
8.18          Swap Agreement
Termination.  To the extent the Borrower or a Restricted
Subsidiary changes the material terms of any commodity-price Swap Agreement to
which it is a party, terminates any such Swap Agreement or enters into a new
Swap Agreement which has the effect of creating an off-setting position under
any such Swap Agreement and the product of (a) the net decrease in notional
volumes of Hydrocarbons hedged as a result thereof, times (b) the excess of (i)
the strike or fixed rate payor price over (ii) the “price deck” used in
calculating the Borrowing Base for the relevant commodity, exceeds in the
aggregate during such any period between consecutive Scheduled Redeterminations
the lesser of (y) $15,000,000 and (z) 3% of the then-effective Borrowing Base,
the Borrower will give the Lenders prompt written notice of such event and,
concurrently with such notice, the Required Lenders shall have the right to
adjust the Borrowing Base in accordance with Section 2.07(f).

      
        
           

        

        
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      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
covenants and agrees with the Lenders that:

      

      Section
9.01           Financial
Covenants.

      

      (a)           Ratio of Total Debt to
EBITDAX.  The Borrower will not, at any time, permit its ratio
of Total Debt as of such time to EBITDAX for the period of four fiscal quarters
ending on the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available to be greater than
3.5 to 1.0.

      

      (b)           Current
Ratio.  The Borrower will not permit, as of the last day of any
fiscal quarter, its ratio of (22) consolidated current assets (including the
unused amount of the total Commitments, but excluding non-cash assets under FAS
133) to (23) consolidated current liabilities (excluding non-cash obligations
under FAS 133 and FAS 143, outstanding Letters of Credit, and current maturities
under this Agreement or the Second Term Loan Agreement) to be less than 1.0 to
1.0.

      

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

      

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

      

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

      

      (c)           Debt
under Capital Leases not to exceed $10,000,000 in the aggregate at any time
outstanding.

      

      (d)           Debt
associated with workers’ compensation claims, performance, bid, surety or
similar bonds or surety obligations required by Governmental Requirements or
third parties in connection with the operation of the Oil and Gas
Properties.

      
        
           

        

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

      

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

      

      (g)           Debt
under the Second Lien Notes and any guarantees thereof, the principal amount of
which Debt does not exceed $100,000,000 in the aggregate (provided that, for the
avoidance of doubt, the parties hereto agree that any issuance of Second Lien
Notes after the Effective Date shall not reduce the Borrowing Base), and any
refinancing or replacement thereof, subject to subordination provisions
substantially as provided in the Second Lien Notes as confirmed by
Administrative Agent.

      

      (h)           other
Debt not to exceed $10,000,000 in the
aggregate at any one time outstanding.

      

      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 Indebtedness.

      

      (b)           Excepted
Liens.

      

      (c)           Liens
securing Capital Leases permitted by Section 9.02(c) but only on the Property
under lease.

      

      (d)           Liens
on Property not constituting collateral for the Indebtedness and not otherwise
permitted by the foregoing clauses of this Section 9.03; provided that the
aggregate principal or face amount of all Debt secured under this Section
9.03(d) shall not exceed $5,000,000 at any time.

      

      (e)           Liens
on Property securing the Second Lien Notes and any guaranties thereof as
permitted by Section 9.02(g); provided, however, that (24) such Liens securing
such Debt are subordinate to the Liens securing the Indebtedness, this Agreement
and the other Loan Documents pursuant to the Intercreditor Agreement and (25)
both before and after giving effect to the incurrence of any such Lien, the
Borrower is in compliance with Section 8.14(e).

      

      Section
9.04           Dividends, Distributions and
Redemptions.

      

      (a)           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 (i) 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), (ii) Restricted Subsidiaries may
declare and pay dividends ratably with respect to their Equity Interests and
(iii) the Borrower may make Restricted Payments pursuant to and in accordance
with stock option plans or other benefit plans for management or employees of
the Borrower and its Restricted Subsidiaries.

      
        
           

        

        
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      (b)           Redemption of Second Lien
Notes; Amendment of Second Lien Term Loan Documents. The Borrower will
not, and will not permit any Restricted Subsidiary to: (26) prior to the date
that is ninety-one (91) days after the Maturity Date, call, make or offer to
make any optional or voluntary Redemption of or otherwise optionally or
voluntarily Redeem (whether in whole or in part) the Second Lien Notes, provided
that the Borrower may optionally prepay the Second Lien Notes, including
refinancings thereof, if (A) no Default or Event of Default has occurred and is
continuing or would exist after giving effect to such prepayment or refinancing,
and (B) after giving effect to such prepayment or refinancing, the Borrower
would have liquidity (which shall include undrawn availability under the then
existing Borrowing Base) of at least $25,000,000 of cash or Investments
permitted by Section 9.05(c), Section 9.05(d), Section 9.05(e) or Section
9.05(f) and (27) amend, modify, waive or otherwise change, consent or agree to
any amendment, modification, waiver or other change to, any of the terms of any
Second Lien Term Loan Document if (a) the effect thereof would be to shorten the
maturity of the Second Lien Notes or shorten the average life or increase the
amount of any payment of principal thereof or increase the rate or add call or
pre-payment premiums or shorten any period for payment of interest thereon, (b)
such action requires the payment of a consent fee (howsoever described), (c)
such action adds additional Property as collateral to secure the Second Lien
Notes unless the Borrower complies with Section 8.14(e) or (d) such action adds
any covenants or defaults without this Agreement being contemporaneously amended
to add substantially similar covenants or defaults, provided that the foregoing
shall not prohibit the execution of supplemental agreements to add guarantors if
required by the terms thereof provided that any such guarantor also guarantees
the Indebtedness pursuant to the Guaranty Agreement and each of the Borrower and
such guarantor otherwise complies with Section 8.14(d).

      

      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:

      

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

      

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

      

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

      

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

      
        
           

        

        
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      (e)           deposits
maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the
United States of any other bank or trust company which is organized under the
laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively 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
(28) made by the Borrower in or to the Guarantors, (29) made by any Restricted
Subsidiary in or to the Borrower or any Guarantor, (30) 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
$500,000 and (31) made by the Borrower or any Restricted Subsidiary in or to any
Foreign Subsidiary, provided that no less than 85% of the aggregate net present
value (discounted at 10% and using pricing assumptions consistent with SEC
reporting requirements at such time) of the combined Borrower’s and Restricted
Subsidiaries’ Oil and Gas Properties are located inside the United States and
Canada.

      

      (h)           subject
to the limits in Section 9.07, Investments (including, without limitation,
capital contributions) in general or limited partnerships or other types of
entities (each a “venture”) entered
into by the Borrower or a Restricted Subsidiary with others in the ordinary
course of business; provided that (i) any such venture is primarily engaged in
oil and gas exploration, development, production, processing and related
activities, including transportation, (ii) the interest in such venture is
acquired in the ordinary course of business and on fair and reasonable terms and
(iii) such venture interests acquired and capital contributions made (valued as
of the date such interest was acquired or the contribution made) do not exceed,
in the aggregate at any time outstanding an amount equal to $5,000,000.

      

      (i)          
 subject to the limits in Section 9.07, Investments in direct ownership
interests in additional Oil and Gas Properties and gas gathering systems related
thereto or related to farm-out, farm-in, joint operating, joint venture or area
of mutual interest agreements, gathering systems, pipelines or other similar
arrangements which are usual and customary in the oil and gas exploration and
production business located within the geographic boundaries of the United
States of America.

      

      (j)          
 loans or advances to employees, officers or directors in the ordinary
course of business of the Borrower or any of its 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.

      

      (k)           Investments
in stock, obligations or securities received in settlement of debts arising from
Investments permitted under this Section 9.05 owing to the Borrower or any
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(k) exceeds $1,000,000.

      
        
           

        

        
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      (l)       
    Investments in Unrestricted Subsidiaries, provided that
xxvii) the aggregate amount of all such Investments at any one time shall not
exceed $25,000,000 (or its equivalent in other currencies as of the date of
Investment) and xxviii) after giving effect to such Investment, the Borrower
would have at least $25,000,000 in unused availability under the
Commitments.

      

      Section
9.06           Designation and Conversion
of Restricted and Unrestricted Subsidiaries; Debt 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 xxix) prior, and after giving
effect, to such designation, neither a Default nor a Borrowing Base Deficiency
would exist and xxx) 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 ownership
interest in such Subsidiary and such Investment would be permitted to be made at
the time of such designation under Section 9.05(l).  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, xxxi) 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), xxxii) no Default
would exist and xxxiii) the Borrower complies with the requirements of Section
8.14, Section 8.16 and Section 9.16.  Any such designation shall be
treated as a cash dividend in an amount equal to the lesser of the fair market
value of the Borrower’s direct and indirect ownership interest in such
Subsidiary or the amount of the Borrower’s cash investment previously made for
purposes of the limitation on Investments under Section 9.05(l).

      

      (d)           The
Borrower shall not permit the aggregate principal amount of all Non-Recourse
Debt outstanding at any one time to exceed $25,000,000.

      

      Section
9.07           Nature of Business;
International Operations.  The Borrower will not, and will not
permit any Restricted Subsidiary to, allow any material change to be made in the
character of its business as an independent oil and gas exploration and
production company.  From and after the date hereof, the Borrower and
its Domestic Subsidiaries will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any Oil and Gas Properties not located within the geographical boundaries of the
United States.  For the avoidance of doubt, any Foreign Subsidiary may
(i) acquire and make expenditures in or related to Oil and Gas Properties
located within the geographical boundaries of Canada, and (ii) acquire and make
expenditures in or related to Oil and Gas Properties, in an amount not to exceed
fifteen percent (15%) of the aggregate net present value (discounted at 10% and
using pricing assumptions consistent with SEC reporting requirements at such
time) of the Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries, located outside the geographical boundaries of the United States
and Canada.

      
        
           

        

        
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      Section
9.08           Limitation on
Leases.  The Borrower will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal but excluding Capital Leases and leases of Hydrocarbon
Interests), under leases or lease agreements which would cause the aggregate
amount of all payments made by the Borrower and the Restricted Subsidiaries
pursuant to all such leases or lease agreements, including, without limitation,
any residual payments at the end of any lease, to exceed $5,000,000 in any
period of twelve consecutive calendar months during the life of such
leases.

      

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

      

      Section
9.10           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), (l) or (m)
of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the
Code.

      

      (b)           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.

      

      (c)           without
prior written notice to the Administrative Agent, contribute to or assume an
obligation to contribute to, or permit any ERISA Affiliate to contribute to or
assume an obligation to contribute to (i) any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by such entities in their sole discretion at any time without
any material liability, or (ii) any employee pension benefit plan, as defined in
section 3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of
ERISA or section 412 of the Code.

      
        
           

        

        
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      Section
9.11           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
9.12           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)           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

      

      (b)           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.

      

      Section
9.13           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 xxxiv) the sale of Hydrocarbons in the ordinary course
of business; xxxv) farmouts in the ordinary course of business of undeveloped
acreage or undrilled depths and assignments in connection with such farmouts;
xxxvi) the sale or transfer of (1) 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 or (2) Oil and Gas Properties or
interests therein or Restricted Subsidiaries owning Oil and Gas Properties to
which there were no proved reserves attributed in the most recent Reserve Report
delivered to the Lenders; xxxvii) the sale, transfer or other disposition of
Equity Interests in Unrestricted Subsidiaries; xxxviii) the sale or other
disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Restricted Subsidiary owning Oil and Gas Properties;
provided that (1) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or Restricted Subsidiary subject of such sale
or other disposition (as reasonably determined by 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), (2) except as
provided in Section 2.07(e), if the fair market value of such sale or other
disposition (including asset swaps) of Oil and Gas Properties or Restricted
Subsidiary owning Oil and Gas Property included in the most recently delivered
Reserve Report (whether made for non-cash consideration or otherwise) during any
period between two successive Scheduled Redetermination Dates exceeds five
percent (5%) of the Borrowing Base in effect at such time (as determined by the
Administrative Agent), individually or in the aggregate, then the Borrowing Base
shall be reduced, effective immediately upon such sale or disposition, by an
amount equal to the value, if any, assigned such Properties in the most recently
delivered Reserve Report, (3) if any such sale or other disposition is of a
Restricted Subsidiary owning Oil and Gas Properties, such sale or other
disposition shall include all the Equity Interests of such Restricted Subsidiary
(unless such Restricted Subsidiary is contemporaneously therewith being
designated as an Unrestricted Subsidiary pursuant to Section 9.06(b)); and
xxxix) sales and other dispositions of Properties not regulated by Section
9.13(a) to (e) having a fair market value not to exceed $2,500,000 during any
6-month period.

      
        
           

        

        
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      Section
9.14          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
9.15           Transactions with
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 the Guarantors and Wholly-Owned
Subsidiaries of the Borrower) unless such transactions are otherwise permitted
under this Agreement and are upon fair and reasonable terms no less favorable to
it than it would obtain in a comparable arm’s length transaction with a Person
not an Affiliate.

      

      Section
9.16           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 gives written notice
to the Administrative Agent of such creation or acquisition and complies with
Section 8.14(b) and Section 8.14(c).  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 9.13(e).

      

      Section
9.17           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 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; provided, however, that the preceding
restrictions will not apply to encumbrances or restrictions arising under or by
reason of (1) this Agreement or the Security Instruments, (2) Debt securing
Liens permitted by Section 9.03(c) or Section 9.03(d) or any contract, agreement
or understanding creating Liens permitted by Section 9.03(d) (but only to the
extent related to the Property on which such Liens were created), (3) any leases
or licenses or similar contracts as they affect any Property or Lien subject to
a lease or license, (4) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the direct or indirect sale or
disposition of all or substantially all the equity or Property of such
Restricted Subsidiary (or the Property that is subject to such restriction)
pending the closing of such sale or disposition, or (5) customary provisions
with respect to the distribution of Property in joint venture
agreements.

      
        
           

        

        
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      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 such Oil and Gas 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 bcf of gas (on an mcf
equivalent basis) in the aggregate.

      

      Section
9.19           Swap
Agreements.  The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than (a) those Swap Agreements required under Section 8.18; (b) Swap Agreements
in respect of commodities (including price Swap Agreements, basis differential
Swap Agreements, caps, collars, floors and other similar agreements described in
the definition of “Swap Agreements”) (i)
with an Approved Counterparty and (ii) the notional volumes for which, (when
aggregated with other commodity Swap Agreements then in effect other than basis
differential swaps on volumes already hedged pursuant to other Swap Agreements)
do not exceed, as of the date each such Swap Agreement is executed, (A) 100% of
the reasonably anticipated projected production (as shown in the most recent
Reserve Report and/or in another engineering report which is in form and
substance satisfactory to the Administrative Agent) from proved, developed,
producing Oil and Gas Properties for each twelve month period during which each
such Swap Agreement is in effect, for the next thirty-six months succeeding the
execution of each such Swap Agreement, (B) 75% of the reasonably anticipated
projected production (as shown in the most recent Reserve Report and/or in
another engineering report which is in form and substance satisfactory to the
Administrative Agent) from proved, developed, producing Oil and Gas Properties
for each twelve month period during which each such Swap Agreement is in effect,
for each twelve month period after the first thirty-six months after each such
Swap Agreement is executed, (C) 50% of the reasonably anticipated projected
production (as shown in the most recent Reserve Report and/or in another
engineering report which is in form and substance satisfactory to the
Administrative Agent) from proved, developed, non-producing Oil and Gas
Properties for each twelve month period during which each such Swap Agreement is
in effect, for the next twenty-four months succeeding the execution of each such
Swap Agreement and (D) 35% of the reasonably anticipated projected production
(as shown in the most recent Reserve Report and/or in another engineering report
which is in form and substance satisfactory to the Administrative Agent) from
proved, developed, non-producing Oil and Gas Properties for each twelve month
period during which each such Swap Agreement is in effect, for the period of
twelve months succeeding the two-year anniversary of the execution of each such
Swap Agreement; provided, however, that for purposes of this Section 9.19(b),
put options and price floors for crude oil and natural gas shall be disregarded;
(c) Swap Agreements in respect of interest rates with an Approved Counterparty,
as follows: (i) Swap Agreements effectively converting interest rates from fixed
to floating, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Restricted Subsidiaries then in effect
effectively converting interest rates from fixed to floating) do not exceed 50%
of the then outstanding principal amount of the Borrower’s Debt for borrowed
money which bears interest at a fixed rate (after netting out any Swap
Agreements then in effect effectively converting interest rates from floating to
fixed) and (ii) Swap Agreements effectively converting interest rates from
floating to fixed, the notional amounts of which (when aggregated with all other
Swap Agreements of the Borrower and its Restricted Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75%
of the then outstanding principal amount of the Borrower’s Debt for borrowed
money which bears interest at a floating rate (after netting out any Swap
Agreements then in effect effectively converting interest rates from floating to
fixed). For purposes of this Section 9.19(b), the notional volumes and
corresponding swap volumes so determined shall be calculated and recorded
separately for natural gas and crude oil, and natural gas volumes shall include
associated natural gas liquids volumes.  In no event shall any Swap
Agreement contain any current requirement, agreement or covenant for the
Borrower or any Restricted Subsidiary to post collateral or margin, other than
letters of credit permitted by this Agreement (in an amount not to exceed
$10,000,000 in the aggregate), to secure their obligations under such Swap
Agreement or to cover market exposures.

      
        
           

        

        
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      Section
9.20           Gas Sales
Contracts.  The Borrower will not, and will not permit any of
its Subsidiaries to (the Borrower or any such Subsidiary being the “Seller” for purposes
of this Section), enter into any Gas Sales Contract unless (6) such Gas Sales
Contract is with a counterparty (the “Purchaser”) that is
an Approved Purchaser at the time such Gas Sales Contract is entered into or the
Purchaser has posted Acceptable Collateral to secure the Purchaser’s obligations
thereunder, (7) the terms of such Gas Sales Contract provide that if the
Purchaser is not, or is no longer, an Approved Purchaser, and if reasonable
grounds for insecurity exists regarding performance of the obligations under the
Gas Sales Contract by the counterparty, the Borrower will or may demand Adequate
Assurance of Performance from such counterparty to secure the Purchaser’s
obligations under the Gas Sales Contract, (8) the terms of such Gas Sales
Contract provide that upon the failure to provide such Adequate Assurance of
Performance, the Seller may immediately suspend deliveries of gas as provided in
such Gas Sales Contract and sell all or substantially all of the volumes of gas
subject of the Gas Sales Contract to third party Purchasers and (9) the proceeds
of such Gas Sales Contract shall be deposited directly into the account of the
Seller.  Such Gas Sales Contract may also provide that if following
any posting of Acceptable Collateral the Purchaser becomes an Approved
Purchaser, any Acceptable Collateral previously posted by such Purchaser shall
be immediately released and returned to such Purchaser; provided that,
notwithstanding the foregoing, the Seller may enter into one or more Gas Sales
Contracts which do not comply with the requirements of this Section 9.20 so long
as the unpaid Exposure on all such Gas Sales Contracts does not, in the
aggregate, exceed $15,000,000 at any one time.

       

        
          
             

          

          
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      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 three 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 in any material respect.

      

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

      

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

      

      (f)          
 the Borrower or any Restricted Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable
following the expiration of any applicable grace period therefor.

      

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

      
        
           

        

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

      

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

      

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

      

      (k)           (10)
one or more judgments for the payment of money in an aggregate amount in excess
of $5,000,000
(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 (11) 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 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any
such judgment.

      

      (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)           the
Intercreditor Agreement, 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 its terms against the
Borrower or any 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, or the Borrower or any Subsidiary or
any of their Affiliates shall so state in writing.

      
        
           

        

        
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      (n)           Calpine
Energy Services L.P., as purchaser, fails to post Acceptable Collateral in
respect of any Gas Sales Contract with the Borrower or any Restricted Subsidiary
within three (3) Business Days after Calpine Energy Services L.P., is required
by the terms of such Gas Sales Contract to post Acceptable Collateral and the
Seller fails to (i) exercise its right to suspend delivery of gas subject of
such Gas Sales Contract no later than two (2) Business Days after such failure
by such purchaser and (ii) sell all or substantially all the volumes of gas
subject of such Gas Sales Contract to one or more third-party Purchasers in
accordance with the provisions of Section 9.20 no later than the five (5)
Business Day after such suspension.

      

      (o)           a
Change in Control shall occur.

      

      Section
10.02         Remedies of
Lenders.

      

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

      

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

      

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

      
        
           

        

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

      

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

      

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

      

      (iv)         fourth, pro rata to payment
of principal outstanding on the Loans and Indebtedness referred to in Clause (b)
of the definition of Indebtedness owing to a Lender or an Affiliate of a
Lender;

      

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

      

      (vi)        sixth, to serve as cash
collateral to be held by the Administrative Agent to secure the LC Exposure;
and

      

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

      

      ARTICLE
XI

      The
Agents

      

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

      

      Section
11.02         Duties and Obligations of
Administrative Agent.  The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan
Documents.  Without limiting the generality of the foregoing, xl) 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), xli) the Administrative Agent shall have no duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and xlii) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (1) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (2) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (3) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (4) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (5) 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, (6) 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 (7) 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.

      
        
           

        

        
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      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 Required 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 xliii)
receive written instructions from the Required 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 xliv) 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, no Agent
other than the Administrative 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
Required Lenders or the Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
12.02), and otherwise the Administrative Agent shall not be liable for any
action taken or not taken by it hereunder or under any other Loan Document or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY
NEGLIGENCE, except for its own gross negligence or willful
misconduct.

      
        
           

        

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

      
        
           

        

        
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      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.

      

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

      

      (b)           The
Lenders acknowledge that the Administrative Agent and the Arranger are acting
solely in administrative capacities with respect to the structuring and
syndication of this facility and have no duties, responsibilities or liabilities
under this Agreement and the other Loan Documents other than their
administrative duties, responsibilities and liabilities specifically as set
forth in the Loan Documents and in their capacity as Lenders
hereunder.  In structuring, arranging or syndicating this facility,
each Lender acknowledges that the Administrative Agent and/or Arranger may be an
agent or lender under these Notes, the Second Lien Term Notes, other loans or
other securities and waives any existing or future conflicts of interest
associated with the their role in such other debt instruments.  If in
its administration of this facility or any other debt instrument, the
Administrative Agent determines (or is given written notice by any Lender that a
conflict exists), then it shall eliminate such conflict within 90 days or resign
pursuant to Section 11.06 and shall have no liability for action taken or not
taken while such conflict existed.

      
        
           

        

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

      

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

      

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

      

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

      

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

      

      Section
11.10         Authority of Administrative
Agent to Release Collateral and Liens.  Each Lender and the
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 the 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 9.13 (as it may
be amended, waived or otherwise modified by the Required Lenders) or is
otherwise authorized by the terms of the Loan Documents.

      

      Section
11.11         The Arranger and other
Agents.  None of the Arranger, any syndication agent or any
documentation agent hereunder shall have any duties, responsibilities or
liabilities under this Agreement or the other Loan Documents other than their
duties, responsibilities and liabilities in their capacity as Lenders
hereunder.

      
        
           

        

        
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      ARTICLE
XII

      Miscellaneous

      

      Section
12.01         Notices.

      

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

      

      (i)          if to the Borrower, to it
at 717 Texas, Suite 2800, Houston, TX 77002, Attention of
Michael H. Hickey, Vice President and General Counsel  (Telecopy No.
(713) 481-8561);

      

      (ii)         if
to the Administrative Agent, to it at 919 Third Avenue, New
York, New York 10022, Attention: Millie Carillo, Loan Assistant (Telecopy
No. (212)
841-2683), with a copy to 1200 Smith Street, Suite
3100, Houston, Texas  77002, Attention: Donna Verwold (Telecopy
No. (713)
659-6915);

      

      (iii)        if
to the Issuing Bank, to it at 919 Third Avenue, New York, New York 10022,
Attention: Millie Carillo, Loan Assistant (Telecopy No. (212) 841-2683), with a
copy to 1200 Smith Street, Suite 3100, Houston, Texas  77002,
Attention: Donna Verwold (Telecopy No. (713) 659-6915); and

      

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

      

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

      

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

      

      Section
12.02         Waivers;
Amendments.

      

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

      
        
           

        

        
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      (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 Required
Lenders or by the Borrower and the Administrative Agent with the consent of the
Required Lenders; provided that no such agreement shall (1) increase the
Commitment or the Maximum Credit Amount of any Lender without the written
consent of such Lender, (2) increase the Borrowing Base without the written
consent of each Lender, decrease or maintain the Borrowing Base without the
consent of the Required Lenders, or modify Section 2.07 in any manner without
the consent of each Lender (other as provided under Section 4.03(c)(ii)
concerning a Defaulting Lender); provided that a Scheduled Redetermination may
be postponed by the Required Lenders, (3) reduce the principal amount of any
Loan or LC Disbursement or reduce the rate of interest thereon (other than as a
result of a waiver, amendment or other modification, as a result of which, the
interest rate specified in Section 3.02(c) shall be effectively waived), or
reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or
under any other Loan Document, without the written consent of each Lender
affected thereby, (4) 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 Indebtedness hereunder or under any
other Loan Document, or reduce the amount of, waive or excuse any such payment,
or postpone or extend the Termination Date without the written consent of each
Lender affected thereby, (5) 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, (6) waive or amend Section 3.04(b),
Section 6.01, Section 8.14, Section 10.02(c) or Section 12.14 or change the
definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary” or
“Subsidiary”, without the written consent of each Lender, (7) release any
Guarantor (except as set forth in the Guaranty Agreement), release a substantial
portion of the collateral from the Liens under the Security Instruments (other
than as provided in Section 11.10), or reduce the percentage set forth in
Section 8.14(a) to less than 80%, without the written consent of each Lender
(other as provided under Section 4.03(c)(ii) concerning a Defaulting Lender), or
(8) change any of the provisions of this Section 12.02(b) or the definition of
“Required Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
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 (other as provided under Section 4.03(c)(ii) concerning a Defaulting
Lender); provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, any other
Agent, or the Issuing Bank hereunder or under any other Loan Document without
the prior written consent of the Administrative Agent, such other Agent or the
Issuing Bank, as the case may be.  Notwithstanding the foregoing, any
supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.

      
        
           

        

        
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      Section
12.03         Expenses, Indemnity; Damage
Waiver.

      

      (a)           The
Borrower shall pay (9) 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, including all Intralinks 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), (10) 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, (11) all reasonable out-of-pocket expenses incurred by the Issuing Bank
in connection with the issuance, amendment, renewal or extension of any Letter
of Credit or any demand for payment thereunder, (12) all out-of-pocket expenses
incurred by any Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for any Agent, the 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.

      
        
           

        

        
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      (b)           THE
BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND EACH
LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
BEING CALLED AN “INDEMNITEE”) AGAINST,
AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE
FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY
OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (13) 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, (14) 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,
(15) 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, (16) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS
THEREFROM, INCLUDING, WITHOUT LIMITATION, (a) ANY REFUSAL BY THE ISSUING BANK TO
HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED
IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH
LETTER OF CREDIT, 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, (17) ANY OTHER ASPECT OF THE
LOAN DOCUMENTS, (18) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (19) ANY ASSERTION THAT THE
LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS, (20) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR OPERATIONS, INCLUDING, 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 OR AT ANY OF THEIR PROPERTIES, (21) THE BREACH
OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (22) 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, (23) 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, (24) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (25) ANY OTHER ENVIRONMENTAL, HEALTH
OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (26) ANY ACTUAL OR
PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
BREACH OF ANY OBLIGATION OF SUCH INDEMNITEE UNDER ANY LOAN DOCUMENT OR THE GROSS
NEGLIGENCE, WILFUL MISCONDUCT OR VIOLATION OF LAW OF SUCH
INDEMNITEE.

      
        
           

        

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

      

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

      

      (e)           All
amounts due under this Section 12.03 shall be payable not later than 10 days after
written demand therefor.

      

      Section
12.04         Successors and
Assigns.

      

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

      
        
           

        

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

      

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

      

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

      

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

      

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

      

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

      

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

      
        
           

        

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

      

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

      

      (c)

      

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

      
        
           

        

        
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      (ii)         A
Participant shall not be entitled to receive any greater payment under Section
5.01 or Section 5.03 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower’s prior
written consent.  A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 5.03 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
5.03(d) 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 other Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated.  The provisions of Section 5.01, Section 5.02, Section
5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.

      

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

      
        
           

        

        
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      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 telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.

      

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

      

      Section
12.08         Right of
Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitations obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
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.

      
        
           

        

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

      

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

      

      (b)           ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY 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 NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

      

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

      

      (d)           EACH
PARTY HEREBY (27) 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; (28)
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; (29) 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 (30) 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.

      
        
           

        

        
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      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 Bank and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed xlv) 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), xlvi) to the extent requested by any
regulatory authority, xlvii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, xlviii) to any other
party to this Agreement or any other Loan Document, xlix) 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, l) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(1) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (2) any
actual or prospective counterparty (or its advisors) to any Swap Agreement
relating to the Borrower and its obligations, li) with the consent of the
Borrower or lii) to the extent such Information (1) becomes publicly available
other than as a result of a breach of this Section 12.11 or (2) becomes
available to the Administrative Agent, the 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, the 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 so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

      

      Section
12.12         Interest Rate
Limitation.  It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to
it.  Accordingly, if the transactions contemplated hereby would be
usurious as to any Lender under laws applicable to it (including the laws of the
United States of America and the State of New York or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding the
other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any of the Loan Documents or any agreement entered
into in connection with or as security for the Notes, it is agreed as
follows:  (3) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by such Lender to the Borrower); and (4) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower).  All sums paid or agreed to
be paid to any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to such Lender, be
amortized, prorated, allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law.  If at any time and from time to time
(1) 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 (2) 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.

      
        
           

        

        
          100

          
            

          

        

        
           

        

      

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

      
        
           

        

        
          101

          
            

          

        

        
           

        

      

      Section
12.14         Collateral Matters; Swap
Agreements.  The benefit of the Security Instruments and of the
provisions of this Agreement relating to any collateral securing the
Indebtedness shall also extend to and be available to those Lenders which are
counterparties to any Swap Agreement with the Borrower or any of its Restricted
Subsidiaries on a pro
rata basis in respect of any obligations of the Borrower or any of its
Restricted Subsidiaries which arise under any such Swap Agreement while such
Person or its Affiliate is a Lender, but only while such Person is a Lender,
including any Swap Agreements between such Persons in existence prior to the
date hereof; provided that if a Person or its Affiliate ceases to be a Lender
solely because the Revolving Credit Exposures have been paid in full and the
Commitments terminated, then the Liens securing such Swap Agreements shall
continue in favor of such Person until those obligations are paid in full in
cash or otherwise expire or are terminated.  No Lender or any
Affiliate of a Lender shall have any voting rights under any Loan Document as a
result of the existence of obligations owed to it under any such Swap
Agreements.

      

      Section
12.15         Reaffirmation and Grant of
Security Interest.  The Borrower and each Subsidiary hereby (i)
confirms that each Security Instrument (for purposes of this Section 12.15, as
defined in the Existing Credit Agreement) to which it is a party or is otherwise
bound and all assets, property and interests encumbered thereby will continue to
guarantee or secure, as the case may be, to the fullest extent possible in
accordance with the Loan Documents, the payment and performance of all
Indebtedness under this Agreement.

      

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

      

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

      

      [SIGNATURES
BEGIN NEXT PAGE]

      
        
           

        

        
          102

          
            

          

        

        
           

        

      

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

      

      
        
          
            
              
                
                  
                    
                      	
                              BORROWER:

                            	
                              ROSETTA
      RESOURCES INC.

                            
	 
      	 
      
	 
      	 
      
	 
      	
                              /s/ Michael J. Rosinski

                            
	 
      	
                              Michael
      J. Rosinski

                            
	 
      	
                              Executive
      Vice President, Chief Financial Officer and
  Treasurer

                            

                    

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      
        
          
            
              	
                      ADMINISTRATIVE
      AGENT:

                    	
                      BNP
      PARIBAS,

                    
	 
      	
                      as
      Administrative Agent and as a Lender

                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/ Polly Schott

                    
	 
      	
                      Name:

                    	
                      Polly
      Schott

                    
	 
      	
                      Title:

                    	
                      Director

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      /s/ Betsy Jocher

                    
	 
      	
                      Name:

                    	
                      Betsy
      Jocher

                    
	 
      	
                      Title:

                    	
                      Director

                    

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            	
                    CO-SYNDICATION
      AGENT:

                  	
                    WELLS
      FARGO BANK, N.A.,

                  
	 
      	
                    as
      Co-Syndication Agent and as a Lender

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                    By:

                  	
                    /s/  Scott
  Hodges

                  
	 
      	
                    Name:

                  	
                    Scott
      Hodges

                  
	 
      	
                    Title:

                  	
                    Vice
      President

                  

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            CO-SYNDICATION
      AGENT:

                          	
                            UNION
      BANK OF CALIFORNIA, N.A.,

                          
	 
      	
                            as
      Co-Syndication Agent and as a Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Daniel A. Davis

                          
	 
      	
                            Name:

                          	
                            Daniel
      A. Davis

                          
	 
      	
                            Title:

                          	
                            Vice
      President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            CO-DOCUMENTATION
      AGENT:

                          	
                            COMPASS
      BANK,

                          
	 
      	
                            as
      Co-Syndication Agent and as a Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Kathleen J. Bowen

                          
	 
      	
                            Name:

                          	
                            Kathleen
      J. Bowen

                          
	 
      	
                            Title:

                          	
                            Senior
      Vice
President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            CO-DOCUMENTATION
      AGENT:

                          	
                            BANK
      OF MONTREAL,

                          
	 
      	
                            as
      Co-Syndication Agent and as a Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ James V. Ducote

                          
	 
      	
                            Name:

                          	
                            James
      V. Ducote

                          
	 
      	
                            Title:

                          	
                            Director

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        	
                                LENDER:

                              	
                                JPMORGAN
      CHASE BANK, N.A., as a
      Lender

                              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                                By:

                              	/s/ Michael A. Kamauf
	 
      	
                                Name:

                              	
                                Michael
      A. Kamauf

                              
	 
      	
                                Title:

                              	
                                Vice
      President

                              

                      

                    

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  	
                          LENDER:

                        	
                          COMERICA
      BANK, as a
      Lender

                        
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                          By:

                        	
                          /s/ Greg Smith

                        
	 
      	
                          Name:

                        	
                          Greg
      Smith

                        
	 
      	
                          Title:

                        	
                          Senior
      Vice
President

                        

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	
                            BANK
      OF AMERICA, N.A., as a
      Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Stephen J. Hoffman

                          
	 
      	
                            Name:

                          	
                            Stephen
      J. Hoffman

                          
	 
      	
                            Title:

                          	
                            Managing
      Director

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	
                            U.S.
      BANK NATIONAL ASSOCIATION,

                          
	 
      	
                            as
      a Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Mark E. Thomson

                          
	 
      	
                            Name:

                          	
                            Mark
      E. Thomson

                          
	 
      	
                            Title:

                          	
                            Senior
      Vice
President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    LENDER:

                                  	
                                    ALLIED
      IRISH BANKS P.L.C, as a
      Lender

                                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                                    By:

                                  	
                                    /s/ Mark Connelly

                                  
	 
      	
                                    Name:

                                  	
                                    Mark
      Connelly

                                  
	 
      	
                                    Title:

                                  	
                                    Senior
      Vice President

                                  
	 
      	 
      	 
      
	 
      	
                                    By:

                                  	
                                    /s/ Vaughn Buck

                                  
	 
      	
                                    Name:

                                  	
                                    Vaughn
      Buck

                                  
	 
      	
                                    Title:

                                  	
                                    Executive
      Vice
President

                                  

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	
                            BANK
      OF TEXAS, N.A., as a
      Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Mari Salazar

                          
	 
      	
                            Name:

                          	
                            Mari
      Salazar

                          
	 
      	
                            Title:

                          	
                            Vice
      President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	
                            AMEGY
      BANK NATIONAL ASSOCIATION,

                          
	 
      	
                            as
      a Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ W. Bryan Chapman

                          
	 
      	
                            Name:

                          	
                            W.
      Bryan Chapman

                          
	 
      	
                            Title:

                          	
                            Senior
      Vice
President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	
                            THE
      FROST NATIONAL BANK, as a
      Lender

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	
                            /s/ Andrew Merryman

                          
	 
      	
                            Name:

                          	
                            Andrew
      Merryman

                          
	 
      	
                            Title:

                          	
                            Senior
      Vice
President

                          

                  

                

              

            

          

        

      

      

      

      [Signature
Page to Amended and Restated Senior Revolving Credit Agreement]ex10_19.htm

    
      

    

    
      EXHIBIT
10.19

       

      

       

      
        

        

      

       

      AMENDED
AND RESTATED

      SECOND
LIEN TERM LOAN AGREEMENT

       

      dated
as of April 9, 2009

       

      among

       

      ROSETTA
RESOURCES INC.,

      as
Borrower,

       

      BNP
PARIBAS,

      as
Administrative Agent,

       

      WELLS
FARGO ENERGY CAPITAL, INC.

      as
Syndication Agent,

       

      UNIONBANCAL
EQUITIES, INC.,

      as
Documentation Agent

       

      and

       

      THE
LENDERS PARTY HERETO

       

      _________________________

       

       

      BNP
PARIBAS SECURITIES CORP.

       

      Sole
Lead Arranger and Sole Bookrunner

       

       

      
        

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      TABLE
OF CONTENTS

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                
                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            
                                                                                                              
                                                                                                                
                                                                                                                  
                                                                                                                    
                                                                                                                      
                                                                                                                        
                                                                                                                          
                                                                                                                            
                                                                                                                              
                                                                                                                                
                                                                                                                                  
                                                                                                                                    
                                                                                                                                      
                                                                                                                                        
                                                                                                                                          	 
      	 
      	 
      	 
      	
                                                                                                                                                  Page

                                                                                                                                                
	 
      	 
      	 
      	 
      	 
      
	
                                                                                                                                                  ARTICLE
      I

                                                                                                                                                
	
                                                                                                                                                  DEFINITIONS
      AND ACCOUNTING MATTERS

                                                                                                                                                
	 
	
                                                                                                                                                  Section
      1.01

                                                                                                                                                	 
      	
                                                                                                                                                  Terms
      Defined Above

                                                                                                                                                	 
      	
                                                                                                                                                  1

                                                                                                                                                
	
                                                                                                                                                  Section
      1.02

                                                                                                                                                	 
      	
                                                                                                                                                  Certain
      Defined Terms

                                                                                                                                                	 
      	
                                                                                                                                                  1

                                                                                                                                                
	
                                                                                                                                                  Section
      1.03

                                                                                                                                                	 
      	
                                                                                                                                                  Types
      of Loans and Tranches

                                                                                                                                                	 
      	
                                                                                                                                                  22

                                                                                                                                                
	
                                                                                                                                                  Section
      1.04

                                                                                                                                                	 
      	
                                                                                                                                                  Terms
      Generally; Rules of Construction

                                                                                                                                                	 
      	
                                                                                                                                                  22

                                                                                                                                                
	
                                                                                                                                                  Section
      1.05

                                                                                                                                                	 
      	
                                                                                                                                                  Accounting
      Terms and Determinations; GAAP

                                                                                                                                                	 
      	
                                                                                                                                                  22

                                                                                                                                                
	 	 	 	 	 
	
                                                                                                                                                  ARTICLE
      II

                                                                                                                                                
	
                                                                                                                                                  THE
      CREDITS

                                                                                                                                                
	 
	
                                                                                                                                                  Section
      2.01

                                                                                                                                                	 
      	
                                                                                                                                                  Term
      Loans.

                                                                                                                                                	 
      	
                                                                                                                                                  23

                                                                                                                                                
	
                                                                                                                                                  Section
      2.02

                                                                                                                                                	 
      	
                                                                                                                                                  Loans
      and Tranches.

                                                                                                                                                	 
      	
                                                                                                                                                  23

                                                                                                                                                
	
                                                                                                                                                  Section
      2.03

                                                                                                                                                	 
      	
                                                                                                                                                  Requests
      for Loans

                                                                                                                                                	 
      	
                                                                                                                                                  24

                                                                                                                                                
	
                                                                                                                                                  Section
      2.04

                                                                                                                                                	 
      	
                                                                                                                                                  Interest
      Elections for Floating Rate Loans.

                                                                                                                                                	 
      	
                                                                                                                                                  25

                                                                                                                                                
	
                                                                                                                                                  Section
      2.05

                                                                                                                                                	 
      	
                                                                                                                                                  Funding
      of Loans.

                                                                                                                                                	 
      	
                                                                                                                                                  27

                                                                                                                                                
	
                                                                                                                                                  Section
      2.06

                                                                                                                                                	 
      	
                                                                                                                                                  Termination

                                                                                                                                                	 
      	
                                                                                                                                                  28

                                                                                                                                                
	
                                                                                                                                                  Section
      2.07

                                                                                                                                                	 
      	
                                                                                                                                                  Total
      Reserve Value.

                                                                                                                                                	 
      	
                                                                                                                                                  28

                                                                                                                                                
	
                                                                                                                                                  Section
      2.08

                                                                                                                                                	 
      	
                                                                                                                                                  Intercreditor
      Agreement

                                                                                                                                                	 
      	
                                                                                                                                                  29

                                                                                                                                                
	
                                                                                                                                                  Section
      2.09

                                                                                                                                                	 
      	
                                                                                                                                                  Optional
      Increase in Aggregate Outstanding Loan Amounts.

                                                                                                                                                	 
      	
                                                                                                                                                  29

                                                                                                                                                
	 	 	 	 	 
	
                                                                                                                                                  ARTICLE
      III

                                                                                                                                                
	
                                                                                                                                                  PAYMENTS
      OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

                                                                                                                                                
	 
	
                                                                                                                                                  Section
      3.01

                                                                                                                                                	 
      	
                                                                                                                                                  Repayment
      of Loans

                                                                                                                                                	 
      	
                                                                                                                                                  30

                                                                                                                                                
	
                                                                                                                                                  Section
      3.02

                                                                                                                                                	 
      	
                                                                                                                                                  Interest.

                                                                                                                                                	 
      	
                                                                                                                                                  30

                                                                                                                                                
	
                                                                                                                                                  Section
      3.03

                                                                                                                                                	 
      	
                                                                                                                                                  Alternate
      Rate of Interest

                                                                                                                                                	 
      	
                                                                                                                                                  31

                                                                                                                                                
	
                                                                                                                                                  Section
      3.04

                                                                                                                                                	 
      	
                                                                                                                                                  Prepayments.

                                                                                                                                                	 
      	
                                                                                                                                                  32

                                                                                                                                                
	
                                                                                                                                                  Section
      3.05

                                                                                                                                                	 
      	
                                                                                                                                                  Mandatory
      Prepayments.

                                                                                                                                                	 
      	
                                                                                                                                                  33

                                                                                                                                                
	
                                                                                                                                                  Section
      3.06

                                                                                                                                                	 
      	
                                                                                                                                                  Fees

                                                                                                                                                	 
      	
                                                                                                                                                  33

                                                                                                                                                
	
                                                                                                                                                  Section
      3.07

                                                                                                                                                	 
      	
                                                                                                                                                  No
      Make-Whole Amount for Floating Rate Loans

                                                                                                                                                	 
      	
                                                                                                                                                  33

                                                                                                                                                
	 	 	 	 	 
	
                                                                                                                                                  ARTICLE
      IV

                                                                                                                                                
	
                                                                                                                                                  PAYMENTS;
      PRO RATA TREATMENT; SHARING OF SET-OFFS

                                                                                                                                                
	 
	
                                                                                                                                                  Section
      4.01

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

                                                                                                                                                	 
      	
                                                                                                                                                  33

                                                                                                                                                
	
                                                                                                                                                  Section
      4.02

                                                                                                                                                	 
      	
                                                                                                                                                  Presumption
      of Payment by the Borrower

                                                                                                                                                	 
      	
                                                                                                                                                  34

                                                                                                                                                
	
                                                                                                                                                  Section
      4.03

                                                                                                                                                	 
      	
                                                                                                                                                  Payments
      and Deductions; Defaulting Lenders.

                                                                                                                                                	 
      	
                                                                                                                                                  35

                                                                                                                                                
	
                                                                                                                                                  Section
      4.04

                                                                                                                                                	 
      	
                                                                                                                                                  Disposition
      of Proceeds

                                                                                                                                                	 
      	
                                                                                                                                                  35

                                                                                                                                                
	 	 	 	 	 
	
                                                                                                                                                  ARTICLE
      V

                                                                                                                                                
	
                                                                                                                                                  INCREASED
      COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

                                                                                                                                                
	 
	
                                                                                                                                                  Section
      5.01

                                                                                                                                                	 
      	
                                                                                                                                                  Increased
      Costs.

                                                                                                                                                	 
      	
                                                                                                                                                  36

                                                                                                                                                
	
                                                                                                                                                  Section
      5.02

                                                                                                                                                	 
      	
                                                                                                                                                  Break
      Funding Payments

                                                                                                                                                	 
      	
                                                                                                                                                  37

                                                                                                                                                
	
                                                                                                                                                  Section
      5.03

                                                                                                                                                	 
      	
                                                                                                                                                  Taxes.

                                                                                                                                                	 
      	
                                                                                                                                                  37

                                                                                                                                                

                                                                                                                                        

                                                                                                                                      

                                                                                                                                    

                                                                                                                                  

                                                                                                                                

                                                                                                                              

                                                                                                                            

                                                                                                                          

                                                                                                                        

                                                                                                                      

                                                                                                                    

                                                                                                                  

                                                                                                                

                                                                                                              

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          i

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        	
                                                                                                Section
      5.04

                                                                                              	 
      	
                                                                                                Mitigation
      Obligations; Replacement of Lenders.

                                                                                              	 
      	
                                                                                                38

                                                                                              
	
                                                                                                Section
      5.05

                                                                                              	 
      	
                                                                                                Illegality

                                                                                              	 
      	
                                                                                                39

                                                                                              
	 	 	 	 	 
	
                                                                                                ARTICLE
      VI

                                                                                              
	
                                                                                                CONDITIONS
      PRECEDENT

                                                                                              
	 
	
                                                                                                Section
      6.01

                                                                                              	 
      	
                                                                                                Effective
      Date

                                                                                              	 
      	
                                                                                                39

                                                                                              
	
                                                                                                Section
      6.02

                                                                                              	 
      	
                                                                                                Additional
      Conditions

                                                                                              	 
      	
                                                                                                41

                                                                                              
	 	 	 	 	 
	
                                                                                                ARTICLE
      VII

                                                                                              
	
                                                                                                REPRESENTATIONS
      AND WARRANTIES

                                                                                              
	 
	
                                                                                                Section
      7.01

                                                                                              	 
      	
                                                                                                Organization;
      Powers

                                                                                              	 
      	
                                                                                                42

                                                                                              
	
                                                                                                Section
      7.02

                                                                                              	 
      	
                                                                                                Authority;
      Enforceability

                                                                                              	 
      	
                                                                                                42

                                                                                              
	
                                                                                                Section
      7.03

                                                                                              	 
      	
                                                                                                Approvals;
      No Conflicts

                                                                                              	 
      	
                                                                                                43

                                                                                              
	
                                                                                                Section
      7.04

                                                                                              	 
      	
                                                                                                Financial
      Condition; No Material Adverse Change.

                                                                                              	 
      	
                                                                                                43

                                                                                              
	
                                                                                                Section
      7.05

                                                                                              	 
      	
                                                                                                Litigation.

                                                                                              	 
      	
                                                                                                44

                                                                                              
	
                                                                                                Section
      7.06

                                                                                              	 
      	
                                                                                                Environmental
      Matters

                                                                                              	 
      	
                                                                                                44

                                                                                              
	
                                                                                                Section
      7.07

                                                                                              	 
      	
                                                                                                Compliance
      with the Laws and Agreements; No Defaults.

                                                                                              	 
      	
                                                                                                45

                                                                                              
	
                                                                                                Section
      7.08

                                                                                              	 
      	
                                                                                                Investment
      Company Act

                                                                                              	 
      	
                                                                                                45

                                                                                              
	
                                                                                                Section
      7.09

                                                                                              	 
      	
                                                                                                Taxes

                                                                                              	 
      	
                                                                                                45

                                                                                              
	
                                                                                                Section
      7.10

                                                                                              	 
      	
                                                                                                ERISA.

                                                                                              	 
      	
                                                                                                46

                                                                                              
	
                                                                                                Section
      7.11

                                                                                              	 
      	
                                                                                                Disclosure;
      No Material Misstatements

                                                                                              	 
      	
                                                                                                46

                                                                                              
	
                                                                                                Section
      7.12

                                                                                              	 
      	
                                                                                                Insurance

                                                                                              	 
      	
                                                                                                47

                                                                                              
	
                                                                                                Section
      7.13

                                                                                              	 
      	
                                                                                                Restriction
      on Liens

                                                                                              	 
      	
                                                                                                47

                                                                                              
	
                                                                                                Section
      7.14

                                                                                              	 
      	
                                                                                                Subsidiaries

                                                                                              	 
      	
                                                                                                47

                                                                                              
	
                                                                                                Section
      7.15

                                                                                              	 
      	
                                                                                                Location
      of Business and Offices

                                                                                              	 
      	
                                                                                                47

                                                                                              
	
                                                                                                Section
      7.16

                                                                                              	 
      	
                                                                                                Properties;
      Titles, Etc.

                                                                                              	 
      	
                                                                                                48

                                                                                              
	
                                                                                                Section
      7.17

                                                                                              	 
      	
                                                                                                Maintenance
      of Properties

                                                                                              	 
      	
                                                                                                49

                                                                                              
	
                                                                                                Section
      7.18

                                                                                              	 
      	
                                                                                                Gas
      Imbalances, Prepayments

                                                                                              	 
      	
                                                                                                49

                                                                                              
	
                                                                                                Section
      7.19

                                                                                              	 
      	
                                                                                                Marketing
      of Production

                                                                                              	 
      	
                                                                                                49

                                                                                              
	
                                                                                                Section
      7.20

                                                                                              	 
      	
                                                                                                Swap
      Agreements

                                                                                              	 
      	
                                                                                                50

                                                                                              
	
                                                                                                Section
      7.21

                                                                                              	 
      	
                                                                                                Use
      of Loans

                                                                                              	 
      	
                                                                                                50

                                                                                              
	
                                                                                                Section
      7.22

                                                                                              	 
      	
                                                                                                Solvency

                                                                                              	 
      	
                                                                                                50

                                                                                              
	 	 	 	 	 
	
                                                                                                ARTICLE
      VIII

                                                                                              
	
                                                                                                AFFIRMATIVE
      COVENANTS

                                                                                              
	 
	
                                                                                                Section
      8.01

                                                                                              	 
      	
                                                                                                Financial
      Statements; Other Information

                                                                                              	 
      	
                                                                                                50

                                                                                              
	
                                                                                                Section
      8.02

                                                                                              	 
      	
                                                                                                Notices
      of Material Events

                                                                                              	 
      	
                                                                                                53

                                                                                              
	
                                                                                                Section
      8.03

                                                                                              	 
      	
                                                                                                Existence;
      Conduct of Business

                                                                                              	 
      	
                                                                                                54

                                                                                              
	
                                                                                                Section
      8.04

                                                                                              	 
      	
                                                                                                Payment
      of Obligations

                                                                                              	 
      	
                                                                                                54

                                                                                              
	
                                                                                                Section
      8.05

                                                                                              	 
      	
                                                                                                Performance
      of Obligations under Loan Documents

                                                                                              	 
      	
                                                                                                54

                                                                                              
	
                                                                                                Section
      8.06

                                                                                              	 
      	
                                                                                                Operation
      and Maintenance of Properties

                                                                                              	 
      	
                                                                                                54

                                                                                              
	
                                                                                                Section
      8.07

                                                                                              	 
      	
                                                                                                Insurance

                                                                                              	 
      	
                                                                                                55

                                                                                              
	
                                                                                                Section
      8.08

                                                                                              	 
      	
                                                                                                Books
      and Records; Inspection Rights

                                                                                              	 
      	
                                                                                                56

                                                                                              
	
                                                                                                Section
      8.09

                                                                                              	 
      	
                                                                                                Compliance
      with Laws

                                                                                              	 
      	
                                                                                                56

                                                                                              
	
                                                                                                Section
      8.10

                                                                                              	 
      	
                                                                                                Environmental
      Matters.

                                                                                              	 
      	
                                                                                                56

                                                                                              
	
                                                                                                Section
      8.11

                                                                                              	 
      	
                                                                                                Further
      Assurances.

                                                                                              	 
      	
                                                                                                57

                                                                                              
	
                                                                                                Section
      8.12

                                                                                              	 
      	
                                                                                                Reserve
      Reports.

                                                                                              	 
      	
                                                                                                57

                                                                                              

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          ii

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          	
                                                                                                  Section
      8.13

                                                                                                	 
      	
                                                                                                  Title
      Information.

                                                                                                	 
      	
                                                                                                  59

                                                                                                
	
                                                                                                  Section
      8.14

                                                                                                	 
      	
                                                                                                  Additional
      Collateral; Additional Guarantors.

                                                                                                	 
      	
                                                                                                  59

                                                                                                
	
                                                                                                  Section
      8.15

                                                                                                	 
      	
                                                                                                  ERISA
      Compliance

                                                                                                	 
      	
                                                                                                  61

                                                                                                
	
                                                                                                  Section
      8.16

                                                                                                	 
      	
                                                                                                  Unrestricted
      Subsidiaries

                                                                                                	 
      	
                                                                                                  61

                                                                                                
	
                                                                                                  Section
      8.17

                                                                                                	 
      	
                                                                                                  Marketing
      Activities.

                                                                                                	 
      	
                                                                                                  61

                                                                                                
	
                                                                                                  Section
      8.18

                                                                                                	 
      	
                                                                                                  Swap
      Agreement Termination

                                                                                                	 
      	
                                                                                                  61

                                                                                                
	 	 	 	 	 
	
                                                                                                  ARTICLE
      IX

                                                                                                
	
                                                                                                  NEGATIVE
      COVENANTS

                                                                                                
	 
	
                                                                                                  Section
      9.01

                                                                                                	 
      	
                                                                                                  Financial
      Covenants.

                                                                                                	 
      	
                                                                                                  62

                                                                                                
	
                                                                                                  Section
      9.02

                                                                                                	 
      	
                                                                                                  Debt

                                                                                                	 
      	
                                                                                                  62

                                                                                                
	
                                                                                                  Section
      9.03

                                                                                                	 
      	
                                                                                                  Liens

                                                                                                	 
      	
                                                                                                  63

                                                                                                
	
                                                                                                  Section
      9.04

                                                                                                	 
      	
                                                                                                  Restricted
      Payments

                                                                                                	 
      	
                                                                                                  63

                                                                                                
	
                                                                                                  Section
      9.05

                                                                                                	 
      	
                                                                                                  Investments,
      Loans and Advances

                                                                                                	 
      	
                                                                                                  63

                                                                                                
	
                                                                                                  Section
      9.06

                                                                                                	 
      	
                                                                                                  Designation
      and Conversion of Restricted and Unrestricted Subsidiaries; Debt of
      Unrestricted Subsidiaries.

                                                                                                	 
      	
                                                                                                  65

                                                                                                
	
                                                                                                  Section
      9.07

                                                                                                	 
      	
                                                                                                  Nature
      of Business; International Operations

                                                                                                	 
      	
                                                                                                  66

                                                                                                
	
                                                                                                  Section
      9.08

                                                                                                	 
      	
                                                                                                  Limitation
      on Leases

                                                                                                	 
      	
                                                                                                  66

                                                                                                
	
                                                                                                  Section
      9.09

                                                                                                	 
      	
                                                                                                  Proceeds
      of Notes

                                                                                                	 
      	
                                                                                                  66

                                                                                                
	
                                                                                                  Section
      9.10

                                                                                                	 
      	
                                                                                                  ERISA
      Compliance

                                                                                                	 
      	
                                                                                                  66

                                                                                                
	
                                                                                                  Section
      9.11

                                                                                                	 
      	
                                                                                                  Sale
      or Discount of Receivables

                                                                                                	 
      	
                                                                                                  67

                                                                                                
	
                                                                                                  Section
      9.12

                                                                                                	 
      	
                                                                                                  Mergers,
      Etc

                                                                                                	 
      	
                                                                                                  67

                                                                                                
	
                                                                                                  Section
      9.13

                                                                                                	 
      	
                                                                                                  Sale
      of Properties

                                                                                                	 
      	
                                                                                                  67

                                                                                                
	
                                                                                                  Section
      9.14

                                                                                                	 
      	
                                                                                                  Environmental
      Matters

                                                                                                	 
      	
                                                                                                  68

                                                                                                
	
                                                                                                  Section
      9.15

                                                                                                	 
      	
                                                                                                  Transactions
      with Affiliates

                                                                                                	 
      	
                                                                                                  68

                                                                                                
	
                                                                                                  Section
      9.16

                                                                                                	 
      	
                                                                                                  Subsidiaries

                                                                                                	 
      	
                                                                                                  69

                                                                                                
	
                                                                                                  Section
      9.17

                                                                                                	 
      	
                                                                                                  Negative
      Pledge Agreements; Dividend Restrictions

                                                                                                	 
      	
                                                                                                  69

                                                                                                
	
                                                                                                  Section
      9.18

                                                                                                	 
      	
                                                                                                  Gas
      Imbalances, Take-or-Pay or Other Prepayments

                                                                                                	 
      	
                                                                                                  69

                                                                                                
	
                                                                                                  Section
      9.19

                                                                                                	 
      	
                                                                                                  Swap
      Agreements

                                                                                                	 
      	
                                                                                                  69

                                                                                                
	
                                                                                                  Section
      9.20

                                                                                                	 
      	
                                                                                                  Gas
      Sales Contracts

                                                                                                	 
      	
                                                                                                  70

                                                                                                
	
                                                                                                  Section
      9.21

                                                                                                	 
      	
                                                                                                  Anti-Layering

                                                                                                	 
      	
                                                                                                  71

                                                                                                
	 	 	 	 	 
	
                                                                                                  ARTICLE
      X

                                                                                                
	
                                                                                                  EVENTS
      OF DEFAULT; REMEDIES

                                                                                                
	 
	
                                                                                                  Section
      10.01

                                                                                                	 
      	
                                                                                                  Events
      of Default

                                                                                                	 
      	
                                                                                                  71

                                                                                                
	
                                                                                                  Section
      10.02

                                                                                                	 
      	
                                                                                                  Remedies
      of Lenders.

                                                                                                	 
      	
                                                                                                  73

                                                                                                
	 	 	 	 	 
	
                                                                                                  ARTICLE
      XI

                                                                                                
	
                                                                                                  THE
      AGENTS

                                                                                                
	 
	
                                                                                                  Section
      11.01

                                                                                                	 
      	
                                                                                                  Appointment;
      Powers

                                                                                                	 
      	
                                                                                                  74

                                                                                                
	
                                                                                                  Section
      11.02

                                                                                                	 
      	
                                                                                                  Duties
      and Obligations of Administrative Agent

                                                                                                	 
      	
                                                                                                  75

                                                                                                
	
                                                                                                  Section
      11.03

                                                                                                	 
      	
                                                                                                  Action
      by Administrative Agent

                                                                                                	 
      	
                                                                                                  75

                                                                                                
	
                                                                                                  Section
      11.04

                                                                                                	 
      	
                                                                                                  Reliance
      by Administrative Agent

                                                                                                	 
      	
                                                                                                  76

                                                                                                
	
                                                                                                  Section
      11.05

                                                                                                	 
      	
                                                                                                  Subagents

                                                                                                	 
      	
                                                                                                  76

                                                                                                
	
                                                                                                  Section
      11.06

                                                                                                	 
      	
                                                                                                  Resignation
      or Removal of Administrative Agent

                                                                                                	 
      	
                                                                                                  77

                                                                                                
	
                                                                                                  Section
      11.07

                                                                                                	 
      	
                                                                                                  Agents
      as Lenders

                                                                                                	 
      	
                                                                                                  77

                                                                                                
	
                                                                                                  Section
      11.08

                                                                                                	 
      	
                                                                                                  No
      Reliance.

                                                                                                	 
      	
                                                                                                  77

                                                                                                

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          iii

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            	
                                                    Section
      11.09

                                                  	 
      	
                                                    Administrative
      Agent May File Proofs of Claim

                                                  	 
      	
                                                    78

                                                  
	
                                                    Section
      11.10

                                                  	 
      	
                                                    Authority
      of Administrative Agent to Release Collateral and Liens

                                                  	 
      	
                                                    79

                                                  
	
                                                    Section
      11.11

                                                  	 
      	
                                                    The
      Arranger, and other Agents

                                                  	 
      	
                                                    79

                                                  
	 	 	 	 	 
	
                                                    ARTICLE
      XII

                                                  
	
                                                    MISCELLANEOUS

                                                  
	 
	
                                                    Section
      12.01

                                                  	 
      	
                                                    Notices.

                                                  	 
      	
                                                    79

                                                  
	
                                                    Section
      12.02

                                                  	 
      	
                                                    Waivers;
      Amendments.

                                                  	 
      	
                                                    80

                                                  
	
                                                    Section
      12.03

                                                  	 
      	
                                                    Expenses,
      Indemnity; Damage Waiver.

                                                  	 
      	
                                                    81

                                                  
	
                                                    Section
      12.04

                                                  	 
      	
                                                    Successors
      and Assigns.

                                                  	 
      	
                                                    83

                                                  
	
                                                    Section
      12.05

                                                  	 
      	
                                                    Survival;
      Revival; Reinstatement.

                                                  	 
      	
                                                    86

                                                  
	
                                                    Section
      12.06

                                                  	 
      	
                                                    Counterparts;
      Integration; Effectiveness.

                                                  	 
      	
                                                    87

                                                  
	
                                                    Section
      12.07

                                                  	 
      	
                                                    Severability

                                                  	 
      	
                                                    87

                                                  
	
                                                    Section
      12.08

                                                  	 
      	
                                                    Right
      of Setoff

                                                  	 
      	
                                                    87

                                                  
	
                                                    Section
      12.09

                                                  	 
      	
                                                    GOVERNING
      LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

                                                  	 
      	
                                                    88

                                                  
	
                                                    Section
      12.10

                                                  	 
      	
                                                    Headings

                                                  	 
      	
                                                    89

                                                  
	
                                                    Section
      12.11

                                                  	 
      	
                                                    Confidentiality

                                                  	 
      	
                                                    89

                                                  
	
                                                    Section
      12.12

                                                  	 
      	
                                                    Interest
      Rate Limitation

                                                  	 
      	
                                                    89

                                                  
	
                                                    Section
      12.13

                                                  	 
      	
                                                    EXCULPATION
      PROVISIONS

                                                  	 
      	
                                                    90

                                                  
	
                                                    Section
      12.14

                                                  	 
      	
                                                    Reaffirmation
      and Grant of Security Interest

                                                  	 
      	
                                                    91

                                                  
	
                                                    Section
      12.15

                                                  	 
      	
                                                    No
      Third Party Beneficiaries

                                                  	 
      	
                                                    91

                                                  
	
                                                    Section
      12.16

                                                  	 
      	
                                                    USA
      Patriot Act Notice

                                                  	 
      	
                                                    91

                                                  

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
          iv

          
            

          

        

        
           

        

      

       

      ANNEXES,
EXHIBITS AND SCHEDULES

      

       

      
        
          
            	
                    Annex
      I

                  	 
      	
                    List
      of Commitments

                  
	 
      	 
      	 
      
	
                    Exhibit
      A

                  	 
      	
                    Form
      of Note

                  
	
                    Exhibit
      B

                  	 
      	
                    Form
      of Borrowing Request

                  
	
                    Exhibit
      C

                  	 
      	
                    Form
      of Interest Election Request

                  
	
                    Exhibit
      D

                  	 
      	
                    Form
      of Compliance Certificate

                  
	
                    Exhibit
      E

                  	 
      	
                    Security
      Instruments

                  
	
                    Exhibit
      F

                  	 
      	
                    Form
      of Assignment and Assumption

                  
	
                    Exhibit
      G

                  	 
      	
                    Form
      of Reserve Report Certificate

                  
	
                    Exhibit
      H

                  	 
      	
                    Additional
      Lender Certificate

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    Schedule
      7.05

                  	 
      	
                    Litigation

                  
	
                    Schedule
      7.14

                  	 
      	
                    Subsidiaries
      and Partnerships; Unrestricted Subsidiaries

                  
	
                    Schedule
      7.18

                  	 
      	
                    Gas
      Imbalances

                  
	
                    Schedule
      7.19

                  	 
      	
                    Marketing
      Contracts

                  
	
                    Schedule
      7.20

                  	 
      	
                    Swap
      Agreements

                  
	
                    Schedule
      9.05

                  	 
      	
                    Investments

                  

          

        

      

      
        
           

        

        
          v

          
            

          

        

        
           

        

      

      THIS AMENDED AND RESTATED SECOND LIEN
TERM LOAN AGREEMENT dated as of April 9, 2009, is among:
Rosetta Resources
Inc., a corporation duly formed and existing under the laws of the State
of Delaware
(the “Borrower”); each of
the Lenders from time to time party hereto; BNP Paribas (in its
individual capacity, “BNP
Paribas”), as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative
Agent”); Wells Fargo Energy Capital, Inc. as syndication agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Syndication
Agent”); and UnionBanCal Equities, Inc. as documentation agent for the
Lenders (in such capacity, together with its successors in such capacity, the
“Documentation
Agent”).

       

      R E C I T A L
S

       

      A.           The
Borrower, the Administrative Agent and the other financial institutions named
and defined therein as lenders and agents are parties to that certain Second
Lien Term Loan Agreement dated July 7, 2005 (as amended from time to time,
the “Existing Term
Loan Agreement”).

       

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

       

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

       

      ARTICLE
I

      Definitions
and Accounting Matters

       

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

       

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

       

      “ABR”, when used in
reference to any Tranche, refers to whether such Tranche, bears interest at a
rate determined by reference to the Alternate Base Rate.

       

      “Acceptable
Collateral” means (a) letters of credit having terms satisfactory to
the Administrative Agent issued by a 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, (b) cash prepayment for gas purchases and
(c) such other forms of collateral as may be approved by the “Required
Lenders” as such term is defined in the Senior Revolving Credit
Agreement.

       

      “Adequate Assurance of
Performance” means sufficient security in the form, amount and for the
term reasonably acceptable to the Borrower, including but not limited to, a
standby irrevocable letter of credit, a prepayment, a security interest in an
asset or a performance bond or guaranty.

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      “Adjusted LIBO Rate”
means, with respect to any Eurodollar Tranche for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%)
equal to the LIBO Rate for such Interest Period multiplied by the Statutory
Reserve Rate; provided that the applicable Adjusted LIBO Rate shall be no less
than 3.50% at any time.

       

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

       

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

       

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

       

      “Agents” means,
collectively, the Administrative Agent, and any syndication agent, documentation
agent or similar agent that hereafter becomes a party hereto, and “Agent” shall
mean either the Administrative Agent or such other agent, as the context
requires.

       

      “Agreement” means this
Amended and Restated Second Lien Term Loan Agreement, as the same may from time
to time be amended, modified, supplemented or restated.

       

      “Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Federal Funds Effective Rate in effect
on such day plus 1⁄2 of 1%, (c) the Adjusted LIBO Rate for a one month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1.5% and (d) the Reference Bank Cost of
Funds Rate.  Any change in the Alternate Base Rate due to a change in
the Prime Rate, the Federal Funds Effective Rate, the Adjusted LIBO Rate or the
Reference Bank Cost of Funds Rate shall be effective from and including the
effective date of such change in the Prime Rate, the Federal Funds Effective
Rate, the Adjusted LIBO Rate or the Reference Bank Cost of Funds Rate,
respectively.

       

      “Applicable Margin”
means (a) with respect to each Eurodollar Tranche, a rate per annum equal to
8.50%; and (b) with respect to each ABR Tranche, a rate per annum equal to
7.00%.

       

      “Approved
Counterparty” means (a) any “Lender” as such term is defined in the
Senior Revolving Credit Agreement or any Affiliate of such Lender and
(b) any other Person whose long term senior unsecured debt rating is A/A2
by S&P or Moody’s (or their equivalent) or higher or (c) any other Person
from time to time approved by the “Required Lenders” as such term is defined in
the Senior Revolving Credit Agreement.

       

      “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.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

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

       

      “Approved Purchaser”
means a Person whose long-term senior unsecured debt rating from S&P is at
least “BBB” or whose obligations are unconditionally guaranteed pursuant to a
guaranty of payment by a Person (the “Approved Purchaser
Guarantor”) whose long-term senior unsecured debt rating from S&P is
at least “BBB”, in either case at the time such Gas Sales Contract is entered
into, provided that if such Person’s (or Approved Purchaser Guarantor’s, if
applicable) long-term senior unsecured debt rating from S&P subsequently is
downgraded to below “BBB”, the Person will cease to be an Approved Purchaser
until such time as such Person’s (or such Approved Purchaser Guarantor’s, if
applicable) long-term senior unsecured debt rating is upgraded to “BBB” or
above.

       

      “Arranger” means BNP Paribas Securities
Corp., in its capacity as the sole lead arranger and sole bookrunner
hereunder.

       

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

       

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

       

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

       

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

       

      “Calpine” means
Calpine Corporation, a Delaware corporation.

       

      “Calpine Gas
Contracts” means all Gas Sales Contracts between the Borrower or any of
its Subsidiaries and Calpine or any of its Subsidiaries.

       

      “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.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      “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 having a fair
market value in excess of $2,500,000.

       

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

       

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

       

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

       

      “Commitment” means,
with respect to each Lender and Additional Lender, the commitment of such Lender
to make its Loans hereunder and “Commitments” means the aggregate amount of the
Commitments of all Lenders.  The amount of each Lender’s Commitment is
set forth on Annex I.

       

      “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, (d) non cash gains or
losses under FAS 133 resulting from the net change in Borrower’s and the
Consolidated Restricted Subsidiaries’ mark to market portfolio of commodity
price risk management activities during that period, (e) non cash gains or
losses under FAS 143 resulting from the net change in the fair value of asset
retirement obligations (including plugging and abandonment liabilities) during
that period, (f) non cash gains or losses under FAS 123(R) resulting from the
stock based compensation adjustments and (g) any gains or losses attributable to
writeups or writedowns of assets, including ceiling test writedowns; and
provided further that for purposes of calculating the financial ratios in
Section 9.01, if the Borrower or any Consolidated Restricted Subsidiary shall
acquire or dispose of any material Property or a Subsidiary shall be
redesignated as either an Unrestricted Subsidiary or a Restricted Subsidiary, in
any case, during the period of four fiscal quarters ending on the last day of
the fiscal quarter immediately preceding the date of determination for which
financial statements are available and up to and including the date of the
consummation of such acquisition, disposition or redesignation, then
Consolidated Net Income shall be calculated after giving pro forma effect to such
acquisition (including the revenues of the Properties acquired), merger,
disposition or redesignation, as if such acquisition, merger, disposition or
redesignation had occurred on the first day of such period.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

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

       

      “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 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.

       

      “Cost of Funds” means
with respect to any Lender, the rate per annum quoted by such Lender to the
Administrative Agent as contemplated in the Reference Bank Cost of Funds Rate as
its cost of funds with respect to a Borrowing Request, as determined solely by
such Lender in its reasonable discretion based upon such factors as such Lender
shall deem appropriate from time to time, including market, regulatory and
liquidity conditions; provided that such rate is not necessarily the cost to
such Lender of funding the specific Borrowing Request.

       

      “Debt” means, for any
Person, the sum of the following (without duplication): (a) all obligations of
such Person for borrowed money or evidenced by bonds, bankers’ acceptances,
debentures, notes or other similar instruments; (b) all obligations of such
Person (whether contingent or otherwise) in respect of letters of credit, surety
or other bonds and similar instruments; (c) all accounts payable and all accrued
expenses, liabilities or other obligations of such Person to pay the deferred
purchase price of Property or services that are more than ninety (90) days past
the date of invoice other than those which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (d) all obligations under Capital Leases; (e) all
obligations under Synthetic Leases; (f) all Debt (as defined in the other
clauses of this definition) of others secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person; (g) all Debt (as defined in the other clauses of this definition) of
others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others to
insure a creditor against a loss; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments made more than one month in advance of the month
in which the commodities, goods or services are to be delivered, other than gas
balancing arrangements in the ordinary course of business; (j) obligations to
pay for goods or services even if such goods or services are not actually
received or utilized by such Person; (k) any Debt of a partnership for which
such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l)
Disqualified Capital Stock; and (m) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment.  The Debt of any Person shall include
all obligations of such Person of the character described above to the extent
such Person remains legally liable in respect thereof notwithstanding that any
such obligation is not included as a liability of such Person under
GAAP.  For purposes of determining compliance with the financial
covenants contained in this Agreement, any election by the Borrower to measure
an item of Debt using fair value (as permitted by Statement of Financial
Accounting Standards No. 159 or any similar accounting standard) shall be
disregarded and such determination shall be made as if such election had not
been made.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

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

       

      “Defaulting Lender”
means any Lender, as determined by the Administrative Agent, that has (a) failed
to fund any portion of its Loans within three Business Days of the date required
to be funded by it hereunder, (b) notified the Borrower, the Administrative
Agent, the Issuing Bank or any Lender in writing that it does not intend to
comply with any of its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under other agreements in which it
commits to extend credit, (c) failed, within three Business Days after request
by the Administrative Agent or the Borrower, to confirm that it will comply with
the terms of this Agreement relating to its obligations to fund prospective
Loans, (d) otherwise failed to pay over to the Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within three
Business Days of the date when due, unless the subject of a good faith dispute,
or (e) (i) become or is insolvent or has a parent company that has become or is
insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding,
or has had a receiver, conservator, trustee or custodian appointed for it, or
has taken any action in furtherance of, or indicating its consent to, approval
of or acquiescence in any such proceeding or appointment or has a parent company
that has become the subject of a bankruptcy or insolvency proceeding, or has had
a receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      “Determination Date”
has the meaning assigned such term in Section 2.04(f).

       

      “Discounted Value”
means, with respect to any Fixed Rate Loan, the amount obtained by discounting
the value of that portion of the principal repaid on any date of prepayment
pursuant to Section 3.04, Section 3.05 or Section 10.02 and the interest
payments that would be due after the date of prepayment, from their respective
scheduled due dates to the date of such of prepayment, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on such Fixed Rate Loan is payable)
equal to the Reinvestment Yield.

       

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

       

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

       

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

       

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

       

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

       

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

       

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      “Environmental Laws”
means any and all Governmental Requirements pertaining in any way to health,
safety, the environment or the preservation or reclamation of natural resources,
in effect in any and all jurisdictions in which the Borrower or any 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 Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 (“RCRA”),
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as amended, and
other environmental conservation or protection Governmental
Requirements.  The term “oil” shall have the
meaning specified in OPA, the terms “hazardous substance”
and “release”
(or “threatened
release”) have the meanings specified in CERCLA and the terms “solid waste” and
“disposal” (or
“disposed”)
have the meanings specified in RCRA; provided, however, that (a) in the event
either OPA, CERCLA or RCRA 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”
or “disposal”
which is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply.
 

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

       

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

       

      “ERISA Affiliate”
means each trade or business (whether or not incorporated) which together with
the Borrower or 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.

       

      “Eurodollar”, when
used in reference to any Tranche, refers to whether such Tranche is bearing
interest at a rate determined by reference to the Adjusted LIBO Rate other than
pursuant to clause (c) of the definition of Alternate Base Rate.

       

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

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      “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, 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 real property leases, operating
agreements, joint venture agreements, oil and gas partnership agreements, oil
and gas leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits
agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are usual and customary in the oil and gas business
and are for claims which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP, provided that any such Lien referred to in this clause
does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Restricted
Subsidiary or materially impair the value of such Property subject thereto; (e)
Liens 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
that do not secure any Debt 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, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature
incurred in the ordinary course of business; (h) Liens arising under Uniform
Commercial Code financing filings regarding operating leases which are not
Synthetic Leases entered into by Borrower and Restricted Subsidiaries in the
ordinary course of business covering only the Property under such lease; 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 priority of the Lien granted in favor of the Administrative
Agent and the Lenders is to be hereby implied or expressed by the permitted
existence of such Excepted Liens.
 

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

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      “Exposure” means, for
any day, the volume of physical gas flow delivered during the previous day
multiplied by the contract price therefor.

       

      “FAS 123R” means
Statement of Financial Accounting Standard 123R (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

       

      “FAS 133” means
Statement of Financial Accounting Standard 133 (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

       

      “FAS 143” means
Statement of Financial Accounting Standard 143 (and any statements replacing,
modifying or superceding such statement) adopted by the Financial Accounting
Standards Board.

       

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

       

      “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 Borrower.

       

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

       

      “Fixed Rate” means a
fixed rate per annum as set forth in an Additional Lender
Certificate.

       

      “Fixed Rate Loan”
means any Loan designated as such in any Additional Lender Certificate and
bearing interest at the Fixed Rate.

       

      “Fixed Rate Loan
Lender” means any Lender making a Fixed Rate Loan.

       

      “Floating Rate Loan”
means any ABR Tranche or Eurodollar Tranche.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      “Floating Rate Loan
Lender” means any Lender making a Floating Rate Loan.

       

      “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
1.05.

       

      “Gas Sales Contract”
means any contract for the purchase and sale of gas.

       

      “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 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,
collectively:

       

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Operating LP;

              

      

       

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Offshore, LLC;

              

      

       

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Operating GP, LLC;

              

      

       

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Holdings, LLC;

              

      

       

      
        	
                 
      

              	
                ·

              	
                Rosetta
      Resources Gathering LP;

              

      

       

      
        	
                 
      

              	
                ·

              	
                each
      Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b);
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                any
      other Person that must guarantee the Indebtedness in order for the
      Borrower to comply with Section
9.04(b)(ii)(D).

              

      

       

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

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

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

       

      “Hydrocarbon
Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever
nature.  Unless otherwise indicated herein, each reference to the term
“Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower and the
Restricted Subsidiaries.

       

      “Hydrocarbons” means
oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
or separated therefrom.  Unless otherwise indicated herein, each
reference to the term “Hydrocarbons” shall mean Hydrocarbons of the Borrower and
the Restricted Subsidiaries.

       

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

       

      “Indemnified Taxes”
means Taxes other than Excluded Taxes.

       

      “Initial Reserve
Report” means the report of Netherland, Sewell & Associates, Inc.
dated as of January 20, 2009, with respect to certain Oil and Gas Properties of
the Borrower and its Subsidiaries as of December 31, 2008.

       

      “Intercreditor
Agreement” means that certain Intercreditor Agreement dated as of even
date herewith, by and among the Administrative Agent, the administrative agent
under the Senior Revolving Credit Documents and the Borrower, as amended,
modified or replaced from time to time.

       

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

       

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

       

      “Interest Period”
means with respect to any Eurodollar Tranche, the period commencing on the date
of such Tranche 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 immediately preceding
Business Day and (b) any Interest Period pertaining to a Eurodollar Tranche 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 Tranche
initially shall be the date on which such Tranche is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Tranche.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

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

       

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

       

      “LIBO Rate” means,
with respect to any Eurodollar Tranche for any Interest Period, the rate
appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page
of such service, or any successor to or substitute for such service, providing
rate quotations comparable to those currently provided on such page of such
service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest
Period.  In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with
respect to such Eurodollar Tranche for such Interest Period shall be the rate
(rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar
deposits of an amount comparable to such Eurodollar Tranche and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      “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 it
has acquired or holds subject to a conditional sale agreement, or leases under a
financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person in a transaction intended to
create a financing.

       

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

       

      “Loans” means,
collectively, the Fixed Rate Loans and the Floating Rate Loans made by the
Lenders to the Borrower pursuant to this Agreement.

       

      “Majority Lenders”
means, at any time while no Loans are outstanding, Lenders having more than
fifty percent (50.0%) of the Commitments; and at any time while any Loans are
outstanding, Lenders holding more than fifty percent (50.0%) of the outstanding
principal amount of the Loans (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)); provided that, if any one
Lender has more than fifty percent (50.0%) of the Commitments, then “Majority
Lenders” shall mean, at any time while any Loans are outstanding, at least two
Lenders having more than the greater of (i) sixty percent (60%) of the
Commitments and (ii) 10% plus the percentage of the Commitments held by the
Lender holding the greater amount of Commitments.

       

      “Make-Whole Amount”
means, with respect to any Fixed Rate Loan, an amount equal to the excess, if
any, of the Discounted Value of amounts prepaid in respect of such Loan pursuant
to Section 3.04, Section 3.05 or Section 10.02 over the amount of such principal
amount prepaid; provided that, the Make-Whole Amount may in no event be less
than zero.

       

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

       

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

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      “Maturity Date” means
October 2,
2012.

       

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

       

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

       

      “Net Cash Proceeds”
means in connection with any issuance or sale of assets, Debt, Casualty Events
or the incurrence of loans, the cash proceeds received from such disposition,
issuance or incurrence, net of attorneys’ fees, investment banking fees,
accountants’ fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.

       

      “Non-Defaulting
Lender” means, at any time, each Lender that is not a Defaulting Lender
at such time.

       

      “Non-Recourse Debt”
means any Debt of any Unrestricted Subsidiary, in each case in respect of which:
(a) the holder or holders thereof (i) shall have recourse only to, and shall
have the right to require the obligations of such Unrestricted Subsidiary to be
performed, satisfied, and paid only out of, the Property of such Unrestricted
Subsidiary and/or one or more of its Subsidiaries (but only to the extent that
such Subsidiaries are Unrestricted Subsidiaries) and/or any other Person (other
than Borrower and/or any Restricted Subsidiary) and (ii) shall have no direct or
indirect recourse (including by way of guaranty, support or indemnity) to the
Borrower or any Restricted Subsidiary or to any of the Property of Borrower or
any Restricted Subsidiary, whether for principal, interest, fees, expenses or
otherwise; and (b) the terms and conditions relating to the non-recourse nature
of such Debt are in form and substance reasonably acceptable to the
Administrative Agent.

       

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

       

      “Oil and Gas
Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real or
personal, now owned or hereafter 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.  Unless otherwise
indicated herein, each reference to the term “Oil and Gas Properties” shall mean
Oil and Gas Properties of the Borrower and the Restricted
Subsidiaries.

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

       

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

       

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

       

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

       

      “Post-Default Rate”
means (i) with respect to any Fixed Rate Loan, a rate of interest equal to 2%
per annum over the applicable Fixed Rate and (ii) with respect to any Floating
Rate Loan, a rate of interest equal to two percent (2%) plus the rate applicable
to ABR Tranches as provided in Section 3.02(a).

       

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

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

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

       

      “Purchaser” has the
meaning assigned such term in Section 9.20.

       

      “Proved Oil and Gas
Properties” means Oil and Gas Properties containing Proved
Reserves.

       

      “Proved Reserves”
means “Proved Reserves” which shall include “Proved Developed Producing
Reserves”, “Proved Developed Nonproducing Reserves” and “Proved Undeveloped
Reserves” each as defined in the Definitions for Oil and Gas Reserves
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.

       

      “PV” means the net
present value, discounted at 10% per annum, of the future net revenues expected
to accrue to the Borrower’s and its Restricted Subsidiaries’ collective
interests in Proved Reserves expected to be produced from Oil and Gas Properties
during the remaining expected economic lives of such reserves.  Each
calculation of such expected future net revenues shall be made in accordance
with the then existing standards of the Society of Petroleum Engineers, provided
that in any event (a) appropriate deductions shall be made for severance and ad
valorem taxes, and for operating, gathering, transportation and marketing costs
required for the production and sale of such reserves, (b) appropriate
adjustments shall be made for hedging operations, provided that Swap Agreements
with non-investment grade counterparties shall not be taken into account to the
extent that such Swap Agreements improve the position of or otherwise benefit
the Borrower or any of its Restricted Subsidiaries, (c) the pricing assumptions
used in determining PV for any particular reserves shall be based upon the
following price decks:  (i) for natural gas, the lesser of (A) the
quotation for deliveries of natural gas for each such year from the New York
Mercantile Exchange for Henry Hub, provided that with respect to quotations for
calendar years after the fifth calendar year, the quotation for the fifth
calendar year shall be applied and (B) $6.00/MMBtu and (ii) for crude oil, the
lesser of (A) the quotation for deliveries of West Texas Intermediate crude oil
for each such calendar year from the New York Mercantile Exchange for Cushing,
Oklahoma, provided that with respect to quotations for calendar years after the
fifth calendar year, the quotation for the fifth calendar year shall be applied
and (B) $40.00/Bbl, and (d) the cash-flows derived from the pricing assumptions
set forth in clauses (b) and (c) above shall be further adjusted to account for
the historical basis differentials for each month during the preceding 12-month
period calculated by comparing realized crude oil and natural gas prices to
Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such
period.

       

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

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      “Reference Bank Cost of Funds
Rate” means the rate determined pursuant to Section
2.04(f)(i).

       

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

       

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

       

      “Reinvestment Yield”
means, with respect to the portion of the principal repaid on any Fixed Rate
Loan on any date pursuant to Section 3.04, Section 3.05 or Section 10.02, 1.0%
over the yield to maturity implied by (i) the yields reported, as of 10:00 a.m.,
New York City time, on the second Business Day preceding such date of
prepayment, on the display designated as “Page PXI” (or such other display as
may replace Page PX1) on Bloomberg Financial Markets for the most recently
issued actively traded on the run U.S. Treasury securities having a maturity
equal to the Remaining Life of such amount prepaid as of the date of prepayment
or (ii) if such yields are not reported as of such time or the yields reported
as of such time are not ascertainable (including by way of interpolation), the
Treasury Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding such
date of prepayment with respect to the prepaid principal amount, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity most
nearly equal to the Remaining Life of such amount prepaid as of the date of
prepayment.

       

      In the
case of each determination under clause (i) or clause (ii), as the case may be,
of the preceding paragraph, such implied yield will be determined, if necessary,
by (a) converting U.S. Treasury bill quotations to bond equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the applicable U.S. Treasury security with the maturity closest to
and greater than such Remaining Life and (2) the applicable U.S. Treasury
security with the maturity closest to and less than such Remaining
Life.  The Reinvestment Yield shall be rounded to the number of
decimal places as appears in the interest rate of the applicable
Note.

       

      “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.

       

      “Remaining Life”
means, as of any date of prepayment of principal of a Fixed Rate Loan, the
number of years (calculated to the nearest one-twelfth) that will elapse between
the date of such prepayment with respect to such portion of the principal repaid
pursuant to Section 3.04 and the Maturity Date.

       

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

       

      “Reserve Report” means
a report, in form and substance reasonably satisfactory to the Administrative
Agent and otherwise prepared in accordance with Section 8.12, 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, based
upon the pricing assumptions consistent with SEC reporting requirements at the
time.

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

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

       

      “Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
Property) with respect to any Equity Interests in the Borrower or any of its
Restricted 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 Restricted Subsidiaries
or any option, warrant or other right to acquire any such Equity Interests in
the Borrower or any of its Restricted Subsidiaries.

       

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

       

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

       

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

       

      “Seller” has the
meaning assigned such term in Section 9.20.

       

      “Senior Revolving Credit
Agreement” means that certain Credit Agreement dated as of even date
herewith among the Borrower, as borrower, BNP Paribas, as administrative agent
and the other agents and lenders from time to time parties thereto and any “Loan
Documents” (as defined therein) executed in connection therewith, in each case,
as hereafter amended, supplemented, modified, restated, refinanced or replaced
from time to time, subject to Section 9.02(g) and Section 9.03(e).

       

      “Senior Revolving Credit
Documents” means the Senior Revolving Credit Agreement, the Senior Notes
and any “Loan Documents” (as defined therein), in each case, together with all
amendments, modifications and supplements thereto.

       

      “Senior Revolving Credit
Notes” means the Notes from time to time issued under the Senior
Revolving Credit Agreement.

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

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

       

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

       

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

       

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

       

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

       

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

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

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

       

      “Total Debt” means, at
any date, all Debt of the Borrower and the Consolidated Restricted Subsidiaries
on a consolidated basis, excluding non-cash obligations under FAS 133 and FAS
143.

       

      “Total Reserve Value”
means at any time the PV attributable to Proved Reserves as most recently
determined and certified to the Lenders in accordance with Section 2.07, as the
same may be adjusted from time to time pursuant to Section 8.13(c) or Section
9.13(e) and further adjusted, if necessary, to exclude a portion of reserves
other than Proved Developed Producing Reserves such that (i) not less than 60%
of Total Reserve Value is attributable to the PV of Proved Developed Producing
Reserves and (ii) not more than 25% of Total Reserve Value is attributable to
the PV of Proved Undeveloped Reserves.

       

      “Tranche” means, with
respect to any Floating Rate Loans, that portion of the Floating Rate Loans of
the same Type, made, converted or continued on the same date and, in the case of
that portion of the Floating Rate Loans for which the rate of interest is
determined by reference to the Adjusted LIBO Rate, as to which a single Interest
Period is in effect.

       

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

       

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

       

      “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.

       

      
        
           

        

        
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      “Wholly-Owned
Subsidiary” means 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.

       

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

       

      Section
1.04  Terms
Generally;
Rules of Construction.  The definitions of terms herein shall
apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” as used in this Agreement shall be deemed
to be followed by the phrase “without limitation”.  The word “will”
shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires otherwise (a) any definition of
or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person’s successors and assigns (subject to
the restrictions contained in the Loan Documents), (d) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word
“from” means “from and including” and the word “to” means “to and including” and
(f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Annexes, Exhibits
and Schedules to, this Agreement.  No provision of this Agreement or
any other Loan Document shall be interpreted or construed against any Person
solely because such Person or its legal representative drafted such
provision.

       

      Section
1.05  Accounting
Terms and Determinations; GAAP.  Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which the Borrower’s independent
certified public accountants concur and which are disclosed to the
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

      
        
           

        

        
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      Section
2.01          Term
Loans.

       

      (a)           Subject
to the terms and conditions set forth herein, each Lender agrees on the
Effective Date to make a Floating Rate Loan to the Borrower in a principal
amount equal to such Lender’s Commitment.  Each Floating Rate Loan
shall bear an issue discount (the “Issue Discount”)
equal to 2% of the amount of such Loan.  After applying the Issue
Discount, the Borrower shall receive 98% of the face amount of each Floating
Rate Loan.  Each reference (whether express or implied) herein and in
the other Loan Documents to the “principal” or “principal amount” of a Note or a
Loan shall be a reference to the full face amount of such Note or Loan (as the
case may be) without giving effect to the Issue Discount.  The
Commitments are not revolving and amounts repaid or prepaid may not be
re-borrowed under any circumstance.  Except as set forth in Section
2.09, any portion of the Commitments not utilized by the Borrower on or before
3:00 p.m. New York City time on the Effective Date shall be permanently
cancelled.

       

      (b)           On
the Effective Date (or as soon as practicable with respect to
(ii)):

       

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

       

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

       

      It is the
intent of the parties hereto that this Agreement amends and restates in its
entirety the Existing Term Loan Agreement and re-evidences the obligations of
the Borrower outstanding thereunder.  This Agreement does not
constitute a novation of the obligations and liabilities under the Existing Term
Loan Agreement or evidence repayment of any such obligations and
liabilities.  All loans and other indebtedness, obligations and
liabilities outstanding under the Existing Term Loan Agreement on such date
shall continue to constitute Loans and other Indebtedness, obligations and
liabilities under this Agreement.

       

      Section
2.02          Loans and
Tranches.

       

      (a)           Loans; Several
Obligations.  Except as provided in Section 2.09, each Loan
shall be made on the Effective Date by the Lenders ratably in accordance with
their respective Commitments.  The failure of any Lender to fund its
Loan 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 fund its Loan as required.

       

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

       

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      (c)           Minimum Amounts; Limitation
on Number of Tranches.  At the commencement of each Interest
Period for any Eurodollar Tranche, such Tranche shall be in an aggregate amount
that is an integral multiple of $100,000 and not
less than $1,000,000.  At
the time that each ABR Tranche is made, such Tranche shall be in an aggregate
amount that is an integral multiple of $100,000 and not
less than $1,000,000.  Tranches
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 8 Eurodollar
Tranches outstanding.  Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Tranche if the Interest Period requested with respect thereto
would end after the Maturity Date.

       

      (d)           Notes.  The
Loans made by each Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A, dated, in the case of (i) any
Lender party hereto as of the date of this Agreement, as of the date of this
Agreement or (ii) any Lender that becomes a party hereto pursuant to an
Assignment and Assumption, an Additional Lender Certificate or an Increasing
Lender Certificate, as of the effective date of the Assignment and Assumption,
Additional Lender Certificate or an Increasing Lender Certificate, payable to
the order of such Lender in a principal amount equal to such Lender’s funded
Loan as in effect on such date, and otherwise duly completed.  The
date, amount, Type (in the case of any Floating Rate Loan), interest rate and,
if applicable, Interest Period of each Tranche consisting of a portion of the
Floating Rate Loans 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 its Loans or affect the validity of such transfer by
any Lender of its Note.  

       

      Section
2.03          Requests for Loans.  Except
with respect to any additional Loans made in accordance with Section 2.09, not
later than 11:00 a.m., New York City time, on the Effective Date, the Borrower
shall request the Loans by notifying the Administrative Agent by telephone, fax
(or transmit by electronic communication, if arrangements for doing so have been
approved by the Administrative Agent) and shall confirm such request by
delivering to the Administrative Agent a written Borrowing Request in
substantially the form of Exhibit B and signed by the Borrower.  Such
telephonic, electronic communication and written Borrowing Request shall specify
the following information in compliance with Section 2.02:

       

      (i)            the
aggregate amount of the requested Loans;

       

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

       

      (iii)          whether
any portion of the Floating Rate Loans is to be an ABR Tranche or a Eurodollar
Tranche;

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      Promptly
following receipt of the Borrowing Request in accordance with this Section 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.

       

      Section
2.04          Interest
Elections for
Floating Rate Loans.

       

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

       

      (b)           Interest Election
Requests.  To make an election pursuant to this Section 2.04,
the Borrower shall notify the Administrative Agent of such election by
telephone, fax (or transmit by electronic communication, if arrangements for
doing so have been approved by the Administrative Agent) (i) in the case of a
Eurodollar Tranche, not later than 12:00 noon, New York City time, three
Business Days before the first day of the Interest Period related to such
Tranche and (ii) in the case of an ABR Tranche, not later than 11:00 a.m., New
York City time, on the Business Day of the proposed conversion or
continuation.  Each such Interest Election Request shall be
irrevocable, and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in substantially the
form of Exhibit C and signed by the Borrower.

       

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

       

      (i)            the
Tranche 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 Tranche (in which case the
information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall be
specified for each resulting Tranche);

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

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

       

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

       

      (iv)          if
the resulting Tranche is a Eurodollar Tranche, 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 Tranche but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month’s duration.

       

      (d)           Notice to Lenders by the
Administrative Agent.  Promptly following receipt of an
Interest Election Request, the Administrative Agent shall advise each Lender of
the details thereof and of such Lender’s portion of each resulting Tranche and
if there are ABR Tranches outstanding or if the Interest Election Request is for
an ABR Tranche, then the Administrative Agent shall request that each Lender
provide its Cost of Funds rate consistent with the procedures set forth in the
Section 2.04(f).

       

      (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 Tranche prior to the end of the
Interest Period applicable thereto, then, unless such Tranche is repaid as
provided herein, at the end of such Interest Period such Tranche shall be
converted to an ABR Tranche.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing:  (i) no
outstanding Tranche may be converted to or continued as a Eurodollar Tranche
(and any Interest Election Request that requests the conversion of any Tranche
to, or continuation of any Tranche as, a Eurodollar Tranche shall be
ineffective) and (ii) unless repaid, each Eurodollar Tranche shall be converted
to an ABR Tranche at the end of the Interest Period applicable
thereto.

       

      (f)           Reference Bank Cost of
Funds.

       

      (i)            For
each Business Day (A) that the Administrative Agent receives Interest Election
Request for an ABR Tranche (including any request for a Eurodollar Tranche
converted to an ABR Tranche pursuant to Section 3.03) (each individually, an
“ABR Request”),
on or prior to 12:00 noon, New York City time on such Business Day and (B) that
an ABR Tranche is outstanding under this Agreement and the Alternate Base Rate
communicated by the Administrative Agent on the previous Business Day has
changed, on or prior to 10:00 a.m., New York City time, on each such Business
Day, the Administrative Agent shall communicate the Alternate Base Rate on such
Business Day (without reference to the Reference Bank Cost of Funds Rate (as
defined below)) to each Lender.  Each Lender shall notify the
Administrative Agent no later than 1:00 p.m., New York City time, on such
Business Day an ABR Request is received by the Administrative Agent, and 11:00
a.m., New York City time, on each Business Day that an ABR Tranche is
outstanding (in each instance, a “Determination Date”),
whether such Lender’s Cost of Funds exceeds the Alternate Base Rate for such
Business Day (without reference to the Reference Bank Cost of Funds Rate (as
defined below)).  Any Lender that does not provide notice to the
Administrative Agent with respect to its Cost of Funds prior to 1:00 p.m. or
11:00 a.m., New York City time, on such Business Day, as applicable, shall be
deemed to have confirmed to the Administrative Agent that such Lender’s Cost of
Funds does not exceed the Alternate Base Rate without reference to the Reference
Bank Cost of Funds Rate.

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

      (ii)            If
sixty percent (60%) or more of the Lenders holding Floating Rate Loans as of the
applicable Determination Date (the “Cost of Funds Calculation
Threshold”) notify the Administrative Agent that their Cost of Funds
exceeds the Alternate Base Rate communicated by the Administrative Agent, then
the Administrative Agent shall calculate the “Reference Bank Cost of Funds
Rate” which shall be calculated as the simple average of the Cost of
Funds of the Lenders; provided that, any Lender which does not submit a Cost of
Funds Rate shall be deemed to have confirmed to the Administrative Agent that
such Lender’s Cost of Funds does not exceed the Alternate Base Rate without
reference to the Reference Bank Cost of Funds Rate.  The Alternate
Base Rate communicated by the Administrative Agent as of such Determination Date
(without reference to the Reference Bank Cost of Funds) shall be used for each
such Lender which does not submit a Cost of Funds Rate to calculate the
Reference Bank Cost of Funds Rate.  If the Cost of Funds Calculation
Threshold is not met, then the Reference Bank Cost of Funds Rate shall not be
calculated and shall be disregarded for the purposes of calculating the
Alternate Base Rate as of such Determination Date. For purposes of determining
the Reference Bank Cost of Funds Rate, each Lender and the Administrative Agent
may provide notice by electronic communications pursuant to procedures approved
by the Administrative Agent.

       

      (iii)          On
any Determination Date that a Reference Bank Cost of Funds Rate is calculated,
the Administrative Agent shall calculate the Reference Bank Cost of Funds Rate
in accordance with the procedures set forth in subsection (ii) above and shall
provide such rate to the Borrower and each Lender no later than 2:00 p.m., New
York City time for any ABR Request, and 12:00 noon, New York City time on each
Business Day that an ABR Tranche is outstanding, without identifying the
underlying rates submitted by the Lenders.

       

      Section
2.05          Funding of Loans.

       

      (a)           Funding by
Lenders.  Except with respect to any additional Loans made
under Section 2.09, each Lender shall make its Loan on the Effective Date by
wire transfer of immediately available funds by 2:00 p.m., New York City time,
to the account of the Administrative Agent most recently designated by it for
such purpose by notice to the Lenders.  The Administrative Agent will
make such Loans available to the Borrower by promptly crediting the amounts so
received, in like funds, to an account of the Borrower maintained with the
Administrative Agent in New York, New York and designated by the Borrower in
Borrowing Request.  Nothing herein shall be deemed to obligate any
Lender to obtain the funds for its Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

       

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

       

      
        
           

        

        
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      Section
2.06          Termination.  Subject
to Section 2.09, the Commitments shall terminate at 3:00 p.m., New York City
time, on the Effective Date.

       

      Section
2.07          Total Reserve
Value.

       

      (a)           Subject
to interim adjustment under Section 8.13, Section 8.18 and Section 9.13, the
initial Total Reserve Value shall be $943,359,901.  The Borrower shall
deliver to the Administrative Agent a Reserve Report Certificate, no later than
March 1st and September 1st of each year reflecting the Total Reserve Value as
of the immediately preceding January 1 and July 1, commencing September 1,
2009.  In addition, the Borrower may, by notifying the Administrative
Agent thereof, and the Administrative Agent may, at the direction of the
Majority Lenders, by notifying the Borrower thereof, each elect to require the
Total Reserve Value to be determined one additional time on a specified “as of”
date between such regular determinations (which shall be the first day of a
calendar month following the date of such notice), in which event the Borrower
shall deliver to the Administrative Agent a certificate, in form reasonably
satisfactory to the Administrative Agent, no later than three months after such
specified date reflecting the Total Reserve value as of such specified
date.  The Borrower shall calculate the Total Reserve Value based upon
the applicable definitions of this Agreement, and provide with each such
certificate the Reserve Report and other information used by the Borrower in
calculating the Total Reserve Value.

       

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

       

      (c)           Reduction of Total Reserve
Value Upon Termination of Hedge Positions.  If the Borrower or
any Restricted Subsidiary changes the material terms of any commodity-price Swap
Agreement, terminates any such Swap Agreement or creates any off-setting
positions in respect of any hedge positions under any such Swap Agreement
(whether evidenced by a floor, put or Swap Agreement) and, as a result thereof,
the Borrower is required to give the Lenders notice in accordance with Section
8.18, then the Total Reserve Value shall be simultaneously reduced by an amount
determined by the Required Lenders not exceeding the economic consequences of
such change, termination or creation of off-setting positions.

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

      Section
2.08          Intercreditor
Agreement.  The Loans, the Notes, this Agreement and the other
Loan Documents; the rights and remedies of the Lenders and the Administrative
Agent hereunder and thereunder and the Liens created thereby are subject to the
Intercreditor Agreement.  Each Lender hereunder (a) acknowledges that
it has received a copy of the Intercreditor Agreement, (b) consents to the
subordination of Liens provided for in the Intercreditor Agreement, (c) agrees
that it will be bound by and will take no actions contrary to the provisions of
the Intercreditor Agreement and (d) authorizes and instructs the Administrative
Agent to enter into the Intercreditor Agreement as Second Lien Collateral Agent
(as defined therein) and on behalf of such Lender.  The foregoing
provisions are intended as an inducement to the lenders under the Senior
Revolving Credit Agreement to permit the incurrence of Indebtedness under this
Agreement and to extend credit to the Borrower and such lenders are intended
third party beneficiaries of such provisions.

       

      Section
2.09          Optional Increase in
Aggregate Outstanding Loan Amounts.

       

      (a)           Subject
to the conditions set forth in Section 2.09(b), the Borrower may, for the 30 day
period following the Effective Date and with the prior written consent of the
Administrative Agent, increase the aggregate amount of Loans outstanding under
this Agreement, by causing one or more Lenders to make additional Loans and or
causing any other Person that at such time is not a Lender to become a Lender
(an “Additional
Lender”).

       

      (b)           The
incurrence of any new Loan under this Agreement by the Borrower after the
Effective Date shall be subject to the following additional
conditions:

       

      (i)            each
new Loan shall not be in an amount of less than $5,000,000 unless the
Administrative Agent otherwise consents, and no such new Loan shall be permitted
if after giving effect thereto the aggregate principal amount of Loans
outstanding under this Agreement would exceed $100,000,000;

       

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

       

      (iii)          if
a new Loan is a Fixed Rate Loan, then (i) in no event shall the Fixed Rate
exceed a rate per annum of 13.75% and (ii) such Loan shall be made at par value
with no original issue discount;

       

      (iv)          if
the Borrower elects to increase the aggregate principal amount of Loans
outstanding under this Agreement 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 H (an “Additional Lender
Certificate”), together with an Administrative Questionnaire and a
processing and recordation fee of $3,500 payable by the Borrower, and 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;

       

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

      (v)           if
the Borrower elects to increase the aggregate principal amount of Loans
outstanding under this Agreement by causing an existing Lender to make
additional Loans, then the Borrower and such Additional Lender shall execute and
deliver to the Administrative Agent a certificate in form and substance
satisfactory to the Administrative Agent (an “Increasing Lender
Certificate”), and the Borrower shall deliver a replacement Note payable
to the order of such Lender in a principal amount equal to its original
Commitment plus the amount of its additional Loans, and otherwise duly
completed.

       

      (c)           Subject
to acceptance and recording thereof pursuant to Section 2.09(d), from and after
the effective date specified in any Additional Lender Certificate or any
Increasing Lender Certificate:  (A) the aggregate principal amount of
Loans outstanding under this Agreement shall be increased as set forth therein,
and (B) 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.

       

      (d)           Upon
its receipt of a duly completed Additional Lender Certificate or Increasing
Lender Certificate, executed by the Borrower and the Additional Lender party
thereto or the Borrower and the Lender party thereto, the processing and
recording fee referred to in Section 2.09(b)(iv), the Administrative
Questionnaire referred to in Section 2.09(b)(iv) (if required) and the written
consent of the Administrative Agent to such increase required by Section
2.09(a), the Administrative Agent shall accept such Additional Lender
Certificate or Increasing 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) (if
required).  No increase in the aggregate principal amount of Loans
outstanding under this Agreement shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
Section 2.09(d).

       

      ARTICLE
III

      Payments
of Principal and Interest; Prepayments; Fees

       

      Section
3.01          Repayment of
Loans.  On the Maturity Date, the Borrower shall repay the
outstanding principal balance of the Loans in full.

       

      Section
3.02          Interest.

       

      (a)           Fixed Rate
Loans.  Each Fixed Rate Note shall bear interest at a rate per
annum equal to the applicable Fixed Rate.

       

      (b)           Floating Rate
Loans.

       

      (i)            ABR
Tranches.  The portion of the Floating Rate Loans comprising
each ABR Tranche shall bear interest at the Alternate Base Rate plus the
Applicable Margin, but in no event to exceed the Highest Lawful
Rate.

       

      
        
           

        

        
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      (ii)           Eurodollar
Tranches.  The portion of the Floating Rate Loans comprising
each Eurodollar Tranche shall bear interest at the Adjusted LIBO Rate for the
Interest Period in effect for such Tranche plus the Applicable Margin, but in no
event to exceed the Highest Lawful Rate.

       

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

       

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

       

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

       

      (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 (excluding any Fixed
Rate Loan Lenders for the purposes of this calculation) 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 that
portion of their Floating Rate Loan included in such Tranche for such Interest
Period;

       

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

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

       

      Section
3.04          Prepayments.

       

      (a)           Optional
Prepayments.  

       

      (i)            Subject
to any break funding costs payable pursuant to Section 5.02 and prior notice in
accordance with Section 3.04(b), the Borrower shall have the right to prepay the
Loans at any time on or after the first anniversary of the Effective Date, in
whole or in part, as follows:

       

      (A)          during
the period commencing on the first anniversary of the Effective Date to and
including the second anniversary of the Effective Date, with a premium equal to
2% of such amount prepaid;

       

      (B)       
   during the period commencing on the next day after the second
anniversary of the Effective Date, without premium or penalty;

       

      provided
that, each prepayment is in an amount that is an integral multiple of $1,000,000
and not less than $1,000,000, or if such amount is less than $1,000,000, the
outstanding principal amount of the Loans.  During the period
commencing on the Effective Date to, the date immediately preceding the first
anniversary of the Effective Date, the Borrower may not prepay the
Loans.

       

      (ii)            Notwithstanding
anything to the contrary in this Section 3.04(a), with respect to the amount of
any optional prepayment (including the equivalent prepayment premium, if any) in
this Section 3.04(a) that would be allocated to the Fixed Rate Loans (such
amount, the “Fixed
Rate Loan Prepayment Amount”), at any time when Fixed Rate Loans remains
outstanding, the Borrower shall, in lieu of applying such amount to the
prepayment of the Fixed Rate Loans on the date specified in this Section
3.04(a), give each Fixed Rate Loan Lender written notice (a “Prepayment Option
Notice”) which shall include an offer by the Borrower to prepay, on the
date the Floating Rate Loans are prepaid pursuant to this Section 3.04(a), the
Fixed Rate Loans by an amount equal to the Fixed Rate Loan Prepayment
Amount.  If any Fixed Rate Loan Lender accepts the prepayment offer
pursuant to the Prepayment Option Notice, then the Borrower shall pay an amount
equal to such Lender’s pro rata share of the Fixed Rate Loan Prepayment Amount
to such Fixed Rate Loan Lender.  If any Fixed Rate Loan Lender
declines the prepayment offer, then Borrower shall pay to the Floating Rate
Lenders and such Fixed Rate Loan Lenders accepting the prepayment, an amount
equal to the portion of the optional prepayment not accepted by a Fixed Rate
Loan Lender (ratably as between the Floating Rate Lenders and the Fixed Rate
Loan Lenders accepting the prepayment); provided that, the Borrower may prepay
any Fixed Rate Loan, without the consent of such Fixed Rate Loan Lender, if the
Borrower pays to such Fixed Rate Loan Lender the principal amount allocated to
such Fixed Rate Loan pursuant to such prepayment, plus accrued interest thereon
and the applicable Make-Whole Amount, if any.

       

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

      (b)           Notice and Terms of Optional
Prepayment.  The Borrower shall notify the Administrative Agent
by telephone (confirmed by telecopy) or telecopy of any prepayment hereunder (i)
in the case of prepayment of a Eurodollar Tranche or any Fixed Rate Loan, not
later than 12:00 noon, New York City time, three Business Days before the date
of prepayment, or (ii) in the case of prepayment of an ABR Tranche, not later
than 12:00 noon, New York City time, on the Business Day of
prepayment.  Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of the Loans (and, with respect to
the Floating Rate Loans, each Tranche or portion thereof) to be
prepaid.  Promptly following receipt of any such notice, the
Administrative Agent shall advise the Lenders of the contents
thereof.  Each prepayment of a Loan shall be applied ratably to the
Loans of all Lenders.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 3.02.

       

      Section
3.05          Mandatory
Prepayments.

       

      (a)           Any
time after the first anniversary of the Effective Date, the Borrower shall
prepay the Notes (including the prepayment premium, if any, that would otherwise
be payable under Section 3.04 for optional prepayments of Floating Rate Loans
and including the Make-Whole Amount on the Fixed Rate Loans being prepaid) in
amounts equal to, to the extent not applied as otherwise allowed pursuant to
Section 9.13(e), 100% of the Net Cash Proceeds of any sale (including any
Casualty Event) of any Oil and Gas Properties of the Borrower or any Restricted
Subsidiary.

       

      (b)           Notwithstanding
anything herein to the contrary, if the amount of any Net Cash Proceeds referred
to in Section 3.05(a) would otherwise be a required prepayment under the terms
of the Senior Revolving Credit Agreement, then prepayment shall only be required
to the extent any excess Net Cash Proceeds remain after making such prepayment,
provided, however, that if such payment is waived, such amount shall be payable
to the Borrower pursuant to this Section 3.05.

       

      Section
3.06          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.

       

      Section
3.07          No Make-Whole Amount for
Floating Rate Loans.  Notwithstanding anything to the contrary
contained herein, in no event shall any Lender of a Floating Rate Loan be
entitled to receive any Make-Whole Amount under any circumstances.

       

      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.  Except as provided for in Section 4.03, the Borrower
shall make each payment required to be made by it hereunder (whether of
principal, interest or fees, or of amounts payable under Section 5.01, Section
5.02, Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the
date when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim.  Fees, once paid, shall be fully
earned and shall not be refundable under any circumstances.  Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  Except as
provided for in Section 4.03, all such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, as expressly
provided herein and except that payments pursuant to Section 5.01, Section 5.02,
Section 5.03 and Section 12.03 shall be made directly to the Persons entitled
thereto.  The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in
dollars.

       

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

      (b)           Application of Insufficient
Payments.  If at any time insufficient funds are received by
and available to the Administrative Agent to pay fully all amounts of principal,
interest and fees then due hereunder (including, without limitation, the
Make-Whole Amount), such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably, among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.

       

      (c)           Sharing of Payments by
Lenders.  If any Lender shall, by exercising any right of
set-off or counterclaim or otherwise, obtain payment in respect of any principal
of or interest on any of its Loan resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Loan and accrued interest
thereon than the proportion received by any other Lender (other than as provided
in Section 3.04(a)(ii)), then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Loans of other Lenders
to the extent necessary so that the benefit of all such payments shall be shared
by the Lenders ratably in accordance with the aggregate amount of principal of
and accrued interest on their respective Loans; provided that iv) 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 v) 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 its Loan 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 that the Borrower
will not make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders the amount
due.  In such event, if the Borrower has not in fact made such
payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.

       

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

      Section
4.03          Payments and Deductions;
Defaulting Lenders.

       

      (a)           The
Borrower and the Guarantors shall each have the right, to the extent permitted
by applicable law, to setoff any Debt owed to it by any Defaulting Lender in
respect of deposit liabilities of such Defaulting Lender against amounts owed by
the Borrower to such Defaulting Lender under this Agreement, provided that the
amount of such set-off shall not exceed the amount of such Defaulting Lender’s
pro rata share of the Indebtedness and interest.  Further, if any
Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(b) or Section 4.02, then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid in cash.

       

      (b)           If
a Defaulting Lender (or a Lender who would be a Defaulting Lender but for the
expiration of the relevant grace period) as a result of the exercise of a
set-off shall have received a payment in respect of its pro rata share of the
Indebtedness which results in its Loans outstanding to the Borrower being less
than its pro rata share of the Indebtedness, then payments (including principal,
interest and fees) to such Defaulting Lender will be suspended until such time
as all amounts due and owing to the Lenders has been equalized in accordance
with each of the Lenders respective pro rata share of the
Indebtedness.  After acceleration or maturity of the Loans, subject to
the first sentence of this Section 4.03(b), all principal will be paid ratably
as provided in Section 10.02(c).

       

      (c)           In
the event that the Administrative Agent and the Borrower each agrees that a
Defaulting Lender has adequately remedied all matters that caused such Lender to
be a Defaulting Lender, then on such date such Lender shall purchase at par such
of the Loans of the other Lenders as the Administrative shall determine may be
necessary in order for such Lender to hold such Loans in accordance with its pro
rata share of the Indebtedness.

       

      Section
4.04          Disposition of
Proceeds.  The Security Instruments contain an assignment by
the Borrower and/or the Guarantors unto and in favor of the Administrative Agent
for the benefit of the Lenders of all of the Borrower’s or each Guarantor’s
interest in and to production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged Property.  The Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (i) 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 (ii) 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.

       

      
        
           

        

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

       

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

       

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

       

      (d)           Effect of Failure or Delay
in Requesting Compensation.  Failure or delay on the part of
any Lender to demand compensation pursuant to this Section 5.01 shall not
constitute a waiver of such Lender’s right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 180 days
prior to the date that such Lender notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s intention
to claim compensation therefor; provided further that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

       

      
        
           

        

        
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      Section
5.02          Break Funding
Payments.  In the event of (a) the payment of any principal of
any Eurodollar Tranche 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 Tranche into an ABR Tranche other than on the last
day of the Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any Eurodollar Tranche on the date specified in any
notice delivered pursuant hereto, or (d) the assignment of any Eurodollar
Tranche 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
Tranche, 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 Eurodollar
Tranche had such event not occurred, at the Adjusted LIBO Rate that would have
been applicable to such Eurodollar Tranche, 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 Eurodollar Tranche), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market.

       

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

       

      Section
5.03          Taxes.

       

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

       

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

       

      
        
           

        

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

       

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

       

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

       

      Section
5.04          Mitigation Obligations;
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 Loan 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 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, or if any Lender becomes a Defaulting Lender, then the Borrower may to the
extent not prohibited by applicable law, 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, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loan, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrower (in the case of all other amounts) and (iii) in the case of
any such assignment resulting from a claim for compensation under Section 5.01
or payments required to be made pursuant to Section 5.03, such assignment will
result in a reduction in such compensation or payments.  A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to
apply.

       

      
        
           

        

        
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      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 Tranches either generally or having a particular Interest
Period hereunder, then vi) such Lender shall promptly notify the Borrower and
the Administrative Agent thereof and such Lender’s obligation to make such
Eurodollar Tranches shall be suspended (the “Affected Loans”)
until such time as such Lender may again make and maintain such Eurodollar
Tranches and vii) all Affected Loans which would otherwise be made by such
Lender shall be made instead as ABR Tranches (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 Tranches 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 Tranches, all payments of
principal which would otherwise be applied to such Lender’s Affected Loans shall
be applied instead to its ABR Tranches.

       

      ARTICLE
VI

      Conditions
Precedent

       

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

       

      (a)           The
Administrative Agent, the Arranger and the Lenders shall have received all
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 two (2) Business
Days prior to the Effective Date, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder (including,
without limitation, the fees and expenses of Vinson & Elkins L.L.P., counsel
to the Administrative Agent).

       

      (b)           The
Administrative Agent shall have received a certificate of the Secretary or an
Assistant Secretary of the Borrower and each Guarantor setting forth (1)
resolutions of its board of directors with respect to the authorization of the
Borrower or such Guarantor to execute and deliver the Loan Documents to which it
is a party and to enter into the transactions contemplated in those documents,
(2) the officers of the Borrower or such Guarantor (y) who are authorized to
sign the Loan Documents to which the Borrower or such Guarantor is a party and
(z) who will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this Agreement
and the transactions contemplated hereby, (3) specimen signatures of such
authorized officers, and (4) the articles or certificate of incorporation and
bylaws (or other applicable organizational documents) of the Borrower and such
Guarantor, certified as being true and complete.  The Administrative
Agent and the Lenders may conclusively rely on such certificate until the
Administrative Agent receives notice in writing from the Borrower to the
contrary.

       

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

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

       

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

       

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

       

      (f)     
      The Administrative Agent shall have received
duly executed Notes payable to the order of each Lender in a principal amount
equal to its 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, including the Guaranty Agreement and the other
Security Instruments described on Exhibit E.  In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall:

       

      (i)            be
reasonably satisfied that the Security Instruments create (or upon the
recordation thereof after the Effective Date will create) first priority,
perfected Liens (subject only to Liens created by the Senior Revolving Credit
Documents and Excepted Liens identified in clauses (a) to (d) and (f) of the
definition thereof, but subject to the provisos at the end of such definition)
on at least 80% of the total value of the Proved Oil and Gas Properties
evaluated in the Initial Reserve Report;

       

      (ii)            be
reasonably satisfied that it has a Lien on all Property constituting security
for the Senior Revolving Credit Agreement.

       

      (h)           The
Administrative Agent shall have received an opinion of (5) Mayer Brown LLP,
special counsel to the Borrower, in form and substance reasonably acceptable to
the Administrative Agent, and (6) local counsel in each of the following states:
Texas, California,
New Mexico, Wyoming, Colorado and any other jurisdictions requested by
the Administrative Agent, in form and substance reasonably acceptable to the
Administrative Agent.

       

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

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

       

      (j)        
   The Administrative Agent shall have received 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 Proved Oil and Gas Properties evaluated in the Initial
Reserve Report.

       

      (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 a certificate of
a Responsible Officer of the Borrower certifying that the Borrower has received
all consents and approvals required by Section 7.03.

       

      (m)          The
Administrative Agent shall have received the financial statements referred to in
Section 7.04(a) and the Initial Reserve Report accompanied by the Reserve Report
Certificate.

       

      (n)           The
Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties of the Borrower and the
Restricted Subsidiaries for each of the following
jurisdictions:  Delaware, Texas, California, New
Mexico, Wyoming, Colorado 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.

       

      (o)           The
Administrative Agent shall have received evidence satisfactory to it, and a
certificate of a Responsible Officer of the Borrower certifying, that on a pro
forma basis after giving effect to the proceeds of the initial funding
hereunder, the Borrower has liquidity of not less than $25,000,000, consisting
of undrawn availability under the Senior Revolving Credit Agreement, cash or
Investments permitted by Section 9.05(c), Section 9.05(d), Section 9.05(e) or
Section 9.05(f).

       

      (p)           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 hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or
prior to 2:00 p.m., New York City time, on April 9, 2009 (and,
in the event such conditions are not so satisfied or waived, the Commitments
shall terminate at such time).

       

      Section
6.02          Additional
Conditions.  The obligation of each Lender to fund its Loan is
subject to the satisfaction of the following additional conditions:

       

      
        
           

        

        
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      (a)           At
the time of and immediately after giving effect to the funding of the Loans, no
Default shall have occurred and be continuing.

       

      (b)           At
the time of and immediately after giving effect to the funding of the Loans, 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 on and
as of the Effective Date, 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 Effective Date, such representations and warranties shall continue
to be true and correct as of such specified earlier date.

       

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

       

      (e)           The
receipt by the Administrative Agent of a Borrowing Request in accordance with
Section 2.03.

       

      ARTICLE
VII

      Representations
and Warranties

       

      The
Borrower represents and warrants to the Lenders that:

       

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

       

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

       

      
        
           

        

        
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      Section
7.03          Approvals; No
Conflicts.  The Transactions viii) 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 (1) filings and
approvals that will have been obtained prior to the Effective Date or are
customarily obtained following an acquisition of Oil and Gas Properties, (ii)
the recording and filing of the Security Instruments as required by this
Agreement and (iii) those third party approvals or consents which, if not made
or obtained, would not cause a Default hereunder, could not reasonably be
expected to have a Material Adverse Effect or do not have an adverse effect on
the enforceability of the Loan Documents, ix) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, x) 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 xi) 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 as of and for the
fiscal year ended December 31, 2008, reported on by PricewaterhouseCoopers,
independent public accountants.  Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such date and for such period in accordance with GAAP.

       

      (b)           Since
December 31, 2008, (1) there has been no event, development or circumstance that
has had or could reasonably be expected to have a Material Adverse Effect and
(2) 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
Debt (including Disqualified Capital Stock) or any contingent liabilities,
off-balance sheet liabilities or partnerships, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements.

       

      
        
           

        

        
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      Section
7.05          Litigation.

       

      (a)           Except
as set forth on Schedule 7.05, there are no actions, suits, investigations
or proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Restricted Subsidiary (3) not fully covered by insurance
(except for normal deductibles) and reasonable self-insurance 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, and (4) that involve any Loan Document or
the Transactions.

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
           

        

        
          44

          
            

          

        

        
           

        

      

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

       

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

       

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

       

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

       

      (a)           Each
of the Borrower and each 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 Restricted 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 Restricted Subsidiary, as applicable, has set aside on its
books adequate reserves in accordance with GAAP or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect.  The charges, accruals and reserves on the books of
the Borrower and its Restricted Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower,
adequate.  No Tax Lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such Tax or other such
governmental charge.

       

      
        
           

        

        
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      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, established and maintained in substantial compliance with
its terms, 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 (5) either a civil penalty assessed pursuant to subsections (c),
(i), (l) or (m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code or (6) breach of fiduciary duty liability damages
under section 409 of ERISA.

       

      (d)           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.

       

      (e)           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.

       

      (f)           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 employee pension benefit
plan, as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA,
section 302 of ERISA or section 412 of the Code.

       

      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.  No 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), taken as a whole, 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 pursuant to a notice under Section
8.02 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 Oil and Gas Properties and 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.

       

      
        
           

        

        
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      Section
7.12          Insurance.  The
Borrower has, and has caused all of its Restricted Subsidiaries to have, xii)
all insurance policies sufficient for the compliance by each of them with all
material Governmental Requirements and all material agreements and xiii)
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 and
xiv) identified to the Administrative Agent the amounts and matters for
which the Borrower or its Restricted Subsidiaries have
self-insurance.  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
Capital Leases creating Liens permitted by Section 9.03(c), but then only on the
Property subject of such Capital Lease), or subject to any order, judgment, writ
or decree, which either restricts or purports to restrict its ability to grant
Liens to the Administrative Agent and the Lenders on or in respect of their
Properties to secure the Indebtedness and the Loan Documents.

       

      Section
7.14          Subsidiaries.  Except
as set forth on Schedule 7.14 or as disclosed in writing to the Administrative
Agent (which shall promptly furnish a copy to the Lenders), which shall be a
supplement to Schedule 7.14, the Borrower has no Subsidiaries 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 Rosetta Resources
Inc.; and the organizational identification number of the Borrower in its
jurisdiction of organization is 3980164 (or, in each case,
as set forth in a notice delivered to the Administrative Agent pursuant to
Section 8.01(m) in accordance with Section 12.01).  The
Borrower’s principal place of business and chief executive offices are located
at the address specified in Section 12.01 (or as set forth in a notice delivered
pursuant to Section 8.01(m) and Section 12.01(c)).  Each 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 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(m)).

       

      
        
           

        

        
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      Section
7.16          Properties; Titles,
Etc.

       

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

       

      (b)           All
material leases and agreements necessary for the conduct of the business of the
Borrower and the 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 agreement, which could reasonably be expected to have a
Material Adverse Effect.

       

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

       

      (d)           All
of the Properties of the Borrower and the 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,
except for such failure as to condition or maintenance as could not be
reasonably expected to have a Material Adverse Effect.

       

      (e)           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.

       

      
        
           

        

        
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      Section
7.17          Maintenance of
Properties.  Except for such acts or failures to act as could
not be reasonably expected to have a Material Adverse Effect, the Oil and Gas
Properties (and Properties unitized therewith) of the Borrower and its
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, (1) no Oil and Gas Property 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 (2) none of the wells comprising a part of the Oil and Gas Properties
(or Properties unitized therewith) of 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) of the Borrower or such Restricted Subsidiary.  All
pipelines, wells, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the Borrower
or any of its Restricted Subsidiaries that are necessary to conduct normal
operations are being maintained in a state adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Borrower or any of its Restricted Subsidiaries, in a manner consistent with the
Borrower’s or its Restricted Subsidiaries’ past practices (other than those the
failure of which to maintain in accordance with this Section 7.17 could not
reasonably be expected to have a Material Adverse Effect).

       

      Section
7.18          Gas Imbalances,
Prepayments.  Except as set forth on Schedule 7.18 or on the
most recent certificate delivered pursuant to Section 8.12(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 their Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding one 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 production sold thereunder
which is computed substantially in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the subject
Property’s delivery capacity), no material agreements exist which are not
cancelable on 60 days notice or less without penalty or detriment for the sale
of production from the Borrower’s or its Restricted Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that xv)
pertain to the sale of production at a fixed price and xvi) have a maturity or
expiry date of longer than six (6) months from the date hereof.

       

      
        
           

        

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

       

      Section
7.21          Use of
Loans.  The proceeds of the Loans shall be used to provide
working capital for exploration and production operations, the acquisition,
exploration and development of additional Oil and Gas Properties, and for
general corporate purposes.  The Borrower and its Restricted
Subsidiaries are not engaged principally, or as one of its or their important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board).  No part of the
proceeds of any Loan will be used for any purpose which violates the provisions
of Regulations T, U or X of the Board.

       

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

       

      ARTICLE
VIII

      Affirmative
Covenants

       

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

       

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

       

      (a)           Annual Financial
Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the 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 PricewaterhouseCoopers
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.

       

      
        
           

        

        
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      (b)           Quarterly Financial
Statements.  As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, its
unaudited 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.

       

      (c)           Certificate of Financial
Officer -- Compliance.  Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of
a Financial Officer in substantially the form of Exhibit D hereto (1) 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, (2) setting forth reasonably detailed calculations demonstrating
compliance with Section 9.01 and (3) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial
statements referred to in Section 7.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate.

       

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

       

      
        
           

        

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

       

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

       

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

       

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

       

      (j)         
  Lists of
Purchasers.  Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of Persons
purchasing Hydrocarbons from the Borrower and its Restricted Subsidiaries
constituting at least 80% of the total revenues from such purchases for the
six-month period ending on the date of such Reserve Report (such list to include
and specify in descending order the largest purchasers of Hydrocarbons for such
period based on the percentage of total revenues that each such purchaser
represents); and during the continuance of a Default, promptly upon the request
therefor by the Administrative Agent or any Lender, a list of all Persons
purchasing Hydrocarbons from the Borrower and its Restricted Subsidiaries for
the six-month period ending on the date of such request.

       

      (k)           Notice of Sales of Oil and
Gas Properties.  In the event the Borrower or any Restricted
Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or
Gas Properties or any Equity Interests in any Subsidiary in accordance with
Section 9.13, prior written notice of such disposition, the price thereof and
the anticipated date of closing and any other details thereof requested by the
Administrative Agent or any Lender.

       

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

       

      
        
           

        

        
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      (m)           Information Regarding
Borrower and Guarantors.  Prompt written notice (and in any
event within ten (10) days prior thereto) of any change (4) in the Borrower
or any Guarantor’s corporate name or in any trade name used to identify such
Person in the conduct of its business or in the ownership of its Properties,
(5) in the location of the Borrower or any Guarantor’s chief executive
office or principal place of business, (6) in the Borrower or any
Guarantor’s identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (7) in the Borrower or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (8) in the Borrower or any
Guarantor’s federal taxpayer identification number.

       

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

       

      (o)           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 organic document of the Borrower or any
Restricted Subsidiary.

       

      (p)           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 and any reports or other information required to be filed with respect
thereto under the Code or 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.

       

      (q)           Delivery of Information
Electronically.  Notices to the Administrative Agent and the
Lenders under this Section 8.01 may be delivered or furnished by electronic
communications pursuant to procedures approved by the Administrative Agent,
including broadcast email to the Lenders that the available information has been
made available to the Lenders on either the Borrower’s “Intralinks” page or the
Borrower’s website at www.rosettaresources.com.  Notwithstanding
the foregoing, any such information included in materials otherwise filed with
the SEC may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date on which the Borrower posts such documents, or
provides a link thereto, and notifies Administrative Agent of such posting or
link.

       

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

       

      (a)           the
occurrence of any Default;

       

      (b)           the
filing or commencement of, or the threat in writing of, any action, suit,
proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof not previously disclosed in writing to the Lenders or any material
adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in
liability in excess of $5,000,000, not fully
covered by insurance, subject to normal deductibles; and reasonable
self-insurance;

       

      
        
           

        

        
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      (c)           Calpine
shall fail to make any payment in respect of any Calpine Gas Contract or post
any Acceptable Collateral required by the terms thereof within one Business Day
of when the same shall become due and payable, whether at the due date thereof,
upon acceleration, termination or otherwise; and

       

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

       

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

       

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

       

      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 Restricted Subsidiaries before the same shall become delinquent
or in default, except where xx) the validity or amount thereof is being
contested in good faith by appropriate proceedings, xxi) the Borrower or such
Restricted Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and xxii) 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
Restricted Subsidiary.

       

      Section
8.05          Performance of Obligations
under Loan Documents.  The Borrower will pay the Notes
according to the reading, tenor and effect thereof, and the Borrower will, and
will cause each 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, except in each case where the failure to
comply could not reasonably be expected to have a Material Adverse
Effect:

       

      
        
           

        

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

       

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

       

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

       

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

       

      (e)           operate
its Oil and Gas Properties and other material Properties or cause or make
reasonable and customary efforts to cause such Oil and Gas Properties and other
material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental
Requirements.

       

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

       

      Section
8.07          Insurance.  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.  The loss payable clauses or provisions in said insurance
policy or policies insuring any of the collateral for the Loans shall be
endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice (or 10 days prior notice in the event of
any non-payment of premiums) of any cancellation to the Administrative
Agent.  So long as no Event of Default has occurred and is continuing,
except as otherwise required by Section 9.12, the Borrower or applicable
Restricted Subsidiary shall be entitled to use the proceeds received from any
insurance policy as a result of a Casualty Event (without regarding to the
threshold in the definition thereof) to repair or replace the Property of the
Borrower or such Restricted Subsidiary subject to such Casualty Event or to
otherwise enhance the value of the collateral for the Indebtedness.

       

      
        
           

        

        
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      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 oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas waste,
hazardous substance or solid waste on, under, about or from any of the
Borrower’s or its Subsidiaries’ Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause
each Subsidiary to establish and implement, such 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.

       

      
        
           

        

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

       

      (c)           The
Borrower will, and will cause each Subsidiary to, provide environmental
assessments, audits and tests in accordance with the most current version of the
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 or other
Properties.

       

      Section
8.11          Further
Assurances.

       

      (a)           The
Borrower at its 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
Indebtedness, or to correct any omissions in this Agreement or the Security
Instruments, or to state more fully the obligations secured therein, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the reasonable discretion of the Administrative Agent, in
connection therewith.

       

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

       

      Section
8.12          Reserve
Reports.

       

      (a)           On
or before March 1st and September 1st of each year, commencing September 1,
2009, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries as of the immediately preceding January 1st and July 1st,
respectively, located within the geographic boundaries of the United States of
America (or the Outer Continental Shelf adjacent to the United States of
America).  The Reserve Report as of January 1 of each year shall be
prepared by or under the supervision of the chief engineer of the Borrower
(provided that at least 80% of the Proved Reserves, on a volumetric basis,
evaluated therein shall have been audited 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 in each
case certify (1) there are no statements or conclusions in such 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 Oil and Gas
Properties and production and cost estimates contained in any 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, and (2)
to have been prepared in accordance with the procedures used in the Initial
Reserve Report.

       

      
        
           

        

        
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      (b)           In
the event any party elects a redetermination of the Total Reserve Value as of a
specified date other than January 1 and July 1 pursuant to Section 2.07, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding January 1 Reserve Report.

       

      (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,
in substantially the form of Exhibit G hereto (the “Reserve Report
Certificate”), certifying that in all material respects: (3) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (4) the Borrower or its Restricted
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (5) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (6) none of
their Oil and Gas Properties have been sold since the date of the last Total
Reserve Value determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties sold
and in such detail as reasonably required by the Administrative Agent, (7)
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 (8) attached thereto is a schedule of the Oil and Gas Properties
evaluated by such Reserve Report that are Mortgaged Properties and demonstrating
the percentage of the total value of the Proved Oil and Gas Properties that the
value of such Mortgaged Properties represent.

       

      
        
           

        

        
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      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 reasonably acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total value of the Proved Oil and Gas
Properties evaluated by such Reserve Report.

       

      (b)           If
the Borrower has provided title information for additional Properties under
Section 8.13(a), the Borrower shall, within 60 days of notice from the
Administrative Agent that material title defects or exceptions exist with
respect to such additional Properties, either (9) cure any such material title
defects or exceptions (including defects or exceptions as to priority) which are
not permitted by Section 9.03 raised by such information, (10) substitute
acceptable Mortgaged Properties with no material 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 (11) 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 Proved Oil and Gas Properties evaluated by
such Reserve Report.

       

      (c)           If
the Borrower is unable to cure any material 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 Proved Oil and Gas Properties
evaluated in the most recent Reserve Report, such default shall not be a
Default, but instead the Administrative Agent and/or the Majority Lenders shall
have the right to exercise the following remedy in their sole discretion from
time to time, and any failure to so exercise this remedy at any time shall not
be a waiver as to future exercise of the remedy by the Administrative Agent or
the Lenders.  To the extent that the Administrative Agent or the
Majority Lenders are not 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 Total Reserve
Value shall be reduced by an amount as determined by the Majority Lenders to
cause the Borrower to be in compliance with the requirement to provide
acceptable title information on 80% of the value of the Proved Oil and Gas
Properties.  This new Total Reserve Value shall become effective
immediately after receipt of such notice.

       

      Section
8.14          Additional Collateral;
Additional Guarantors.

       

      (a)           In
connection with each redetermination of the Total Reserve Value, 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 Proved Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its 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 Indebtedness a first-priority Lien interest (subject to a
Lien under the Senior Revolving Credit Documents and 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 Proved Oil and Gas Properties not already subject to a Lien of the
Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value.  All such
Liens will be created and perfected by and in accordance with the provisions of
deeds of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent 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).

       

      
        
           

        

        
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      (b)           The
Borrower shall cause each Domestic Subsidiary to guarantee the Indebtedness
pursuant to the Guaranty Agreement.  In connection with any such
guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to,
promptly, but in any event no later than 30 days after the formation or
acquisition (or other similar event) of such Domestic Subsidiary, (a) execute
and deliver a supplement to the Guaranty Agreement, (b) pledge all of the Equity
Interests of such Domestic Subsidiary (including, without limitation, 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 owner thereof) and (c)
execute and deliver such other additional closing documents, certificates and
legal opinions as shall reasonably be requested by the Administrative
Agent.

       

      (c)           In
the event that the Borrower or any Domestic Subsidiary creates or becomes the
owner of a Foreign Subsidiary, then the Borrower shall promptly, or shall cause
such Domestic Subsidiary to promptly, but in any event no later than 30 days
after the date of becoming an owner thereof, (12) pledge 65% of all the
Equity Interests of such Foreign Subsidiary (including, without limitation,
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) and (13) execute
and deliver such other additional closing documents, certificates and legal
opinions as shall reasonably be requested by the Administrative
Agent.

       

      (d)           The
Borrower agrees that it will not, and will not permit any Restricted Subsidiary
to, grant a Lien on any Property to secure the Senior Revolving Credit Notes
without first (14) giving fifteen (15) days’ prior written notice to the
Administrative Agent thereof and (ii) granting to the Administrative Agent to
secure the Indebtedness a first-priority, perfected Lien (subject to Liens under
the Senior Revolving Credit Documents and Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the
end of such definition) on this same Property pursuant to Security Instruments
in form and substance satisfactory to the Administrative Agent.  In
connection therewith, the Borrower shall, or shall cause its Restricted
Subsidiaries to, execute and deliver such other additional closing documents,
certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.

       

      
        
           

        

        
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      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 (15) upon request promptly after the filing thereof with
the United States Secretary of Labor or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, and (16) immediately upon becoming aware of the occurrence 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 or the Department of Labor
with respect thereto.

       

      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 respective
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 Debt of any of the Unrestricted
Subsidiaries.

       

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

       

      Section
8.17          Marketing
Activities.

       

      The
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
engage in marketing activities for any Hydrocarbons or enter into any contracts
related thereto other than (17) contracts for the sale of Hydrocarbons scheduled
or reasonably estimated to be produced from their proved Oil and Gas Properties
during the period of such contract, (18) contracts for the sale of Hydrocarbons
scheduled or reasonably estimated to be produced from proved Oil and Gas
Properties of third parties during the period of such contract associated with
the Oil and Gas Properties of the Borrower and its 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 and (19)
other contracts for the purchase and/or sale of Hydrocarbons of third parties
(A) which have generally offsetting provisions (i.e. corresponding pricing
mechanics, delivery dates and points and volumes) such that no material
“position” is taken and (B) for which appropriate credit support has been taken
to alleviate the material credit risks of the counterparty thereto.

       

      Section
8.18          Swap Agreement
Termination.  To the extent the Borrower or a Restricted
Subsidiary changes the material terms of any commodity-price Swap Agreement to
which it is a party, terminates any such Swap Agreement or enters into a new
Swap Agreement which has the effect of creating an off-setting position under
any such Swap Agreement and the product of (a) the net decrease in notional
volumes of Hydrocarbons hedged as a result thereof, times (b) the excess of (i)
the strike or fixed rate payor price over (ii) the “price deck” used in
calculating the Total Reserve Value for the relevant commodity, exceeds in the
aggregate during such any period between consecutive Scheduled Redeterminations
the lesser of (y) $15,000,000 and (z) 3% of the then-effective Total Reserve
Value, the Borrower will give the Lenders prompt written notice of such event
and, concurrently with such notice, the Required Lenders shall have the right to
adjust the Total Reserve Value in accordance with Section 2.07(c).

       

      
        
           

        

        
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      ARTICLE
IX

      Negative
Covenants

       

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

       

      Section
9.01          Financial
Covenants.

       

      (a)           Total Reserve Value to Total
Debt Ratio.  The Borrower will not as of any date of
determination permit its ratio of (i) Total Reserve Value as in effect on such
date of determination to (ii) Total Debt as of such date of determination to be
less than 1.5 to 1.0.

       

      (b)           Ratio of Total Debt to
EBITDAX.  The Borrower will not, at any time, permit its ratio
of Total Debt as of such time to EBITDAX for the period of four fiscal quarters
ending on the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available to be greater than
4.0 to 1.0.

       

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

       

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

       

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

       

      (c)           Debt
under Capital Leases not to exceed $10,000,000 in the aggregate at any time
outstanding.

       

      (d)           Debt
associated with workers’ compensation claims, performance, bid, surety or
similar bonds or surety obligations required by Governmental Requirements or
third parties in connection with the operation of the Oil and Gas
Properties.

       

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

       

      
        
           

        

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

       

      (g)           Debt
under the Senior Revolving Credit Notes and any guarantees thereof, and any
refinancing or replacement thereof, provided that such Debt is subject to the
Intercreditor Agreement.

       

      (h)           other
Debt not to exceed $10,000,000 in the aggregate at any one time
outstanding.

       

      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 Indebtedness.

       

      (b)           Excepted
Liens.

       

      (c)           Liens
securing Capital Leases permitted by Section 9.02(c) but only on the Property
under lease.

       

      (d)           Liens
on Property not constituting collateral for the Indebtedness and not otherwise
permitted by the foregoing clauses of this Section 9.03; provided that the
aggregate principal or face amount of all Debt secured under this Section
9.03(d) shall not exceed $5,000,000 at any time.

       

      (e)           Liens
on Property securing “Indebtedness” as defined in the Senior Revolving Credit
Agreement and any guaranties thereof; provided, however, that such Property is
subject to a Lien in favor of the Administrative Agent which secures the
Indebtedness, this Agreement and the other Loan Documents.

       

      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 (i) 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), (ii) Restricted Subsidiaries may
declare and pay dividends ratably with respect to their Equity Interests and
(iii) the Borrower may make Restricted Payments pursuant to and in accordance
with stock option plans or other benefit plans for management or employees of
the Borrower and its Restricted Subsidiaries.

       

      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
reflected in the Financial Statements or which are disclosed to the Lenders in
Schedule 9.05.

       

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

       

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

       

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

       

      (e)           deposits
maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the
United States of any other bank or trust company which is organized under the
laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively 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
(20) made by the Borrower in or to the Guarantors, (21) made by any Restricted
Subsidiary in or to the Borrower or any Guarantor, (22) 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
$500,000 and (23) made by the Borrower or any Restricted Subsidiary in or to any
Foreign Subsidiary, provided that no less than 85% of the aggregate net present
value (discounted at 10% and using pricing assumptions consistent with SEC
reporting requirements at such time) of the combined Borrower’s and Restricted
Subsidiaries’ Oil and Gas Properties are located inside the United States and
Canada.

       

      (h)           subject
to the limits in Section 9.07, Investments (including, without limitation,
capital contributions) in general or limited partnerships or other types of
entities (each a “venture”) entered
into by the Borrower or a Restricted Subsidiary with others in the ordinary
course of business; provided that (i) any such venture is primarily engaged in
oil and gas exploration, development, production, processing and related
activities, including transportation, (ii) the interest in such venture is
acquired in the ordinary course of business and on fair and reasonable terms and
(iii) such venture interests acquired and capital contributions made (valued as
of the date such interest was acquired or the contribution made) do not exceed,
in the aggregate at any time outstanding an amount equal to $5,000,000.

       

      (i)           subject
to the limits in Section 9.07, Investments in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related thereto or
related to farm-out, farm-in, joint operating, joint venture or area of mutual
interest agreements, gathering systems, pipelines or other similar arrangements
which are usual and customary in the oil and gas exploration and production
business located within the geographic boundaries of the United States of
America.

       

      
        
           

        

        
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      (j)           loans
or advances to employees, officers or directors in the ordinary course of
business 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.

       

      (k)           Investments
in stock, obligations or securities received in settlement of debts arising from
Investments permitted under this Section 9.05 owing to the Borrower or any
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(k) exceeds $1,000,000.

       

      (l)           Investments
in Unrestricted Subsidiaries, provided that xxiii) the aggregate amount of all
such Investments at any one time shall not exceed $25,000,000 (or its equivalent
in other currencies as of the date of Investment) and xxiv) after giving effect
to such Investment, the Borrower would have at least $25,000,000 in unused
availability under the Commitments.

       

      Section
9.06          Designation and Conversion
of Restricted and Unrestricted Subsidiaries; Debt 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 xxv) prior, and after giving
effect, to such designation, a Default would not exist and xxvi) 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 ownership interest in such Subsidiary and such
Investment would be permitted to be made at the time of such designation under
Section 9.05(l).  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, xxvii) 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), xxviii) no
Default would exist and xxix) the Borrower complies with the requirements of
Section 8.14, Section 8.16 and Section 9.16.  Any such designation
shall be treated as a cash dividend in an amount equal to the lesser of the fair
market value of the Borrower’s direct and indirect ownership interest in such
Subsidiary or the amount of the Borrower’s cash investment previously made for
purposes of the limitation on Investments under Section 9.05(l).

       

      
        
           

        

        
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      (d)           The
Borrower shall not permit the aggregate principal amount of all Non-Recourse
Debt outstanding at any one time to exceed $25,000,000.

       

      Section
9.07          Nature of Business;
International Operations.  The Borrower will not, and will not
permit any Restricted Subsidiary to, allow any material change to be made in the
character of its business as an independent oil and gas exploration and
production company.  From and after the date hereof, the Borrower and
its Domestic Subsidiaries will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any Oil and Gas Properties not located within the geographical boundaries of the
United States.  For the avoidance of doubt, any Foreign Subsidiary may
(i) acquire and make expenditures in or related to Oil and Gas Properties
located within the geographical boundaries of Canada, and (ii) acquire and make
expenditures in or related to Oil and Gas Properties, in an amount not to exceed
fifteen percent (15%) of the aggregate net present value (discounted at 10% and
using pricing assumptions consistent with SEC reporting requirements at such
time) of the Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries, located outside the geographical boundaries of the United States
and Canada.

       

      Section
9.08          Limitation on
Leases.  The Borrower will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal but excluding Capital Leases and leases of Hydrocarbon
Interests), under leases or lease agreements which would cause the aggregate
amount of all payments made by the Borrower and the Restricted Subsidiaries
pursuant to all such leases or lease agreements, including, without limitation,
any residual payments at the end of any lease, to exceed $5,000,000 in any
period of twelve consecutive calendar months during the life of such
leases.

       

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

       

      Section
9.10          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), (l) or (m)
of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D
of the Code.

       

      
        
           

        

        
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      (b)           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.

       

      (c)           without
prior written notice to the Administrative Agent, contribute to or assume an
obligation to contribute to, or permit any ERISA Affiliate to contribute to or
assume an obligation to contribute to (i) any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by such entities in their sole discretion at any time without
any material liability, or (ii) any employee pension benefit plan, as defined in
section 3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of
ERISA or section 412 of the Code.

       

      Section
9.11          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
9.12          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)           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

       

      (b)           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.

       

      Section
9.13          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 xxx) the sale of Hydrocarbons in the ordinary course of
business; xxxi) farmouts in the ordinary course of business of undeveloped
acreage or undrilled depths and assignments in connection with such farmouts;
xxxii) the sale or transfer of (1) 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 or (2) Oil and Gas Properties or
interests therein or Restricted Subsidiaries owning Oil and Gas Properties to
which there were no proved reserves attributed in the most recent Reserve Report
delivered to the Lenders; xxxiii) the sale, transfer or other disposition of
Equity Interests in Unrestricted Subsidiaries; xxxiv) the sale or other
disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Restricted Subsidiary owning Oil and Gas Properties;
provided that (1) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or Restricted Subsidiary subject of such sale
or other disposition (as reasonably determined by 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), (2) if the fair
market value of such sale or other disposition (including asset swaps) of Oil
and Gas Properties or Restricted Subsidiary owning Oil and Gas Property included
in the most recently delivered Reserve Report (whether made for non-cash
consideration or otherwise) during any period between two successive
determinations of Total Reserve Value exceeds five percent (5%) of the Total
Reserve Value in effect at such time (as determined by the Administrative
Agent), individually or in the aggregate, then the Total Reserve Value shall be
reduced, effective immediately upon such sale or disposition, by an amount equal
to the value, if any, assigned such Properties in the most recently delivered
Reserve Report, (iii) an amount equal to 100% of the Net Cash Proceeds received
from such sale, lease or other disposition shall be used within 180 days of such
disposition: (1) to acquire Property, plant and equipment or any business entity
used or useful in carrying on the business of the Borrower and its Restricted
Subsidiaries or to improve or replace any existing Property of the Borrower and
its Restricted Subsidiaries used or useful in carrying on the business of the
Borrower and its Restricted Subsidiaries (including, without limitation, to pay
for exploration activities and drilling and completion costs of new wells and
related activities), (2) to repay Debt under the Senior Revolving Credit
Agreement or (3) any time after the first anniversary of the Effective Date, to
prepay the Notes (or any combination of the foregoing) and (iv) if any such sale
or other disposition is of a Restricted Subsidiary owning Oil and Gas
Properties, such sale or other disposition shall include all the Equity
Interests of such Restricted Subsidiary (unless such Restricted Subsidiary is
contemporaneously therewith being designated as an Unrestricted Subsidiary
pursuant to Section 9.06(b)); and xxxv) sales and other dispositions of
Properties not regulated by Section 9.13(a) to (e) having a fair market value
not to exceed $2,500,000 during any 6-month period.

       

      
        
           

        

        
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      Section
9.14          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
9.15          Transactions with
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 the Guarantors and Wholly-Owned
Subsidiaries of the Borrower) unless such transactions are otherwise permitted
under this Agreement and are upon fair and reasonable terms no less favorable to
it than it would obtain in a comparable arm’s length transaction with a Person
not an Affiliate.

       

      
        
           

        

        
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      Section
9.16          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 gives written notice
to the Administrative Agent of such creation or acquisition and complies with
Section 8.14(b) and Section 8.14(c).  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 9.13(e).

       

      Section
9.17          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 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; provided, however, that the preceding
restrictions will not apply to encumbrances or restrictions arising under or by
reason of (1) this Agreement or the Security Instruments, (2) Debt securing
Liens permitted by Section 9.03(c) or Section 9.03(d) or any contract, agreement
or understanding creating Liens permitted by Section 9.03(d) (but only to the
extent related to the Property on which such Liens were created), (3) any leases
or licenses or similar contracts as they affect any Property or Lien subject to
a lease or license, (4) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the direct or indirect sale or
disposition of all or substantially all the equity or Property of such
Restricted Subsidiary (or the Property that is subject to such restriction)
pending the closing of such sale or disposition, or (5) customary provisions
with respect to the distribution of Property in joint venture
agreements.

       

      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 such Oil and Gas 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 bcf of gas (on an mcf
equivalent basis) in the aggregate.

       

      Section
9.19          Swap
Agreements.  The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than (a) those Swap Agreements required under Section 8.18; (b) Swap Agreements
in respect of commodities (including price Swap Agreements, basis differential
Swap Agreements, caps, collars, floors and other similar agreements described in
the definition of “Swap Agreements”) (i) with an Approved Counterparty and (ii)
the notional volumes for which, (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date each
such Swap Agreement is executed, (A) 100% of the reasonably anticipated
projected production (as shown in the most recent Reserve Report and/or in
another engineering report which is in form and substance satisfactory to the
Administrative Agent) from proved, developed, producing Oil and Gas Properties
for each twelve month period during which each such Swap Agreement is in effect,
for the next thirty-six months succeeding the execution of each such Swap
Agreement, (B) 75% of the reasonably anticipated projected production (as shown
in the most recent Reserve Report and/or in another engineering report which is
in form and substance satisfactory to the Administrative Agent) from proved,
developed, producing Oil and Gas Properties for each twelve month period during
which each such Swap Agreement is in effect, for each twelve month period after
the first thirty-six months after each such Swap Agreement is executed, (C) 50%
of the reasonably anticipated projected production (as shown in the most recent
Reserve Report and/or in another engineering report which is in form and
substance satisfactory to the Administrative Agent) from proved, developed,
non-producing Oil and Gas Properties for each twelve month period during which
each such Swap Agreement is in effect, for the next twenty-four months
succeeding the execution of each such Swap Agreement and (D) 35% of the
reasonably anticipated projected production (as shown in the most recent Reserve
Report and/or in another engineering report which is in form and substance
satisfactory to the Administrative Agent) from proved, developed, non-producing
Oil and Gas Properties for each twelve month period during which each such Swap
Agreement is in effect, for the period of twelve months succeeding the two-year
anniversary of the execution of each such Swap Agreement; provided, however,
that for purposes of this Section 9.19(b), put options and price floors for
crude oil and natural gas shall be disregarded; (c) Swap Agreements in respect
of interest rates with an Approved Counterparty, as follows: (i) Swap Agreements
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Swap Agreements of the Borrower
and its Restricted Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 50% of the then outstanding
principal amount of the Borrower’s Debt for borrowed money which bears interest
at a fixed rate (after netting out any Swap Agreements then in effect
effectively converting interest rates from floating to fixed) and (ii) Swap
Agreements effectively converting interest rates from floating to fixed, the
notional amounts of which (when aggregated with all other Swap Agreements of the
Borrower and its Restricted Subsidiaries then in effect effectively converting
interest rates from floating to fixed) do not exceed 75% of the then outstanding
principal amount of the Borrower’s Debt for borrowed money which bears interest
at a floating rate (after netting out any Swap Agreements then in effect
effectively converting interest rates from floating to fixed). For purposes of
this Section 9.19(b), the notional volumes and corresponding swap volumes so
determined shall be calculated and recorded separately for natural gas and crude
oil, and natural gas volumes shall include associated natural gas liquids
volumes.  In no event shall any Swap Agreement contain any current
requirement, agreement or covenant for the Borrower or any Restricted Subsidiary
to post collateral or margin, other than letters of credit permitted by this
Agreement (in an amount not to exceed $10,000,000 in the aggregate), to secure
their obligations under such Swap Agreement or to cover market
exposures.

       

      
        
           

        

        
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      Section
9.20          Gas Sales
Contracts.  The Borrower will not, and will not permit any of
its Subsidiaries to (the Borrower or any such Subsidiary being the “Seller” for
purposes of this Section), enter into any Gas Sales Contract unless (1) such Gas
Sales Contract is with a counterparty (the “Purchaser”) that is
an Approved Purchaser at the time such Gas Sales Contract is entered into or the
Purchaser has posted Acceptable Collateral to secure the Purchaser’s obligations
thereunder, (2) the terms of such Gas Sales Contract provide that if the
Purchaser is not, or is no longer, an Approved Purchaser, and if reasonable
grounds for insecurity exists regarding performance of the obligations under the
Gas Sales Contract by the counterparty, the Borrower will or may demand Adequate
Assurance of Performance from such counterparty to secure the Purchaser’s
obligations under the Gas Sales Contract, (3) the terms of such Gas Sales
Contract provide that upon the failure to provide such Adequate Assurance of
Performance, the Seller may immediately suspend deliveries of gas as provided in
such Gas Sales Contract and sell all or substantially all of the volumes of gas
subject of the Gas Sales Contract to third party Purchasers and (4) the proceeds
of such Gas Sales Contract shall be deposited directly into the account of the
Seller.  Such Gas Sales Contract may also provide that if following
any posting of Acceptable Collateral the Purchaser becomes an Approved
Purchaser, any Acceptable Collateral previously posted by such Purchaser shall
be immediately released and returned to such Purchaser; provided that,
notwithstanding the foregoing, the Seller may enter into one or more Gas Sales
Contracts which do not comply with the requirements of this Section 9.20 so long
as the unpaid Exposure on all such Gas Sales Contracts does not, in the
aggregate, exceed $15,000,000 at any one time.

       

      
        
           

        

        
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      Section
9.21          Anti-Layering.  Notwithstanding
the foregoing, the Borrower will not, and will not permit any Restricted
Subsidiary to, incur, create, assume or suffer to exist any Debt if such Debt is
subordinate or junior in ranking in right of payment to the Senior Revolving
Credit Agreement, unless such Debt is expressly subordinated in right of payment
to the obligations under this Agreement.

       

      ARTICLE
X

      Events
of Default; Remedies

       

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

       

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

       

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

       

      
        
           

        

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

       

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

       

      (f)           the
Borrower or any Restricted Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable following the
expiration of any applicable grace period therefor.

       

      (g)           any
event or condition occurs that results in any Material Indebtedness becoming due
prior to its scheduled maturity, 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 and such event or condition continues beyond any applicable grace period
therefor.

       

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

       

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

       

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

       

      
        
           

        

        
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      (k)           (6)
one or more judgments for the payment of money in an aggregate amount in excess
of $5,000,000
(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 (7) 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 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any
such judgment.

       

      (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)           the
Intercreditor Agreement, 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 its terms against the
Borrower or any 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, or the Borrower or any Subsidiary or
any of their Affiliates shall so state in writing.

       

      (n)           Calpine
Energy Services L.P., as purchaser, fails to post Acceptable Collateral in
respect of any Gas Sales Contract with the Borrower or any Restricted Subsidiary
within three (3) Business Days after Calpine Energy Services L.P., is required
by the terms of such Gas Sales Contract to post Acceptable Collateral and the
Seller fails to (i) exercise its right to suspend delivery of gas subject of
such Gas Sales Contract no later than two (2) Business Days after such failure
by such purchaser and (ii) sell all or substantially all the volumes of gas
subject of such Gas Sales Contract to one or more third-party Purchasers in
accordance with the provisions of Section 9.20 no later than the five (5)
Business Day after such suspension.

       

      (o)           a
Change in Control shall occur.

       

      Section
10.02         Remedies of
Lenders.

       

      (a)           In
the case of an Event of Default other than one described in Section 10.01(h),
Section 10.01(i) or Section 10.01(j), at any time thereafter during the
continuance of such Event of Default, the Administrative Agent may, and at the
request of the Majority Lenders, shall, by notice to the Borrower declare the
Notes and the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon,
prepayment premiums, if any, that would otherwise be payable under Section 3.05
and in the case of Fixed Rate Loans, the applicable Make-Whole Amount, and all
fees and other obligations of the Borrower and the Guarantors accrued hereunder
and under the Notes and the other Loan Documents, shall become due and payable
immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Notes and the principal of the Loans then outstanding, together with accrued
interest thereon, prepayment premiums, if any, that would otherwise be payable
under Section 3.05 and in the case of Fixed Rate Loans, the applicable
Make-Whole Amount, and all fees and the other obligations of the Borrower and
the Guarantors accrued hereunder and under the Notes and the other Loan
Documents, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.

       

      
        
           

        

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

       

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

       

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

       

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

       

      (iii)           third, pro rata to payment of
accrued interest and Make-Whole Amounts on the Loans;

       

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

       

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

       

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

       

      ARTICLE
XI

      The
Agents

       

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

       

      
        
           

        

        
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      Section
11.02         Duties and Obligations of
Administrative Agent.  The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan
Documents.  Without limiting the generality of the foregoing, xxxvi)
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), xxxvii) the Administrative Agent shall have no duty to
take any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and xxxviii) except as expressly set forth herein,
the Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (1) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (2) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (3) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (4) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (5) 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, (6) 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 (7) 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 xxxix)
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 xl) 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, no Agent
other than the Administrative 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 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.

       

      
        
           

        

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

       

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

       

      
        
           

        

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

       

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

       

      Section
11.08         No
Reliance.

       

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

       

      
        
           

        

        
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      (b)           The
Lenders acknowledge that the Administrative Agent and the Arranger are acting
solely in administrative capacities with respect to the structuring and
syndication of this facility and have no duties, responsibilities or liabilities
under this Agreement and the other Loan Documents other than their
administrative duties, responsibilities and liabilities specifically as set
forth in the Loan Documents and in their capacity as Lenders
hereunder.  In structuring, arranging or syndicating this facility,
each Lender acknowledges that the Administrative Agent and/or Arranger may be an
agent or lender under these Notes, the Senior Revolving Credit Notes, other
loans or other securities and waives any existing or future conflicts of
interest associated with the their role in such other debt
instruments.  If in its administration of this facility or any other
debt instrument, the Administrative Agent determines (or is given written notice
by any Lender that a conflict exists), then it shall eliminate such conflict
within 90 days or resign pursuant to Section 11.06 and shall have no liability
for action taken or not taken while such conflict existed.

       

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

       

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

       

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

       

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

       

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

       

      
        
           

        

        
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      Section
11.10         Authority of Administrative
Agent to Release Collateral and Liens.  Each Lender hereby
authorizes the Administrative Agent to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan
Documents.  Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower’s sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.13 (as it may be amended, waived or
otherwise modified by the Required Lenders) or is otherwise authorized by the
terms of the Loan Documents.

       

      Section
11.11         The Arranger and other
Agents.  None of the Arranger, any syndication agent or any
documentation agent hereunder shall have any duties, responsibilities or
liabilities under this Agreement or 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 telecopy, as follows:

       

      (i)            if
to the Borrower, to it at 717 Texas, Suite 2800, Houston, TX 77002, Attention of
Michael H. Hickey, Vice President and General Counsel  (Telecopy No.
(713) 481-8561);

       

      (ii)           if
to the Administrative Agent, to it at 919 Third Avenue, New York, New York
10022, Attention: Millie Carillo, Loan Assistant (Telecopy No. (212) 841-2683),
with a copy to 1200 Smith Street, Suite 3100, Houston, Texas 77002, Attention:
Donna Verwold (Telecopy No. (713) 659-6915);

       

      (iii)          if
to the Issuing Bank, to it at 919 Third Avenue, New York, New York 10022,
Attention: Millie Carillo, Loan Assistant (Telecopy No. (212) 841-2683), with a
copy to 1200 Smith Street, Suite 3100, Houston, Texas 77002, Attention: Donna
Verwold (Telecopy No. (713) 659-6915); and

       

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

       

      (b)           Notices
and other communications to the Lenders hereunder may be delivered or furnished
by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to ARTICLE II, 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 telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

       

      Section
12.02         Waivers;
Amendments.

       

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

       

      (b)           Neither
this Agreement nor any provision hereof nor any Security Instrument nor any
provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and the Majority
Lenders or by the Borrower and the Administrative Agent with the consent of the
Majority Lenders; provided that no such agreement shall (1) modify the
definition of “Total Reserve Value” without the written consent of each Lender,
or modify Section 2.07 in any manner without the consent of each Lender, (2)
reduce the principal amount of any Loan or reduce the rate of interest thereon
(other than as a result of a waiver, amendment or other modification, as a
result of which, the interest rate specified in Section 3.02(c) shall be
effectively waived), or reduce any fees payable hereunder, or reduce any other
Indebtedness hereunder or under any other Loan Document, without the written
consent of each Lender affected thereby, (3) postpone the scheduled date of
payment or prepayment of the principal amount of any Loan, or any interest
thereon, or any fees payable hereunder, or any other Indebtedness hereunder or
under any other Loan Document, or reduce the amount of, waive or excuse any such
payment, or postpone or extend the Maturity Date without the written consent of
each Lender affected thereby, (4) 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, (5) waive or amend Section 3.04,
Section 6.01, Section 8.14 or Section 10.02(c) or change the definition of the
terms “Domestic Subsidiary”, “Foreign Subsidiary” or “Subsidiary”, without the
written consent of each Lender, (6) release any Guarantor (except as set forth
in the Guaranty Agreement), release a substantial portion of the collateral from
the Liens under the Security Instruments (other than as provided in Section
11.10), or reduce the percentage set forth in Section 8.14(a) to less than 80%,
without the written consent of each Lender, or (7) change any of the provisions
of this Section 12.02(b) or the definition of “Majority Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or under any other Loan Documents or
make any determination or grant any consent hereunder or any other Loan
Documents, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or any other Agent hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent or such
other Agent, as the case may be.  Notwithstanding the foregoing, any
supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.

       

      
        
           

        

        
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      Section
12.03         Expenses, Indemnity; Damage
Waiver.

       

      (a)           The
Borrower shall pay (8) 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, including all Intralinks 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), (9) 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, and (10) all out-of-pocket expenses incurred by any Agent or any
Lender, including the fees, charges and disbursements of any counsel for any
Agent 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
hereunder, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans.

       

      
        
           

        

        
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      (b)           THE
BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER AND EACH LENDER, AND EACH
RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN
“INDEMNITEE”)
AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES,
CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE
REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE,
INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF (11) 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, (12) 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, (13) 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, (14) ANY LOAN OR THE USE OF THE PROCEEDS
THEREFROM, (15) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (16) THE OPERATIONS OF
THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS
SUBSIDIARIES, (17) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE
THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (18) ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR
PROPERTIES OR OPERATIONS, INCLUDING, 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 OR
AT ANY OF THEIR PROPERTIES, (19) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (20) 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,
(21) 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, (22) ANY
ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (23) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (24) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
BREACH OF ANY OBLIGATION OF SUCH INDEMNITEE UNDER ANY LOAN DOCUMENT OR THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT, OR VIOLATION OF LAW OF SUCH
INDEMNITEE.

       

      
        
           

        

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

       

      (e)           All
amounts due under this Section 12.03 shall be payable not later than 10 days after
written demand therefor.

       

      Section
12.04         Successors and
Assigns.

       

      (a)           The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby,
except that (i) the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of each Lender
(and any attempted assignment or transfer by the Borrower without such consent
shall be null and void) and (ii) no Lender may assign or otherwise transfer its
rights or obligations hereunder except in accordance with this Section
12.04.  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, Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this
Agreement.

       

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

       

      
        
           

        

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

       

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

       

      (B)           each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender’s rights and obligations 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 (provided that in the event of two or more concurrent assignments to
members of the same Assignee Group (which may be effected by a suballocation of
an assigned amount among members of such Assignee Group) or two or more
concurrent assignments by members of the same Assignee Group to a single
Eligible Assignee (or to an Eligible Assignee and members of its Assignee
Group), the Assignment Fee will be $3,500 for up to four concurrent assignments
or suballocations plus $500 for each additional concurrent assignment or
suballocation), and any Eligible Assignee to which any Loans are assigned that
is not then a Lender shall deliver to the Administrative Agent an Administrative
Questionnaire; and

       

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

       

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

       

      
        
           

        

        
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      (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 owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”).  The
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the
contrary.  The Register shall be available for inspection by the
Borrower and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.  In connection with any changes to the
Register, if necessary, the Administrative Agent will reflect the revisions on
Annex I and forward a copy of such revised Annex I to the Borrower and each
Lender.

       

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

       

      (c)

       

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

       

      
        
           

        

        
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      (ii)            A
Participant shall not be entitled to receive any greater payment under Section
5.01 or Section 5.03 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower’s prior
written consent.  A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 5.03 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
5.03(d) 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, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, any other Agent or any Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid.  The provisions of Section 5.01, Section 5.02, Section
5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.

       

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

       

      
        
           

        

        
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      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 telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.

       

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

       

      Section
12.08         Right of
Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitations obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
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.

       

      
        
           

        

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

       

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

       

      (b)           ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY 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 NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

       

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

       

      (d)           EACH
PARTY HEREBY (25) 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; (26)
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; (27) 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 (28) 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.

       

      
        
           

        

        
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      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 and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed xli) 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), xlii) to the extent requested by any regulatory
authority, xliii) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, xliv) to any other party to this
Agreement or any other Loan Document, xlv) 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, xlvi) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(1) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (2) any
actual or prospective counterparty (or its advisors) to any Swap Agreement
relating to the Borrower and its obligations, xlvii) with the consent of the
Borrower or xlviii) to the extent such Information (1) becomes publicly
available other than as a result of a breach of this Section 12.11 or (2)
becomes available to the Administrative Agent or any Lender on a nonconfidential
basis from a source other than the Borrower.  For the purposes of this
Section 12.11, “Information” means
all information received from the Borrower or any 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 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 so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.  

       

      Section
12.12         Interest Rate
Limitation.  It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to
it.  Accordingly, if the transactions contemplated hereby would be
usurious as to any Lender under laws applicable to it (including the laws of the
United States of America and the State of New York or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding the
other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any of the Loan Documents or any agreement entered
into in connection with or as security for the Notes, it is agreed as
follows:  (3) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by such Lender to the Borrower); and (4) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower).  All sums paid or agreed to
be paid to any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to such Lender, be
amortized, prorated, allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law.  If at any time and from time to time
(1) 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 (2) 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.

       

      
        
           

        

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

       

      
        
           

        

        
          90

          
            

          

        

        
           

        

      

      Section
12.14         Reaffirmation and Grant of
Security Interest.  The Borrower and each Subsidiary hereby (i)
confirms that each Security Instrument (for purposes of this Section 12.14, as
defined in the Existing Term Loan Agreement) to which it is a party or is
otherwise bound and all assets, property and interests encumbered thereby will
continue to guarantee or secure, as the case may be, to the fullest extent
possible in accordance with the Loan Documents, the payment and performance of
all Indebtedness under this Agreement.

       

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

       

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

       

      [SIGNATURES
BEGIN NEXT PAGE]

       

      
        
           

        

        
          91

          
            

          

        

        
           

        

      

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

       

      
        
          
            
              
                	
                        BORROWER:

                      	 
      	
                        ROSETTA
      RESOURCES INC.

                      
	 
      	 
      	
                        /s/ Michael J. Rosinski

                      
	 
      	 
      	
                        Michael
      Rosinski

                      
	 
      	 
      	
                        Chief
      Financial
Officer

                      

              

            

          

        

      

      
        
           

        

        
          Annex
I-1

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  	
                          ADMINISTRATIVE
      AGENT:

                        	 
      	
                          BNP
      PARIBAS, as
      Administrative Agent and as a Lender

                        
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                          By:

                        	
                          /s/ Polly Schott

                        
	 
      	 
      	
                          Name:

                        	
                          Polly
      Schott

                        
	 
      	 
      	
                          Title:

                        	
                          Director

                        
	 	 	 	 
	 
      	 
      	 
      	 
      
	 
      	 
      	
                          By:

                        	
                          /s/ Betsy Jocher

                        
	 
      	 
      	
                          Name:

                        	
                          Betsy
      Jocher

                        
	 
      	 
      	
                          Title:

                        	
                          Director

                        

                

              

            

          

        

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      
        
          
            
              	
                      SYNDICATION
      AGENT:

                    	 
      	
                      WELLS FARGO ENERGY
      CAPITAL, INC., as Syndication
      Agent and as a Lender

                    
	 
      	 
      	 
      	 
      
	 
      	 
      	
                      By:

                    	
                      /s/ Bryan McDavid

                    
	 
      	 
      	
                      Name:

                    	
                      Bryan
      McDavid

                    
	 
      	 
      	
                      Title:

                    	
                      Assistant
      Vice
President

                    

            

          

        

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      
        
          
            
              
                
                  
                    	
                            LENDER:

                          	 
      	
                            UNIONBANCAL
      EQUITIES, INC., as a
      Lender

                          
	 
      	 
      	 
      	 
      
	 
      	 
      	
                            By:

                          	
                            /s/ Ted McNulty

                          
	 
      	 
      	
                            Name:

                          	
                            Ted
      McNulty

                          
	 
      	 
      	
                            Title:

                          	
                            Senior
      Vice President

                          
	 	 	 	 
	 	 	 	 
	 
      	 
      	
                            By:

                          	
                            /s/ John W. Schmidt

                          
	 
      	 
      	
                            Name:

                          	
                            John
      W. Schmidt

                          
	 
      	 
      	
                            Title:

                          	
                            Vice
      President

                          

                  

                

              

            

          

        

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      
        
          
            
              	
                      LENDER:

                    	 
      	
                      AMEGY
      BANK NATIONAL ASSOCIATION, as a
      Lender

                    
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                      By:

                    	
                      /s/ W. Bryan Chapman

                    
	 
      	 
      	
                      Name:

                    	
                      W.
      Bryan Chapman

                    
	 
      	 
      	
                      Title:

                    	
                      Senior
      Vice
President

                    

            

          

        

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      ANNEX
I

      LIST
OF COMMITMENTS

      Total
Commitments

       

      
        
          
            
              
                	
                        Name
      of Lender

                      	
                        Percentage

                      	
                        Commitment

                      
	
                        BNP
      Paribas

                      	
                        33.333333333%

                      	
                        $25,000,000.00

                      
	
                        Wells
      Fargo Energy Capital, Inc.

                      	
                        26.666666667%

                      	
                        $20,000,000.00

                      
	
                        UnionBanCal
      Equities, Inc.

                      	
                        20.000000000%

                      	
                        $15,000,000.00

                      
	
                        USB
      Capital Resources, Inc.

                      	
                        13.333333333%

                      	
                        $10,000,000.00

                      
	
                        Amegy
      Bank National Association

                      	
                        6.666666667%

                      	
                        $  5,000,000.00

                      
	
                        TOTAL

                      	
                        100.00000000%

                      	
                        $
      75,000,000.00

                      

              

            

          

        

      
 
 
6

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